Money
Issue No. 4 - February/March 2002
Tax matters - keeping you up to date
Eyes on the prize: ATO puts a GST spoiler on some game-show giveaways
Game shows and sports event organisers could soon be left with a bill for the goods and services tax when awarding prizes. A draft tax ruling by the Australian Tax Office spells warning for organisations that provide non-monetary prizes, such as new cars or holidays.
Under the ruling, providers of non-cash prizes may be liable for GST if the recipient of the prize is a private individual or anyone else not registered for GST purposes. And, if it is confirmed in a subsequent final ruling by the ATO, the draft ruling will likely result in a trend toward direct cash prizes and away from the non-monetary.
The ATO’s view, as outlined in the draft ruling (GSTR 2001/D7), is thus: When a non-monetary prize is provided to a recipient, two supplies occur for GST purposes. The first supply occurs when the recipient takes part in the competition or contest; the second relates to the actual award. In this scenario, the provider of a non-monetary prize would incur a GST cost when it was awarded to someone not registered for the GST. This means that the supplier of a prize in many game shows and sports contests will be hit with a GST bill simply because the recipient is not registered for GST.
In this situation, the provider of a non-monetary prize could be required to account for output GST on the supply (one-eleventh of the market value of a non-monetary prize). But when the recipient is not registered for the GST, the supplier may not receive a compensating input tax credit, and therefore could incur an absolute GST cost.
So to avoid this GST liability, many suppliers may swing to offering cash prizes only. We may well see game show hosts pleading with the winning contestant: “Are you sure you don’t want the cash prize?”
ATO draft ruling seeks to widen international tax base
A draft determination by the Australian Taxation Offi...
