Customer and supplier arrangements: What retail and eCommerce brands need to know

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Customer gift vouchers, supplier discounts, rebates and trade incentives are widely used by retailers. However, the tax treatment of these is far from straightforward. This article examines the tax issues associated with these arrangements and some common issues to be aware of.

Gift vouchers

Gift vouchers can create timing issues for income tax and GST.

For most vouchers, the income tax and GST are recognised when the vouchers are redeemed and the goods are supplied, rather than when the vouchers are sold.

However, the tax treatment can vary depending on the gift vouchers. A different treatment can apply to cash-convertible vouchers, short-expiry vouchers, product-specific instruments and vouchers issued as part of promotional, loyalty or third-party programs. Factors such as breakage estimates, redemption across multiple channels, and the interaction with promotional refunds often mean that each arrangement needs to be assessed on a case‑by‑case basis.

Supplier discounts, rebates and trade incentives

Commercial arrangements such as promotional allowances, volume rebates and marketing support must be correctly characterised for both income tax and GST purposes. The tax outcome depends on the nature of the arrangement and whether the required conditions are satisfied at the relevant time. TR 2009/5 provides guidance on how to treat the payments for income tax. provides guidance on how to treat the payments for income tax.

To understand how these arrangements are treated for tax purposes, it’s helpful to break down the implications for both buyers and sellers.

For buyers:

  • When incentives that directly relate to buying trading stock are subject to conditions, and all those conditions are satisfied at the time of purchase, they are generally treated as a cost reduction
  • If any conditions are not satisfied at the time of purchase, the incentive is typically treated as assessable income when it is earned
  • If the incentive is provided in respect of future acts or services by the buyer, and in practice there’s obligation on the buyer to repay for non-performance, the incentive is typically treated as assessable income when the services are performed.

For sellers:

  • When incentives are subject to conditions and all those conditions are met at the time of purchase, they usually are generally treated as a reduction in sale proceeds
  • If the conditions are not met at the time of purchase, the payment is usually treated as a deductible business expense
  • If the incentives subsidise, compensate, reimburse or reward a buyer for services such as promotional or marketing activities, the payment is typically a business expense for the seller in the year incurred.

For GST purposes, the treatment follows the substance of the arrangement. Depending on the terms, an incentive may reduce the price of a supply or be consideration for a separate supply, depending on the terms.

Failing to correctly identify and document the nature of trade incentives can lead to a number of issues.

The risks of getting it wrong

The incorrect treatment of vouchers and incentives for income tax and GST can have material consequences:

  • Financial penalties and interest may arise from underpayment or misreporting of tax
  • ATO scrutiny and reputational damage, especially where voucher terms are unclear to consumers
  • Potential issues during audits, due diligence, and business sales, with errors impacting valuations and investor confidence
  • Administrative burdens associated with remediation and record adjustments.

How BDO can help

BDO’s retail team has extensive experience advising on all aspects of gift voucher and customer and supplier arrangements. We assist clients with:

  • Reviewing historical and current arrangements for compliance
  • Supporting remediation of past errors and managing ATO disclosures
  • Reviewing your gift vouchers and incentives terms and policies to avoid unexpected tax outcomes.

BDO combines technical expertise with practical solutions, helping retailers and eCommerce brands implement compliant, commercially effective voucher and incentive programmes. To discuss the tax implications of your arrangements, contact your BDO adviser today.

Explore more from our Retail x Tax article series.

Key takeaways

Gift vouchers can create complex income tax and GST timing issues
  • While most gift vouchers are taxed when redeemed rather than sold, the treatment can vary significantly depending on voucher features and program design. Retailers and eCommerce brands need to carefully assess voucher types, breakage assumptions and redemption mechanics to avoid incorrect revenue and GST reporting.
The tax treatment of supplier rebates and trade incentives depends on substance
  • Supplier discounts, rebates and incentives must be correctly characterised based on their conditions and commercial intent. Whether amounts are treated as cost reductions, assessable income or deductible expenses varies for buyers and sellers and can materially affect income tax and GST outcomes.
Poor documentation increases tax risk and ATO scrutiny
  • Failing to clearly document the nature and terms of vouchers and trade incentives can lead to misreporting, penalties and issues during audits or transactions. Robust policies, clear contract terms and consistent tax treatment are critical to managing compliance risk and protecting valuations.

Helping retailers better understand their tax

Retailers and eCommerce brands face tax issues that show up in day‑to‑day decisions, from workforce and incentive arrangements to property, inventory, R&D and growth. These insights share practical guidance on common scenarios and the questions worth checking early to reduce risk and avoid surprises. 

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