• Service: Tax, Indirect Tax
  • Type: Regulatory update
  • Date: 4/11/2013

Tax Insights

KPMG's analysis of tax issues and developments.

Nick Kallinikios

Nick Kallinikios
National Leader, GST

+61 3 9288 6714

GST on fees and charges 

by Nick Kallinikios, GST Specialist

The characterisation of a payment as 'consideration for a supply' informs the goods and services tax (GST) outcome. However not all payments made in the context of commercial relations will be characterised as 'consideration for a supply'. The characterisation is dependent on the facts.

In a recent GST Determination (GSTD 2013/1) the Commissioner has ruled that a 'failed payment fee' charged by a supplier is not consideration for a supply. 'Failed payment fee' describes an amount that may be payable where the recipient’s cheque is dishonoured, or the direct debit fails and as a consequence of that failure causes the supplier to suffer loss or incur additional costs. In essence the fee is compensation payable by the recipient to the supplier.


The Commissioner had previously characterised a failed payment fee as consideration for an input taxed supply. The GST Determination states that the ‘payment of a failed payment fee is not consideration for either a financial supply or another supply’. Although GST is not payable under either characterisation, the revised approach may increase the extent to which GST on certain acquisitions may be for a creditable purpose (i.e. increase GST recovery).


At the heart of the revised characterisation is the recognition that there is insufficient nexus between the failed payment fee and the underlying supply (i.e. the supply in respect of which the payment failed). This can be contrasted to other fees (e.g. a surcharge for using a credit card) that have a more direct and immediate nexus with the underlying supply and are said to form part of the total consideration.


A review of fees, charges or recovery of damages is recommended in light of the Commissioner’s revised interpretation. The fundamental question to be answered is whether the amount is consideration for a supply. The opportunity is to improve your GST recovery.


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