Tax, Centrelink, ABN and GST

Do we have to pay tax on Units?

Generally no. The Commissioner for Taxation has to date exhibited no interest in taxing ordinary LETS members anywhere in Australia. The Australian Tax Office (ATO) knows all about us, of course. The taxation ruling, IT 2668A, is still valid and explains things carefully. Section 11 is the part that applies to us unless we are in business. They call us a “community-based countertrade organisation.”

11. By way of contrast, consideration which is merely the proceeds of a hobby, pastime, domestic or social arrangement, or the receipt of a windfall gain would not fall within the concept of income in subsection 25(1). For example, neighbours who exchange some home-grown vegetables over the back fence will not have derived income in terms of subsection 25(1). Also, benefits derived from the use of informal babysitting clubs would not fall for assessment under subsection 25(1). It is noted that a large proportion of transactions made through community-based countertrade organisations would not fall within the concept of income in subsection 25(1). Only those transactions within these organisations which arise from the carrying on of a business or the provision of skilled services would generally fall for consideration as assessable income.

The general principle is that, whether for money or LETS Units, “assessable income” is defined in relation to one’s regular income and not to sundry informal or amateur hobby or back-yard transactions. The point is that if the income is assessable, the expenses of earning that income are deductable. Obviously, the Commissioner doesn’t want any claims where the expenses exceed the income. On the other hand, if a business like a plumber’s receives plumbing income as LETS Units, it’s just as taxable as if the plumber was paid in dollars. (The ATO already cheerfully assumes that a Unit is equivalent to a dollar, for their purposes.) So a friendly plumber who does plumbing work for Units is entirely justified in asking for some percentage (income tax or GST) of the bill to be paid in dollars, because the ATO won’t accept Units. The page explaining how businesses must treat LETS Units, is Bartering and barter exchanges.

As far as superannuation assets are concerned, see paragraph 132 of Self Managed Superannuation Funds Ruling SMSFR 2010/1.

132. The Commissioner considers trade dollars or barter credits are assets other than money. Trade dollars or barter credits can generally only be exchanged for goods and services. As such, they are not unconditional, nor convertible to cash, and have no assigned monetary value. In addition, credit units arising from barter and counter trade transactions are not acceptable forms of payment for parties external to the bartering arrangements.

Will it affect my Centrelink payments?

No, although Centrelink have not given anybody an unequivocal statement, as far as we are aware, there has never been any threat that LETS income will ever be counted. Certainly Centrelink’s regular interrogations never mention income in alternative currency, although they enquire in great detail about assets, trusts, rentals, bonds and cash at hand. You can be sure that the Centrelink gnomes are as well aware of countertrade organisations as those in the Tax Office.

How about GST?

The same principle applies to GST. If the income is “assessable” GST must be paid, but it’s recoverable against the GST cost of any expenses. The ATO prefers not to bother. The ruling on GST for businesses in barter is Goods and services tax: the GST implications of transactions between members of a barter scheme conducted by a trade exchange GSTR 2003/14. Section 17 explains that amateurs don’t have to worry.

17. The community-based schemes are usually run on a non-profit basis and their membership may consist of individuals, businesses or other organisations. Members of community-based schemes are often not registered or required to be registered for GST or do not make supplies in the course or furtherance of their enterprise. However, where members of community-based schemes are registered or required to be registered for GST and make supplies in the course or furtherance of their enterprise, this Ruling applies to them.

BrisLETS ABN – 37 024 958 224
BrisLETS was incorporated on 8 December 1995 (IA 16070)