Tax – Loyalty Programs GST

July 5, 2012

The role of GST in regards to consumer loyalty programs has been clarified with the passing of the 4 April 2012 ruling.

A loyalty program is an agreement between customers and vendors. The customer benefits from remaining loyal to a brand through a points system or a series of other benefits. When the customer redeems their points with the vendor, the program’s partners are reimbursed for the provision of their goods to the loyalty program.

The ruling determines whether the supply of the product or goods is GST free. In guidelines applying to loyalty program arrangements, the supply of rights from the
operator to the program partner is treated as a taxable income. In some circumstances the tax is not disputed by the input tax credit entitlement of the program partner.
This ruling is effective immediately.

There is an allowance period of six months from the date of issue to allow operators and vendors to adjust their systems.

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