2.13 Does section 12 of the GST Transition Act apply to services provided by architects, engineers and surveyors?

For source of ATO view, refer to general principles in:

• GSTB 2000/4 How you calculate and pay GST on a progressive or periodic supply that spans 1 July 2000
• GSTD 2000/3 Goods and services tax: transitional arrangements: to what extent is the supply of services made on or after 1 July 2000, where the supply spans that date?

ATO position

Where services are provided by architects, engineers, surveyors etc it is necessary to determine whether, under the terms of the agreement, the supply is for a particular task or whether it is a supply made for a period or progressively over a period.

Generally, a supply of services is made when those services are performed. This rule is modified where a supply spanning 1 July 2000 is made for a period or progressively over a period.

Where the supply is for a particular task, it will be necessary to determine the extent to which the services have been performed prior to 1 July 2000 as these services will not be subject to GST. Where a supply is for a period or progressively over a period that spans 1 July 2000 the supply is treated as having been made continuously and uniformly over the period. A supply is a progressive or periodic supply if it is made for a specific period (for example, a engineer on a retainer for 12 months, or a landscape gardener engaged under a 12 month maintenance agreement).

However, a supply will not be for a specific period merely because there is a stipulated completion date. This is because the agreement is for the undertaking of a task rather than a supply for a period. If the task is completed before the stipulated completion date then the service is completed. For example, a painter who contracts to paint a house by a specified date is not agreeing to provide his services until that date. Instead he is agreeing to complete a task by that date so he is not making a supply for a specific period.

Example 1 Subsection 6(4) of the Transition Act

Kylie is a consulting architect who is registered for GST on 1 July 2000. On 15 June 2000 she enters an agreement to draw up architectural plans for Michael's house. The fee for the drawings is $8000 plus any GST. Kylie also agrees to provide to her client the additional service of supervising the construction. The fee for the additional service is $2000 plus any GST. The plans are completed on 15 July 2000, and the construction of the house commences. Kylie has kept timesheets showing the amount of work that she has done before 1 July 2000. Her time sheets indicate that 80% of the work in producing the drawings was performed before 1 July 2000. The GST payable by Michael to Kylie on the whole supply is $360 (20% x $8000 x 10% +$2000 x 10%).

Example 2 Section 12 of the Transition Act

Joe Garden is a sole trader who has his own landscaping business. He is registered for GST on 1 July 2000. On 1 April 2000 he enters into a 12 month maintenance agreement with Springfield Shire Council to maintain the council's lawns and gardens. The agreement commences immediately. Joe's fee for his services is $6000 plus any GST. This is a supply for a period to which section 12 of the Transition Act applies. Consequently, the supply is taken to be made continuously and uniformly over the 12 month period, despite the fact that Joe mows the lawns more often during the summer months. GST of $450.41 is payable on this supply (274/365 x $6000 x 10%).

GSTB 2000/4 and further expand on this issue.