Barter/In-Kind
Transactions
1.
Standard
QH-IMP-267-2-7:2015
Statement
This Standard describes the GST implications for Barter/In-Kind transactions.
2.
Scope
Compliance with this standard is mandatory.
This Standard shall apply to all employees, contractors and consultants within the Department of
Health divisions and commercialised business units as well as Hospital and Health Services.
3.
Requirements
Introduction
The nature of barter/in-kind transactions is that the parties agree to exchange certain goods,
services, or rights of equal value to fulfil their obligations to each other without the exchange of
money. Consideration for a supply may be monetary or “in kind” in nature. Barter/in-kind
transaction should be treated as a supply for non-monetary consideration by each party.
Important: Queensland Health’s (QH) Financial Management Practice Manual (FMPM) states –
“Accounts receivable are not to be set off against an account payable even though the
debtor and the supplier are one and the same person or entity unless the balances
have arisen out of error or mistake of fact”.
While the paramount financial policy document under the Financial Accountability Act 2009 must
be followed, it is recognised that there may be situations where staff are unaware that a Barter/InKind transaction has occurred.
When a situation arises where the consideration for a supply is wholly (or partly) non-monetary, a
GST inclusive market value needs to be established for the non-monetary portion of the
consideration (and added to any monetary amount) to work out the Goods and Services Tax
(GST) inclusive price of the supply. The market value is the price that would be negotiated
between knowledgeable and willing buyer & seller for an arm’s length transaction.
This means that the normal GST rules apply as they would with a monetary payment – that is, a
tax invoice is required for a barter/in-kind transaction, ABN obligations apply to barter/in-kind
transactions and you must keep records of all transactions.
Summary of Tax Codes
Description
Tax Code
Sale
Tax Code
Purchases
Queensland Health Non-Capital Expenditure
Taxable Supply (Non-Capital - Item) – with compliant tax invoice
P0
Taxable Supply – tax invoice not valid
(N.B. under $82.50 compliant tax invoice not required – code to P0)
P2
Taxable Supply – but not able to be claimed as an Input Tax Credit
(e.g. residential property expenses)
P1
Supplier Not Registered for GST
P5
GST-Free Supply
P5
Taxable Supply of Services & Rights in Australia
P0
Supply of Services & Rights outside Australia
P5
Queensland Health Capital Expenditure
Taxable Supply (Capital Item) – with compliant tax invoice
C0
Taxable Supply (Capital Item) – tax invoice not valid
C2
Capital Items fully used for making input Taxed Sales & Income (e.g.
new residential property, capital costs related to QH residential
buildings/housing)
C1
Capital Items that are GST-Free (e.g. medical equipment listed
under Schedule 3 – home dialysis machines, telephone
communications devices, or capital items supplied from non-GST
registered suppliers)
C5
Queensland Health Revenue
Supplies QH makes that are a Taxable Supply – with compliant tax
invoice
S0
Supplies QH makes that are GST-free (excluding exports)
S5
Determining if Transaction is a Taxable Supply
For a supply to be a taxable supply it must satisfy all of the criteria below:
•
It is a supply for consideration; and
•
The supply is made in the course or furtherance of an enterprise; and
•
The supply is connected with Australia; and
•
The entity making the supply is registered or required to be registered; and
•
The supply is not GST-Free or Input Taxed.
The consequence of a supply being a taxable supply is that the goods and/or services are subject
to GST.
The GST is based on the GST inclusive market value of the property or services bartered. Tax
invoices (for the GST amount only) will need to be issued to enable input tax credits to be claimed
FMPM: Barter/In-Kind Transactions
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by either party, (refer to Standards – Processing GST only Transactions), or if a mixed supply, i.e.
part taxable and part “barter/in-kind” transaction an invoice will need to be raised for the GST
amount of the taxable part.
Non-Monetary Consideration
A barter or in-kind transaction is where property or services are traded for other property or
services. This is treated as a supply for consideration by each party and is referred to as nonmonetary consideration.
To identify if consideration is provided for a supply, you must first:
•
Determine whether the consideration for the supply is expressed as an amount of money;
•
Identify anything for which a GST inclusive market value needs to be calculated;
•
Identify when the consideration is received and provided for attribution purposes; and
•
Issue a tax invoice that sets out the price for the supply.
Consideration includes:
•
Any payment, or any act or forbearance, in connection with a supply of anything;
•
Any payment, or any act or forbearance, in response to or for the inducement of a supply of
anything.
It does not matter whether the payment, act or forbearance was voluntary, or whether it was by the
recipient of the supply. Payment in a non-monetary or in an “in kind” form includes supplies such
as:
•
Providing goods;
•
Granting a right or performing a service (an act); and
•
Entering into an obligation, for example to refrain from selling a particular product (or
forbearance).
Example of a Barter/In-Kind Transaction
COMPANY ‘A’ & ‘B’ EXCHANGE GOODS OF EQUAL VALUE
SCENARIO:
‘A’ sells a computer to ‘B’ in return for 10 office chairs (both ‘A’ and ‘B’ are GST Registered).
The GST inclusive market value of the computer and chairs is the same for each, being $5,500.
As the consideration is non-monetary, the price for the supply of the computer is the GST inclusive
market value of the chairs, that is, $5,500.
TRANSACTION BY ‘A’:
•
•
•
‘A’ supplies the computer for consideration (that is, for the chairs) and, as the supply is not otherwise
GST free or input taxed
‘A’ makes a taxable supply.
The GST payable to the Australian Taxation Office (ATO) by ‘A’ is calculated as shown below:
GST inclusive price (market value)
Calculate GST at 1/11th of GST inclusive price
$5,500
$5,500 divided by 11
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GST
$ 500
As the acquisition of the computer by ‘B’ is a creditable acquisition, ‘B’ is entitled to claim an input tax credit
of $500, provided ‘B’ has a compliant tax invoice when ‘B’ submits their Business Activity Statement (BAS)
return.
TRANSACTION BY B:
•
•
‘B’ makes a taxable supply of the chairs to ‘A’ who provides the computer as consideration.
The GST payable to the ATO by ‘B’ is calculated as shown below:
GST inclusive price (market value)
$5,500
Calculate GST at 1/11th of GST inclusive price $5,500 divided by 11
GST
$ 500
As the acquisition ‘A’ makes is a creditable acquisition, ‘A’ is entitled to claim an input tax credit of $500,
provided ‘A’ has a compliant tax invoice when ‘A’ submits their BAS return.
Queensland Health’s Invoice Requirements
Mutual liabilities to pay for supplies cannot be off set against each other in QH. Each of the
supplies is to be a separate supply with separate consideration. The GST on each supply must be
included in the calculation of the net amount by each supplier and each recipient may claim input
tax credits for that tax to the extent allowed by the GST Act and provided that a compliant tax
invoice is held and they are registered for GST.
In Queensland Health the best way to treat these types of transactions is to pay a supplier upon
receiving a compliant tax invoice from them and separately raising another compliant invoice to the
entity for goods/services QH has provided to them. This is also a requirement of the Financial
Management Practice Manual.
Note: A tax invoice must be received and a tax invoice issued by QH for all barter/in-kind
transactions. GST obligations apply to barter /in-kind transactions and records must be kept of all
transactions. The records must be kept for five years after the completion of the transactions or
acts to which they relate.
Tax Invoice Requirements
The GST Act requires that a compliant Tax Invoice for a taxable supply must contain certain
information as a minimum requirement. For complete details on the requirements of a valid Tax
Invoice refer to GST Standard – Tax Invoices found on QHEPS.
4.
Related legislation and documents
•
Financial Management Practice Manual
•
A New Tax System (Goods and Services Tax) Act 1999
•
GSTD 2004/4: can consideration for a supply be provided or received without
transferring money (such as where the parties only make book entries recording their
agreement that the supply is paid for)?
•
GSTR 2001/6 GST: Non-monetary consideration
•
GST Standard – Tax Invoices
FMPM: Barter/In-Kind Transactions
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5.
Definitions
Term
Definition
GST Act
A New Tax System (Goods and Services Tax) Act 1999
ATO
Australian Taxation Office
Version Control
Version
Date
Comments
1
26/06/2005
2
16/01/2006
Colleen Horrobin
3
12/03/2007
Colleen Horrobin
4
02/05/2008
Shayari Singh
5
01/05/2010
Richard Baker
6
17/12/2010
Katia Flanigan
7
01/06/2015
Policy Rationalisation Project
FMPM: Barter/In-Kind Transactions
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09/06/2015
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