When you give away gifts for free (for example, to your customer or your staff), you will need to account for output tax based on the Open Market Value (OMV) of the gifts if:
Accounting of output tax is not required if: a. The value of your gift (excluding GST) is $200 or less, or b. You chose not to claim input tax when you purchase or import the gift.
You gave away two Christmas hampers, where the total cost was $321 (inclusive of GST). To celebrate the festivities, one hamper was delivered on 17 Dec 2018 and the other was delivered on 20 Dec 2018 to the same customer.
If you claimed the GST of $21, which was incurred on the hampers, you will need to account for the output tax of $21 (i.e. 7% of $300), since the cost of the gifts to this customer was more than $200.
Otherwise, when you choose not to claim the GST incurred on the hampers, there would not be a need for you to account for any corresponding output tax on gifts given free-of-charge to your customer.
You gave away Christmas hampers. The first hamper (cost $150 + GST $10.50) was delivered on 20 Dec 2017 to Customer A and a second hamper (cost $150 + GST $10.50) was delivered to Customer B on 23 Dec 2017, as part of festive celebrations.
Even if you had claimed input tax of $21 on the hampers, you are not required to account for output GST since the cost of each hamper given to the two different customers was not more than $200.
To account for output tax, you can either:
Unlike normal transactions, you should not issue a tax invoice to the recipient of the gift. Instead, you may issue a tax certificate to the recipient if:
The tax certificate, similar to the tax invoice, can be used by the recipient to support his input tax claims.
The tax certificate should include the following:
GST is not chargeable on commercial samples if the samples are:
If these conditions are not met, you are treated as making a supply to the recipient. You may therefore need to account for output tax on these goods given away for free. Please refer to gifts for the GST treatment.
Catalogues that are given free to customers to promote sales can be treated as commercial samples. You do not need to charge and account for GST when you give these away.
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The free good is treated as being sold in a package. You will need to account for GST on the price paid by the consumers.
For example, if you sell a good for $100 and you give away a second one for free, you will be treated as selling two items at the price of $100. In this case, GST is accountable on the total consideration received for the 2 goods, i.e. 7% x $100 = $7.00.