The Australian Taxation Office last week published a fact sheet on the handling of GST for incentive payments made by greeting card companies to retailers. Incentive payments from card companies are common in the newsagency channel. They lock in loyalty and guarantee retail real-estate. The advice last week from the ATO will challenge some newsagents who have considered the whole amount payable available for investment in the business.
I expect some greeting card companies are now reconsidering their position on incentive payments.
Incentive payments supplement owner capital and often help improve the business through a re-fit or some other vital capital investment. They are also problematic because they alter the relationship with the supplier – sometimes making the newsagent less demanding of the supplier.
The best incentive is that which is tied to commercial success week in week out. Prepaying for potential success is messy on all sides.
Do greeting cards carry a GST?
Yes, Rex, they do.