Buy-now, pay-later providers: GST considerations

April 6, 2023

The ATO has released a “guidance” which sets out what it sees as the key GST considerations for buy-now, pay-later providers. It focusses on assisting providers to determine their entitlement to input tax credits on related costs. The GST considerations for buy-now, pay-later providers (with no specific identifier) is intended to provide “practical guidance” and explain how the ATO assesses GST risk in this area.

This guidance considers what it describes as typical buy-now, pay-later arrangements. Depending on the facts, a buy-now, pay-later provider may generally make:

  • input taxed supplies of credit when a customer initiates the provider’s provision of payment to the merchant in exchange for the customer’s obligation to repay the provider at a later date
  • taxable supplies of services to merchants in enabling them to accept payment using the provider’s facilities, with the provider then becoming liable to make payment to the merchant (and the customer’s obligation to pay the merchant being discharged). These supplies are made in exchange for merchant fees, charged on a purchase transaction-by-transaction basis.

The ATO states that the apportionment methodology used “must reflect the objective intended use of acquisitions”. The methodology used must have regard to whether some of the acquisitions only relate to making input taxed supplies, or conversely only relate to making taxable supplies. It provides a table of common acquisitions and nexus to the supplies made by buy-now, pay-later providers. There are a number of worked examples.