The ATO issued a Practical Compliance Guideline (PCG 2016/18) on 18 November 2016, addressing the GST treatment of countertrade transactions, more commonly known as barter transactions.
The PCG is, in essence, simplifying the GST treatment of barter transactions thus reducing the compliance burden currently facing taxpayers who enter into such transactions. Currently, if you are involved in a countertrade transaction which is GST neutral you have a requirement to establish the market value of your supply, raise tax invoices to and receive tax invoices from the counterparty (i.e. swap tax invoices) and record both a taxable supply and a creditable acquisition in your BAS.
From 18 November 2016 (date of issue of PCG), if the following apply the Commissioner will not look to verify the compliance of the transaction and, therefore, there is no requirement for the counterparties to meet the requirements outlined above (i.e. record a supply and an acquisition, swap tax invoices etc):
- The barter arrangement does not arise from a ‘barter scheme conducted by a barter or trade exchange’
- Both parties are registered for GST and acting at arm’s length
- The supplies by both parties are wholly taxable and each party is making a fully creditable acquisition of the supply it receives.
- Both parties agree that the GST-inclusive market values of their supplies under the countertrade transaction are equal.
- There is no monetary consideration involved
- The entities hold records containing details of the transactions, the values, the identity of the counterparty and its ABN.
- The exchange occurred and records of what was exchanged and the GST-inclusive market value agreed upon by the parties is kept
The PCG is however limited in its scope, and is only applicable to countertrade transactions making up less than 10% of the taxpayer’s total supplies (based on number of supplies and not value).
The benefit to taxpayers arising from the PCG is primarily the removal of the requirement to issue and swap tax invoices and record equal and opposite supplies and acquisitions, therefore reducing the compliance burden on taxpayers.
To the extent that you are or become involved in barter/counterparty transactions we recommend that you consider whether this PCG can be applied to simplify your arrangements. We recommend, however, that the application of this PCG is considered well in advance of entering into a barter transaction.
