GST and countertrade transactions

The Commissioner will not apply resources to verify an entity’s compliance with its GST reporting obligations for a countertrade transaction, in these circumstances:

• the entity is registered for GST
• the entity engages in a countertrade transaction, under which it directly exchanges things with another entity, at arm’s length, without any monetary consideration
• the other entity to the countertrade transaction is also registered for GST
• both entities made wholly taxable supplies to each other, with the amount of GST payable being 1/11th of the GST-inclusive market value of those taxable supplies
• the entity made a wholly creditable acquisition for which it is entitled to a full GST credit
• the net effect of the countertrade transaction would be GST neutral to the entity in the same tax period because:
  • both entities to the countertrade transaction agree that the GST-inclusive market values of their countertrade supplies are equal, or
  • where both entities to the countertrade transaction do not agree on the GST-inclusive market value, the entity calculates its GST payable and its corresponding GST credit based on the GST-inclusive market value of its own supply.
• the entity has records that show
  • when the countertrade transaction was entered into and occurred
  • what was exchanged (what was supplied and acquired)
  • the identity and ABN of the other entity
  • the GST-inclusive market value that the entity and the other party agreed on (if applicable), and
• there is no evidence of fraud or evasion.

The Commissioner will adopt the compliance approach outlined in the Guideline from 18 November 2016.

Please feel free to call Norman Ruan or Martin van der Saag on 02 9984 7774 if you have any questions.