GST Ruling GSTR 2014/2, issued by the ATO, explains the goods and services tax (GST) treatment of a surcharge imposed by a merchant on a customer in respect of a credit card transaction concerning supplies of goods or services by the merchant to the customer.
According to the ruling, a credit card surcharge imposed by the merchant on the customer for a credit card transaction forms part of the consideration for the supply of the goods or services made by the merchant. The merchant will need to take into account the credit card surcharge that is connected with the supply of the goods or services when calculating the correct amount of GST.
The ruling covers a number of scenarios involving credit card surcharges. The ATO provides the following basic example of a credit card surcharge imposed by a merchant on a customer for a purchase of a shirt, being a taxable supply:
Anna purchases a shirt with a price of $55. A sign at the store’s counter states that a surcharge of 3% of the price will be imposed if payment is made by credit card. When Anna pays for the shirt using her credit card, the merchant imposes a surcharge of $1.65 on the sale. The price of the shirt is $56.65 as the $1.65 surcharge forms part of the consideration for the shirt… The GST payable in respect of the sale is $5.15, being 1/11th of the GST-inclusive price of $56.65.
Note the ruling also discusses the ATO’s view on the GST treatment of surcharges imposed on debit card transactions.
Display credit card surcharges clearly
Prices displayed by a business must be clear, accurate and not misleading to consumers. According to the Australian Competition & Consumer Commission (ACCC), if businesses decide to pass on the cost of accepting credit card payments to their customers and impose a credit card fee, they must ensure that their customers are aware. Customers must be made aware before they enter into the transaction that a fee will apply, and the amount of the fee.
For over 60 years Carrick Aland has been providing taxation services and advice to many businesses and farms across Queensland. Call us in Dalby, Toowoomba or Chinchilla on 07 4669 9800.