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An entity which is GST registered (or which needs to be registered) needs to charge GST on its taxable supplies (s.9.70, A New Tax System (Goods and Services Tax) Act 1999 ("GSTA")). While some transactions may only involve the exchange of a ‘taxable supply', some transactions may involve a mix of ‘taxable supplies' as well as ‘GST-free' and/or ‘input taxed' supplies.

, GSTA, requires that, "if a supply (the actual supply) is (a) partly a taxable supply, and (b) partly a supply that is GST-free or input taxed, the value of the part of the actual supply that is a taxable supply is the proportion of the value of the actual supply that the taxable supply represents." In other words, where a transaction involves the exchange of multiple types of supplies, it is necessary to identify which of these were taxable, because it is only the proportional value of those taxable supplies which would need to be taxed.

In order to determine whether a transaction involved the exchange of a taxable supply, and to determine its value, it is necessary to first identify what the customer was actually paying for. Was it paying a single price in order to receive the value of each element separately, in which case the price should be apportioned so that each element should be treated (for tax purposes) separately based on the tax treatment of its characteristics? Or, alternatively, was it paying for one ‘whole deal' which comprised of different elements? If it is one ‘whole deal', what is the proper characterization of that deal?

Assume that you have been approached by a prospective client, Burwood Cheese; a retail shop that specializes in assorted cheese products. The client is looking to introduce a promotional deal to customers, which involves packaging a new exclusive cheese product along with a T-Shirt. The client is aware that, if supplied separately, the cheese would be a GST-free supply, whereas the T- Shirt would be a taxable supply. The client is asking to have you:

- explain the issue(s) involved in taxing a transaction that provides a package deal that consists of mixed supplies (of the cheese and the T-Shirt);
- identify the relevant legislative provision(s), tax ruling(s), and case law (the client has requested reference to at least one case as an example); and
- suggest how the Commissioner may tax this transaction.

Taxation, Accounting

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