Goods and Services Tax: how do I account for GST when I supply taxable goods, non-taxable goods and delivery services together?

Delivery services are often associated with the supply of goods. [F1] Where you supply goods delivered to an address specified by your customers, the facts will determine whether the goods and delivery are separate supplies, separately identifiable parts of a mixed supply, or a composite supply of delivered goods. [F2]

You may make supplies of goods and delivery, or arranging delivery, under separate contractual arrangements. Alternatively, you may supply goods and a separate service of delivery under one contract where the goods and the delivery service are separately identifiable parts of a mixed supply. We consider that delivery is a separately identifiable part of a mixed supply where it is significant [F3] and could realistically be made as a separate supply. A delivery service is significant where it is an aim in itself. That is, your customers have a genuine choice under the contract about whether you deliver their goods. Such a choice is indicated where: • your customers are not obliged to use your delivery service; and • you provide reasonable access, at no extra charge, to customers who choose to make their own arrangements to collect the goods. [F4]

Optional delivery services to personal or phone order shoppers are often provided by suppliers such as supermarkets, furniture and electrical stores. These services are treated separately for GST.

You supply delivered goods where the delivery is integral, ancillary or incidental to the supply of the goods. [F5] This will be a composite supply. In these cases, you contract to supply delivered goods only, and not a delivery service in addition to the goods. The delivery is necessary for your customer to enjoy the goods. It is not an end in itself, but merely contributes to the proper performance of the contract to supply the goods. That is, to fulfil the contract for the supply of the goods, the supplier has to deliver them and remains responsible for them until they are delivered.

Many internet and mail order suppliers supply delivered goods. They make an integrated supply of delivered goods that includes the selection, packing and delivery of the customer's order. [F6] These aspects of the supply are not optional. While convenient for the customer, the selection, packing and delivery are not considered to be of such significance that they are separately identifiable parts of the supply. [F7] In such cases the delivery service is integral, ancillary or incidental to the composite supply of delivered goods.

Where a delivery service is a separate supply, or a separate part of a mixed supply, the supply of the service will be taxable [F8] regardless of whether the goods supplied are taxable or GST-free. [F9]

Where you supply delivered goods and it is your practice to charge a separate fee for delivery, you will need to apportion the fee if you supply both taxable and GST-free goods. The GST payable is: Character of the goods supplied GST payable The goods supplied are all taxable. 1/11 of the total consideration, including the delivery fee. No apportionment is required. The goods supplied are all GST-free. Nil. The supply includes both taxable and GST-free goods. [F10] 1/11 of the price of the taxable goods, plus 1/11 of the portion of the delivery fee that is referable to the taxable goods. [F11]

Kay's Pharmacy is an Australian internet supplier of prescription medication and general pharmacy lines. Orders are made by internet or fax. Kay's provides both taxable and GST-free goods. Delivery is to any address in Australia. A person over 18 years of age must take delivery of the goods. A GST inclusive 're-delivery fee' of $12 applies if no one is able to accept the order. Kay's delivery prices are: Metropolitan area Regional or country area Orders over $100 $5.50 for orders under 4kg $6.60 for orders under 2kg Nil At cost for orders over 4kg At cost for orders over 2kg Nil

Mirka orders disposable nappies and cosmetics , both taxable , and GST - free medication . The order is for $ 180 . The delivery service is integral , ancillary or incidental to the supply of the goods . Mirka was not at home when Kay's first attempted to deliver the goods . When Kay's successfully re - delivers the order , Mirka is invoiced for : Goods Price 10% GST included Medication $59.00 Nil (GST-free supply) Disposable nappies $66.00 $6.00 Cosmetics $55.00 $5.00 Delivery $12.00 $0.73 [F12] Total $192.00 $11.73 Kay's GST liability on the supply to Mirka is $11.73.

Lia orders the same goods. She is home when Kay's delivers the goods. She is invoiced for: Goods Price 10% GST included Medication $59.00 Nil (GST-free supply) Disposable nappies $66.00 $6.00 Cosmetics $55.00 $5.00 Total $180.00 $11.00 Kay's GST liability on the supply to Lia is $11.00.

Lay's hires out medical aids and appliances. They have a showroom and a website. They also issue catalogues to hospitals and medical centres.

The goods are supplied to customers at the showroom. Alternatively, Lay's will deliver at the customer's request. Their GST inclusive delivery charges are: • in the metropolitan area a flat fee of $5.50 applies, irrespective of how many appliances are delivered; and • outside the metropolitan area the fee is $15.

Felix hires a wheelchair and ventilator, both GST-free. Felix lives outside the metropolitan area and he arranges for Lay's to deliver the appliances to his home. He is invoiced for: Goods Price 10% GST included 4 weeks hire wheelchair $60.00 Nil (GST-free supply) 4 weeks hire ventilator $50.00 Nil (GST-free supply) Delivery $15.00 $1.36 Total $125.00 $1.36

Lay's is making separate supplies of goods and a delivery service. The goods are GST-free, but the delivery service is taxable. Lay's GST liability on the supply to Felix is $1.36.

May's Groceries is an internet supplier of groceries to the Sydney region. Goods can only be ordered by internet or fax. Customers can choose to have their order: • packed (charge - $5 plus GST) for collection at one of May's depots; • packed (charge - $5 plus GST) and delivered to any location within 25km of the Sydney GPO (delivery fee - $10 plus GST); or • packed (charge - $5 plus GST) and delivered to any location between 25km and 75km from the Sydney GPO (delivery fee - $10 plus $3 for each additional 5km outside the 25km boundary - plus GST).

May's marketing promotes the reliability and convenience of having quality goods selected and packed by specially trained staff. This service is integral to the goods that May's contracts to provide. The delivery service is an optional extra that May's does not provide unless requested by the customer.

Anwar lives 10km from the GPO. He orders $120 worth of GST-free fruit and vegetables, and $110 worth of taxable groceries to be delivered to his home. He is invoiced for: Goods Price 10% GST included Fruit and vegetables $120.00 Nil (GST-free supply) Groceries $110.00 $10.00 Packing $5.24 $0.24 [F13] Delivery $11.00 $1.00 Total $246.24 $11.24

May's delivery service is a separately identifiable part of Anwar's supply and is taxable. However, the packing service is merely integral, ancillary or incidental to the supply of the goods. The packing charge is apportioned across the taxable and GST-free goods. May's GST liability on the supply to Anwar is $11.24.

We invite you to comment on this Draft Goods and Services Tax Determination. We are allowing 6 weeks for comments before we finalise the Determination. If you want your comments considered, please provide them to us within this period. Comments by Date: 15 August 2002 Contact officer details have been removed following publication of the final determination.