Common use of Supply of sugar Clause in Contracts

Supply of sugar. The supply of sugar by Wilmar to QSL is also subject to GST. Whilst supplies of many food items are GST-free, raw sugar is still subject to GST, as it has not undergone the refining process and is therefore not yet regarded as food that is fit for human consumption. QSL is able to claim an input tax credit in its BAS in respect of the GST applicable to Wilmar’s supply of sugar. Most of the sugar that is sold by QSL to customers is sold to customers outside Australia. As exports are GST-free, there is typically no GST applicable in respect of sugar sold by QSL. However, if sugar is sold domestically, GST will apply. In such a case, the customer will pay an additional 10% to enable QSL to meet this GST liability to ATO. Accordingly, the GST treatment of QSL’s supplies of sugar to customers has no impact on the net amount available to distribute to the Growers. All of the supplies described above are consistent with the supplies that were formerly made under the previous arrangements that existed before Wilmar pulled out of its RSSA with QSL. The new arrangements involve one additional set of supplies for GST purposes, which occur under the GPA. Under the GPA, the Grower agrees to direct Wilmar to pay the Cane Payables to QSL in return for QSL making an alternative payment to the Grower based on the actual pool prices achieved. This exchanging of one payment for another is called a ‘financial supply’ for GST purposes. Financial supplies are input taxed for GST purposes, which means they do not attract GST. Accordingly, there is no requirement to account for any additional GST in respect of the payments received from QSL. GST is only payable in respect of the supply of cane to Wilmar, for the consideration stated on the Wilmar RCTI.

Supply of sugar. The supply of sugar by Wilmar to QSL is also subject to GST. Whilst supplies of many food items are GST-free, raw sugar is still subject to GST, as it has not undergone the refining process and is therefore not yet regarded as food that is fit for human consumption. QSL is able to claim an input tax credit in its BAS in respect of the GST applicable to Wilmar’s supply of sugar. Most of the sugar that is sold by QSL to customers is sold to customers outside Australia. As exports are GST-free, there is typically no GST applicable in respect of sugar sold by QSL. However, if sugar is sold domestically, GST will apply. In such a case, the customer will pay an additional 10% to enable QSL to meet this GST liability to ATO. Accordingly, the GST treatment of QSL’s supplies of sugar to customers has no impact on the net amount available to distribute to the Growers. All of the supplies described above are consistent with the supplies that were formerly made under the previous arrangements that existed before Wilmar pulled out of its RSSA with QSL. The new arrangements involve one additional set of supplies for GST purposes, which occur under the GPA. Under the GPA, the Grower agrees to direct Wilmar to pay the Cane Payables to QSL in return for QSL making an alternative payment to the Grower based on the actual pool prices achieved. This exchanging of one payment for another is called a ‘financial supply’ for GST purposes. Financial supplies are input taxed for GST purposes, which means they do not attract GST. Accordingly, there is no requirement to account for any additional GST in respect of the payments received from QSL. GST is only payable in respect of the supply of cane to Wilmar, for the consideration stated on the Wilmar RCTI. Rather than receiving payment of the Cane Payables from Wilmar in cash, it has been agreed that this amount will instead be offset against the amount payable by QSL to Wilmar for the acquisition of sugar under the GEISSA. In effect, a single payment will be made by QSL to Wilmar, being the consideration payable by QSL less Cane Payables. As the consideration for cane and sugar have been determined on the same basis, the difference is equal to the net deductions under the CSA. Where costs are incurred in relation to financial supplies, there are special rules that can apply to prevent you from claiming back any GST incurred on related costs (for example, legal or accounting advice in relation to the financial supplies). This is because input tax credits are generally denied in respect of costs relating to input taxed supplies. However, there is a key exception to this general rule that we expect should apply to most Growers. The exception is called the ‘Financial Acquisitions Threshold’. If the GST you incur on costs relating to financial supplies is below a particular threshold, there is no denial of input tax credits in relation to financial supplies. Broadly, the Financial Acquisitions Threshold will be exceeded if, in a twelve month period, the GST paid on expenses relating to financial supplies is greater than: • $150,000; or • 10% of the total amount of input tax credits that are eligible to be claimed in the BAS. Many Growers will not incur any expenses (or associated GST) in respect of the financial supplies made under the new arrangements. For those that do, it is unlikely the costs will exceed the above thresholds. As a result, it is unlikely any denial of GST will arise. We recommend seeking the assistance of your advisor if you are uncertain as to how these rules apply to you.