Bartercard

Bartercard is the world's largest barter trading exchange. Bartercard enables member businesses to exchange goods and services with other member businesses without using cash or cash equivalents, or having to engage in the direct two-way swap of goods and/or services. It was established in Australia in 1991 and operates in over 13 countries with a member database of over 55000.

Members earn Bartercard Trade Dollars for the goods and services they sell and this value is recorded electronically in the member’s account database.

Bartercard is a major sponsor of the Bartercard Cup, the top level rugby league club competition in New Zealand.

Trade exchanges require members who participate in a transaction to pay to the exchange a proportion of the nominal value of the price in cash. The rules vary, but can be seen at the websites of the exchanges.

Taxation

For taxation purposes, that is, for calculating taxation liability, the Australian Taxation Office (ATO) treats one Bartercard Trade Dollar as if it were one dollar in legal currency. It also treats other, similar, "barter credits" - for example, EBanc, Contrabart - as if each "barter credit" were one dollar in legal Australian currency. The revenue authorities of the Australian States treat "barter credit" in the same way. The taxation authorities do not say anything about the actual exchange value for cash.

As with anything that can be exchanged for value, the actual cash exchange value of "barter credits" depends on considerations such as their liquidity (which in turn depends to an extent on the number of members of the trade exchange in any given geographical area) and the cash fees charged by the exchange on each transaction.

Although the practice violates the rules of the "barter credit" exchanges, it is common for vendors to increase the nominal price of goods and services that they exchange for "barter credits," so that the cash value is obviously less than 1:1.

The Australian Taxation Office [http://www.ato.gov.au/super/content.asp?doc=/content/71292.htm] warns the trustees of self-managed superannuation funds that the acquisition of "barter credits" might very well cause the fund to become non-complying. Similarly, the ATO states at the above site that an employer will not comply with its obligations to make contributions to employee superannuation if it makes the contributions in "barter credits."

In fact, the ATO states that "It may also be difficult for trustees to establish a market value for the fund’s assets in situations where barter credits are held." That statement directly contradicts the proposition that the ATO "recognises" that a "Bartercard Trade Dollar" has "the same value as the Australian Dollar." ATO Interpretative Decision ID2003/138 [http://law.ato.gov.au/atolaw/view.htm?docid=AID/AID2003138/00001] contains statements to the same ultimate effect.

The ATO has issued two interpretative decisions on the subject. ID2003/138 has already been mentioned.

In ID2003/137 [http://law.ato.gov.au/atolaw/view.htm?docid=AID/AID2003137/00001] , the ATO says (in part) about the acquisition of "money" by a superannuation fund:

"Unlike bills of exchange and promissory notes, Trade Dollars are not unconditional, nor convertible to cash, nor a promise or order given in writing and have no assigned monetary value. That is, Trade Dollars can generally only be exchanged for goods and services. Also, credit units arising from barter and counter trade transactions are not acceptable forms of payment for parties external to the bartering arrangements, for example credit units are not acceptable for the payment of tax. Therefore, Trade Dollars are not negotiable instruments and as such are not money."

In 2005/2006, the Australian Taxation Office was investigating an alleged scam by the owners of "barter credit" exchanges, who, of course, can issue "barter credits" to themselves free of cost. The scam supposedly went like this (illustrative numbers only):

(a) The owner would buy goods with a market value of $550 for, say, 1,100 "barter credits." The 1,100 "barter credits" cost nothing, but gave rise to a claim for a $100 GST credit (VAT in Europe). (b) The owner would then resell the goods for $550 cash, incurring a GST debt of $50.(c) After the ATO processed the GST claims, the owner would have $550 in cash, made up of the ex-GST sale price of $500 plus $50 cash from the ATO courtesy of the GST legislation.(d) The owner would claim the nominal loss of $500 as an expense against personal tax.(d) The "barter credit" exchange would write off the 1,100 "barter credits" debt owing by the owner, so reducing its income for company tax purposes by $1,100.

External links

* [http://www.bartercard.com/ Bartercard Official Site]

* [http://www.FairTrader.info/ Fair Trade site for Bartercard Members and the Public]

* http://www.ato.gov.au/super/content.asp?doc=/content/71292.htm

ee also

* Credit Card