Is the on-charging of a dishonoured cheque fee subject to GST?
The payment made in relation to the oncharge of a dishonoured cheque fee is consideration for the supply of an interest in an event under item 2 of subregulation 40-5.09(3) of the GST Regulations, to the extent that the customer has a contractual obligation (express or implied) to make good the loss (the dishonoured cheque fee) incurred by the supplier. Such a transaction will be a financial supply for the purposes of subsection 40-5(2) of the GST Act, to the extent that the further requirements of subregulation 40-5.09(1) of the GST Regulations are met. This analysis is not altered by the fact that the supplier increases the value of the on-charge over and above that which was originally levied on them. Where no contractual obligation exists, the payment of the on-charged dishonoured cheque fee is a payment made for no supply.
