GST on gift card purchases (Australia)

We supply volunteers pre-paid gift cards for the purchase or goods or fuel. Gift cards do not attract GST because it isn’t known at the time of supply if that supply would be subject to GST.

Down the track, it may be months later, we receive dockets relating to those purchases and sometimes these include GST. How do you include the GST paid into Manager so it is added in to the GST report at the end of the month and the GST is claimed back from the ATO?

I presume that you purchase the gift cards and distribute to volunteers for legitimate out of pocket expenses incurred by the volunteer. If this is the case I would recommend the following:

First create a new cash account called, say, “Advances to volunteers”.
When gift cards are purchased enter transfer from relative cash/bank account ( used to purchase the gift card) to the new “Advances to volunteers” account.

When the volunteer provides relative dockets for their purchases enter payment from cash account of “Advances to Volunteers” and allocate to relative expense account including the GST if applicable.

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That’s a neat idea, I like it.

Alternatively you maybe able to use capital accounts in a similar way but could also keep track of what value in gift cards each volunteer had been given.

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I will have a little play around with that. In some ways, it seems similar to the use of special accounts which we use for the issue of our in-house voucher system to welfare organisations and also for grants etc. Naturally, a single group “Advances to volunteers” would be preferable to creating a special account for each person.

Cheers, Peter

Personally, I would recommend the special accounts approach. You may, in future, want to know the status of a particular card. Of course, you would probably want a separate control account from the one you use for your voucher system.

I think it is worth saying that all answers so far assume these gift cards are being used for authorized purchases for the business. If you are giving gift cards to volunteers as rewards for their service, that would put you in an entirely different situation. Local law might actually make them employees.

Yes, the cards are used for authorised, out of pocket expenses associated with the business and provided as an imprest with receipts returned to account for expenditure. We only have a couple of people using these as all other ad-hoc expenditure is either reimbursed on submission of receipts for expenditure or on business debit cards (also requiring receipts).

Some of the payments are from funding provided by a government grant specially for volunteer out of pocket fuel costs; however, there is no acquittal required for this expenditure but receipts must be kept.

The special accounts currently employed involve a separate account for each organisation. I was looking at the possibility of keeping special accounts to a minimum as these are either project related or used to manage prepayment of services and keep track of future liabilities. As there are usually no more than two or three gift cards/fuel cards issued at any one time, I was looking to see if there were other options.

Given your additional information about your situation, I would consider setting up the few gift cards as cash accounts. Create a custom control account (under Assets) named something like Prepaid cards. Create each card as a cash account. When you recharge the cards, use an inter account transfer. This would be just like giving each volunteer a cashbox. At any given moment, the balance in the cash account in Manager should match the remaining balance on the gift card.

If the gift cards are not personalized, you would not even need to do anything when a volunteer moved on; just give the card to her replacement (after audit, of course). If they are personalized, you can make the cash accounts inactive when someone leaves.