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  • Property and Construction Industry Partnership – issues register – section 14 – real estate agent issues

     For GST, Luxury Car Tax and Wine Equalisation Tax purposes, from 1 July 2015, where the term ‘Australia’ is used in this document, it is referring to the ‘indirect tax zone’ as defined in subsection 195-1 of the GST Act.

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    (a) added, (u) updated, (w) withdrawn

    Issue number

    Index

    Date

    Issue history

    14

    Real estate agents

    14.1

    Collation of information for business activity statements (BAS)

    21/01/04 (w)

     

    14.2

    Agency relationship and the GST

    09/04/01

     

    14.3

    Tax invoices

    14.3.1

    Will the standard end of month statement, owner statement or tenant statement with the addition of an Australian business number (ABN) suffice as a tax invoice or does a tax invoice need to be issued separately?

    09/04/01

     

    14.3.2

    Are separate tax invoices required for a lease of commercial premises if lease payments are made periodically over the term of the lease?

    04/04/13 (u)

     

    14.3.3

    Should tax invoices issued by the agent on behalf of the property owner, be in the agent's identity or the owner's identity?

    04/04/13 (u)

     

    14.3.4

    Are all lessees required to be supplied with receipts or tax invoices?

    04/04/13 (u)


    14.3.5

    How much information about a supply should be noted on an owner's statement, tenant's statement, tenant's receipt etc?

    04/04/13 (u)

     

    14.3.6

    Whose ABN must be shown on the tax invoice?

    04/04/13 (u)


    14.3.7

    Will a remittance showing the GST that has been paid to a creditor (for example, a tradesman) be required?

    09/04/01

     

    14.4

    GST administration

    14.4.1

    When is an entity required to remit GST to the ATO - monthly or quarterly?

    18/10/02 (u)

     

    14.4.2

    Where should an agent retain the GST collected before the payment is required by the ATO?

    09/04/01

     

    14.4.3

    What happens where the supplier incorrectly charges GST and the recipient, in good faith, claims the input tax credits?

    21/01/04 (u)

     

    14.4.4

    What are the GST obligations for a real estate agent in relation to payment of GST and input tax credit claims?

    21/01/04 (u)

     

    14.4.5

    Will GST be payable on property maintenance etc and who will collect this?

    09/04/01

     

    14.4.6

    When can a real estate agent account for GST on a cash basis?

    21/01/04 (u)

     

    14.4.7

    Does the ATO think there are benefits if all computer programs handle the GST in a standard way?

    09/04/01

     

    14.5

    Expenses incurred on behalf of a property owner

    14.5.1

    If an agent incurs advertising, repair, maintenance costs and electronic banking charges etc on behalf of the owner, who is entitled to the input tax credits and what happens if the agent includes a mark up on these costs?

    09/04/01

     

    14.5.2

    Will the charges to the owner's trust account be subject to GST? For example, agent's commission, lease preparation fees, FID, BADT, statement fees, transfer fees, cheque fees.

    09/04/01

     

    14.5.3

    Does the consideration for a commercial property lease include payments made by the lessee for the lessor (for example, council rates and land tax)?

    21/01/04 (u)

     

    14.6

    Commission

    14.6.1

    Is an agent's commission for the sale of a property subject to GST if the sale contract was entered into before 1 July 2000, but settlement occurs on or after that date?

    21/01/04 (u)

     

    14.7

    Fees

    14.7.1

    Which of the following fees charged by an agent are subject to GST: letting fees, lease preparation fee charged to the landlord, lease preparation fee charged to the tenant, statement and administration fee, property inspection fees?

    21/01/04 (u)

     

    14.7.2

    GST treatment of fees charged by real estate agents for preparation of residential tenancy agreements.

    23/02/04 (a)

     

    14.8

    GST pricing issues

    14.8.1

    Should fees or even property sale prices be stated as GST inclusive or GST exclusive?

    21/01/04 (w)

     

    14.8.2

    Is the rent to be shown as GST inclusive? If so, is the agent's commission or property management fee charged on the GST inclusive or exclusive rent?

    21/01/04 (w)

     

    14.8.3

    Is the auctioneer required to state prior to the commencement of an auction whether bids are to be GST inclusive or exclusive?

    21/01/04 (w)

     

    14.9

    Withholding

    14.9.1

    What does the agent have to do if the lessor does not supply an ABN?

    21/01/04 (w)

     

    14.9.2

    If a supplier does not quote an ABN, does the agent have to withhold tax at the maximum rate?

    21/01/04 (w)

     

    14.10

    Non-resident property owners

    14.10.1

    Is a resident agent for a non-resident owner of a commercial property liable for the GST on the lease of the property?

    21/01/04 (u)

     

    14.10.2

    What is meant by 'resident agent' and 'non-resident'?

    21/01/04 (u)

     

    14.11

    Tax exempt property owners

    14.11.1

    Is the GST treatment of a supply of property management services by an agent any different if the recipient of those services is an income tax exempt organisation (for example, a church)?

    21/01/04 (u)

     

    14.11.2

    Are some commercial lessees GST exempt?

    09/04/01

     

    14.12

    Transitional issues and management agency authorities

    14.12.1

    Are supplies made under the management agency authorities (MAA) subject to GST?

    21/01/04 (w)

     

    14.12.2

    If the period of supply is not specifically identified in the agreement between the real estate agent and the landlord, will section 13 of the Transition Act apply?

    21/01/04 (w)

     

    14.12.3

    Does an opportunity to terminate the agreement give rise to a 'review opportunity'?

    21/01/04 (w)

     

    14.12.4

    Does the change in the rent resulting from the imposition of GST give rise to a 'review opportunity'?

    21/01/04 (w)

     

    14.12.5

    Does section 13 of the Transition Act still apply where the managing fees are varied or the MAA is revised?

    21/01/04 (w)

     

    14.12.6

    Should an agency have new property management agreements with GST inclusions signed by the property owner/lessor? Is there an alternative to this? Can it be done by letter or other methods?

    21/01/04 (w)

     

    14.12.7

    Are the parties required to complete a new MAA if the MAA has an indefinite term?

    21/01/04 (w)

     

    14.12.8

    A developer is currently building twelve new holiday apartments behind an existing four year old complex comprising of two shops, an office and a two bedroom flat. The developer is also building an extension onto the two bedroom flat (an extra bedroom and ensuite bathroom). The developer intends to strata title the whole complex upon completion. The twelve holiday apartments have already begun to be sold individually off-the-plan. Also the uncompleted, extended flat has been sold to the manager of the holiday units. Completion of the whole project is expected on 31 August 2000. After which strata titles will be obtained and settlements will take place.

    (a) Does the manager have to pay GST on the full purchase price of the manager's apartment if the manager intends to use it as a principal place of residence?

    (b) If the developer chooses to use the margin scheme, does the answer to (a) change?

    (c) Can the developer apportion the margin scheme to each new apartment based on their level of completion?

    (d) Can the developer choose the margin scheme for some of the units and not for others?

    21/01/04 (w)


    14.12.9

    If a tenant breaks a 'fixed term' tenancy agreement and the agency re-lets a property for the tenant and the tenant pays a re-let fee, will GST be payable by the tenant and will a special clause be needed in the tenancy agreement to cover the charge?

    21/01/04 (w)

     

    14.12.10

    A real estate agent entered into a written agreement with a developer in April 1999 to sell a unit development, off-the-plan, for a set fee. It was expected that the development would be completed before 30 June 2000. The last of the units was sold several months prior to the 30 June 2000. Due to various factors, the project will not be completed before 30 June 2000. It now appears that settlement will occur on 7 July 2000. Does GST apply to the real estate agent's fee?

    21/01/04 (w)

     

    14.12.11

    A real estate agent entered into a written agreement with a developer in October 1998 to sell a unit development, off-the-plan, for a set fee. It was expected that the development would be completed before 30 June 2000. The last of the units were sold several months prior to the 30 June 2000. Due to various factors, the project will not be completed before 30 June 2000. It now appears that settlement will occur on 7 July 2000. Does GST apply to the real estate agent's fee?

    21/01/04 (w)

     

    14.12.12

    A real estate agent entered into a written agreement on 18 August 1999 to sell the complex mentioned in issue 14.12.8 above. There was no provision for GST included in the real estate agency appointment contract. At present, the real estate agent has been able to sell four holiday apartments and the manager's unit off-the-plan.

    (a) As the project will settle in August 2000, will the real estate agent have to pay GST on their real estate commission on the apartments already sold which they can't recover?

    (b) Can the real estate agent renegotiate with the developer to include GST on the unsold apartments?

    (c) If the contract is renegotiated, can the developer pass the increase due to the GST onto the purchasers of the unsold apartments after 1 July 2000?

    21/01/04 (w)


    14.13

    Rent roll

    14.13.1

    Is the sale of an agent's rent roll subject to GST?

    21/01/04 (u)

     

    14.13.2

    What is the GST treatment of the transfer of a real estate agent's rent roll?

    21/01/04 (w)

     

    14.14

    General

    14.14.1

    What information and advice should a managing agent give to tradespeople and contractors regarding the GST and the general income tax imposition where more than 80% of their income is received from the agent?

    09/04/01

     

    14.14.2

    Are commercial premises under residential leases and residential premises under commercial leases subject to GST?

    04/04/13 (u)

     

    14.14.3

    When do the old taxes such as FID and BADT cease to operate?

    18/10/02 (u)

     

    14.14.4

    What will the agents have to supply to the ATO if a tenant or owner is being investigated?

    09/04/01

     

    14.14.5

    In the process of selling farming properties, plant and equipment is usually sold by way of a clearing sale. Assuming the vendor is registered for GST are the sales taxable supplies and therefore subject to GST?

    09/04/01

     

    14.14.6

    What is the effect of a GST clause in a MAA?

    09/04/01

     

    14.14.7

    How will the GST affect the sale of properties in regard to the agent? Can the GST be handled outside of the trust account?

    09/04/01

     

    14.14.8

    Is a GST registered entity entitled to an input tax credit for the purchase of a new holiday apartment (for which the vendor was liable for GST)?

    21/01/04 (u)

     

     

    Acts and regulations

    GST Act - A New Tax System (Goods and Services Tax) Act 1999

    GST regulations - A New Tax System (Goods and Services Tax) Regulations 1999

    Transition Act - A New Tax System (Goods and Services Tax Transition) Act 1999

    Relevant public rulings

    GSTR 2000/1 Goods and services tax: adjustment notes

    GSTR 2000/13 Goods and services tax: accounting on a cash basis

    GSTR 2000/16 Goods and services tax: transitional arrangements - GST-free supplies under existing agreements

    GSTR 2000/37 Goods and services tax: agency relationships and the application of the law

    GSTR 2002/5 Goods and services tax: when is a 'supply of a going concern' GST-free?

    GSTR 2012/5 Goods and services tax: residential premises

    GSTR 2012/6 Goods and services tax: commercial residential premises

    GSTR 2013/1 Goods and services tax: tax invoices

    Relevant determination

    GSTD 2000/9 Goods and services tax: if you let out a residence do you need to get an ABN for PAYG purposes or register for GST?

    GSTD 2000/10 Goods and services tax: are outgoings payable by a tenant under a commercial property lease part of the consideration for the supply of the premises?

    Relevant sections

    Division 57 'Resident agents acting for non-residents' of the GST Act

    Division 111 'Reimbursement of employees etc' of the GST Act

    Division 153 'Agents and insurance brokers' of the GST Act

    14.1 Collation of information for business activity statement (BAS)

    Issue 14.1 has been withdrawn. For information about business record keeping and information requirements for your BAS, see Record keeping essentials and Activity statements - home on the ATO website.

    14.2 Agency relationship and the GST legislation

    Non-Interpretative - other reference (see GSTR 2000/37 Goods and services tax: agency relationships and the application of the law).

    ATO position

    Ruling GSTR 2000/37 provides a detailed discussion on the general law in relation to agency relationships. It also discusses factors which indicate an agency relationship, and provides examples. Paragraphs 55 to 71 deal with GST payable and input tax credits under agency arrangements, and also with the issuing of tax invoices and adjustment notes.

    There are three special rules in the GST Act that deal specifically with agents and they are:

    1. Division 57 of the GST Act which covers resident agents acting for non-residents
    2. Division 111 of the GST Act which covers reimbursements to agents for expenses incurred on a registered entity's behalf, and
    3. Division 153 of the GST Act which covers agents etc and insurance brokers.

    The Explanatory Memorandum to Division 153 of the GST Act states if you make supplies through agents, the general law of agency applies. That is, a thing done by your agent for you is a thing done by you. It further explains that the entity, not the agent, is liable for the GST on taxable supplies and taxable importations made through the agent as section 9-40 of the GST Act states that you must pay the GST payable on any taxable supply you make. The entity is entitled to input tax credits on creditable acquisitions and creditable importations made through the agent as section 11-20 of the GST Act states that you are entitled to the input tax credit for any creditable acquisition that you make. Therefore, the agent is not liable for GST and is not entitled to the input tax credits. Section 195-1 of the GST Act defines 'you' to apply to entities generally unless expressly limited by a provision.

    Division 57 of the GST Act provides an exception to the general rules where a resident agent is acting for a non-resident. Section 57-20 of the GST Act states that if the non-resident is registered or required to be registered, the resident agent acting for them will be required to be registered. Section 57-5 of the GST Act states that the agent will be required to pay GST on any taxable supplies or taxable importations made through them by the non-resident. Section 57-10 of the GST Act states that the resident agent will be entitled to input tax credits arising from creditable acquisitions or creditable importations made by the non-resident. The responsibility to complete and lodge the business activity statement will lie with the agent.

    14.3 Tax invoices

    14.3.1 Will the standard end of month statement, owner statement or tenant statement with the addition of an Australian business number (ABN) suffice as a tax invoice or does a tax invoice need to be issued separately?

    Non-Interpretative - straight application of the law

    ATO position

    A standard end of month invoice with the addition of an ABN would not satisfy the requirements of a tax invoice. The standard end of month, owner statement or tenant statement must be in the approved form and contain enough information to enable the following to be clearly ascertained before it would be considered to be a tax invoice:

    1. the ABN and the identity of the supplier (subparagraph 29-70(1)(c)(i) of the GST Act)
    2. if the total price of the supply is at least $1,000 or if the document is issued by the recipient-the recipient's identity or ABN (subparagraph 29-70(1)(c)(ii) of the GST Act)
    3. what is supplied, including the quantity (if applicable) and the price of the supply (subparagraph 29-70(1)(c)(iii) of the GST Act)
    4. the extent to which each supply to which the document relates is a taxable supply (subparagraph 29-70(1)(c)(iv) of the GST Act)
    5. the date the document is issued (subparagraph 29-70(1)(c)(v) of the GST Act)
    6. the amount of GST (if any) payable in relation to each supply to which the document relates (subparagraph 29-70(1)(c)(vi) of the GST Act
    7. if the document was issued by the recipient and GST is payable in relation to any supply-that the GST is payable by the supplier (subparagraph 29-70(1)(c)(vii) of the GST Act
    8. it can be clearly ascertained from the document that the document is intended to be a tax invoice or, if it was issued by the recipient, a recipient created tax invoice (paragraph 29-70(1)(d) of the GST Act.

    A tax invoice would not need to be issued separately from an end of month statement, if the end of month statement is modified to incorporate the above information.

    14.3.2 Are separate tax invoices required for a lease of commercial premises if the lease payments are made periodically over the term of the lease?

    Non-Interpretative - other reference (see paragraphs 109 to 111 of  GSTR 2013/1 Goods and services tax: tax invoices).

    ATO position

    No. See paragraphs 101 to 111 of GSTR 2013/1.

    14.3.3 Should tax invoices issued by an agent on behalf of the property owner, be in the agent's identity or the owner's identity?

    Non-Interpretative - other reference (see:

    • paragraphs 95 and 96 of GSTR 2013/1 Goods and services tax: tax invoices, and
    • paragraphs 61 to 66 of GSTR 2000/37 Goods and services tax: agency relationships and the application of the law).

    ATO position

    Subparagraph 29-70(1)(c)(i) of the GST Act provides that a tax invoice contains enough information to enable the supplier's identity and ABN to be clearly ascertainable.

    Paragraph 65 of GSTR 2000/37 states that 'If an agent issues a tax invoice for a supply made on behalf of the principal that contains the agent's identity and ABN, the document would not meet the requirements of subsection 29-70(1). However, the Commissioner has made a determination under subsection 29-10(3) to waive the requirement for the recipient to hold a tax invoice before attributing an input tax credit to a tax period, if the recipient or their agent holds a document that contains the identity and ABN of the supplier's agent, and that otherwise satisfies the requirements of subsection 29-70(1).'

    For more information, refer to:

    A New Tax System (Goods and Services Tax) Waiver of Tax Invoice Requirement (Acquisitions Under an Agency Relationship) Legislative Instrument 2013

    14.3.4 Are all lessees required to be supplied with receipts or tax invoices?

    Non-Interpretative - other reference (see GSTR 2013/1 Goods and services tax: tax invoices).

    ATO position

    A tax invoice for any taxable supply (residential rent is not a taxable supply) made to the lessee must be given to the lessee within 28 days of a request by the lessee. The GST law does not require additional 'receipts' to be issued to the lessee. If a 'receipt' is required for other regulatory or commercial purposes, it may be possible to combine the 'receipt' and the tax invoice into a single document. For more information about tax invoice requirements, see GSTR 2013/1.

    14.3.5 How much information about a supply should be noted on an owner's statement, tenant's statement, tenant's receipt etc?

    Non-Interpretative - other reference (see GSTR 2013/1 - Goods and services tax: tax invoices).

    ATO position

    The information requirements for a tax invoice are set out in GSTR 2013/1, and those for an adjustment note, in draft GSTR 2013/D1. The GST law does not prescribe information requirements for documents other than tax invoices and adjustment notes. If the documents are not to be used as tax invoices, or adjustment notes, the information content of those documents will be an ordinary commercial decision for the entities concerned.

    14.3.6 Whose ABN must be shown on the tax invoice?

    Non-Interpretative - other reference (see GSTR 2013/1 Goods and services tax: tax invoices)

    ATO position

    Section 29-70(1) of the GST Act specifies amongst other requirements that a tax invoice is a document that contains enough information to enable the ABN and identity of the supplier to be clearly ascertained. (Refer to 14.3.3 and GSTR 2013/1 for more information)..

    14.3.7 Will a remittance showing the GST that has been paid to a creditor (for example, a tradesman) be required?

    Non-Interpretative - straight application of the law.

    ATO position

    When a taxable supply is made, the creditor will have issued a tax invoice that identifies how much GST has been charged for the supply. The recipient on payment of that supply is not required to identify to the creditor, the amount of GST they have paid for the supply.

    14.4 GST administration

    14.4.1 When is an entity required to remit GST to the ATO - monthly or quarterly?

    Non-Interpretative - straight application of the law

    ATO position

    If your GST turnover is less than $20 million, you are required to report and pay GST quarterly unless you elect to do so monthly. You are required to report and pay GST monthly if:

    (a) your GST turnover is $20 million or more

    (b) your enterprise will be carried on in Australia for less than three months, or

    (c) you have a history of failing to comply with your obligations under a taxation law.

    The quarterly GST reporting and payment dates are as follows:

     

    Quarter

    Due date

    Time to complete

    Quarter 1 (July-September)

    28 October

    4 weeks

    Quarter 2 (October-December)

    28 February

    8 weeks

    Quarter 3 (January-March)

    28 April

    4 weeks

    Quarter 4 (April-June)

    28 July

    4 weeks

    If you report and pay GST monthly, you must do so no later than the 21st of the following month.

    For more information about payment of GST, see the GST for small business on the ATO website

    14.4.2 Where should an agent retain the GST collected before the payment is required by the ATO?

    Non-Interpretative - straight application of the law

    ATO position

    There is an obligation on registered entities to remit net amounts of GST collected to the ATO. How entities deal with the funds collected prior to remitting them to the ATO is a commercial decision, which will be based on the entity's individual policies and procedures. If the net amount of GST is not remitted to the ATO on or before the due date, penalties will apply. Where entities are required to make electronic lodgements (that is, where GST turnover is $20 million or greater) any GST collected should be placed into an Australian bank account to facilitate this method of payment.

    14.4.3 What happens where the supplier incorrectly charges GST and the recipient, in good faith, claims the input tax credits?

    Non-Interpretative - straight application of the law

    ATO position

    See the fact sheet Correcting GST errors

     

    14.4.4 What are the GST obligations for a real estate agent in relation to payment of GST and input tax credit claims?

    Non-Interpretative - straight application of the law

    ATO position

    It depends on whether the real estate agent is acting in the capacity of agent or principal. Issues 14.2, 14.3.3, 14.3.6, 14.5.1, 14.10 and 14.14.4 discuss the GST implications for an entity acting in the capacity of agent.

    If a real estate agent is acting in the capacity of principal, it is liable to pay GST on any taxable supplies it makes and is entitled to claim an input tax credit for any creditable acquisitions. It is required to report and pay GST according to the rules set out in issue 14.4.1.

    14.4.5 Will GST be payable on property maintenance etc and who will collect this?

    Non-Interpretative - straight application of the law

    ATO position

    A tradesperson who carries out the maintenance of a property is providing a service to the owner of the property. If the supply is a taxable supply, the supplier (tradesperson) is liable to pay the GST.

    14.4.6 When can a real estate agent account for GST on a cash basis?

    Non-Interpretative - other reference (see GSTR 2000/13 Goods and services tax: accounting on a cash basis).

    ATO position

    See GSTR 2000/13.

    14.4.7 Does the ATO think there are benefits if all computer programs handle the GST in a standard way?

    Non-Interpretative

    ATO position

    The type of computer program to be used by an entity to meet their obligations under the GST Act is a commercial decision for that entity to make. The ATO is not in a position to comment on this issue.

    14.5 Expenses incurred on behalf of a property owner

    14.5.1 If an agent incurs advertising, repair, maintenance costs and electronic banking charges etc on behalf of the owner, who is entitled to the input tax credits and what happens if the agent includes a mark up on these costs?

    For source of ATO view refer to GSTR 2000/37 Goods and services tax: agency relationships and the application of the law

    ATO position

    When an owner makes acquisitions through agents the general law of agency may apply. That is, a thing done by an agent as agent for the owner is a thing done by the owner. The owner is entitled to the input tax credits on creditable acquisitions and importations made through the agent. The agent is not liable for the GST and is not entitled to the input tax credits. The terms of the agency agreement will determine whether a particular amount recovered from the owner forms part of the consideration for the supply of agency services or is merely a reimbursement of costs incurred by the agent on behalf of the owner. A payment is a reimbursement when the agent is compensated exactly (meaning precisely, as opposed to approximately) for an expense already incurred although not necessarily disbursed. In general, the owner considers the expense to be its own and the agent incurs the expenditure on behalf of the owner.

    It should be noted that where an agent incurs a cost that is reimbursed by the owner, the agent is not entitled to claim an input tax credit on the acquisition. Where an amount is incurred and not reimbursed, the cost will represent an ordinary operating cost of the agent's enterprise and an input tax credit will be available to the agent (assuming it is otherwise a 'creditable acquisition' for the agent).

    Example

    An agent purchases a $5,500 air-conditioning unit for the owner of a building and claims the reimbursement. The owner is entitled to the input tax credit if it is a creditable acquisition.

    In the example above, if the agent charges the owner more than $5,500, it would not be a reimbursement, that is, the agent charges a mark-up. Assuming the agent who is registered for GST charges the owner $6,050 and invoices the owner for $6,050 being sale of an air-conditioning unit from the agent to the owner; GST payable by the agent would be 1/11 of $6,050 which is $550. The agent is entitled to claim the input tax credit of $500 which is 1/11 of $5,500. The owner is entitled to claim an input tax credit of $550 if the unit is a creditable acquisition. If the agent claims the reimbursement of $5,500 plus a service fee of $550 for organising the purchase and installation, etc; GST payable by the agent would be $50 being 1/11 of $550. The owner is entitled to an input tax credit of $550 (that is, 1/11 of $5,500 + 1/11 of $550) provided the unit is a creditable acquisition.

    Electronic banking charges incurred by the agent and passed on to property owners would not usually be considered a reimbursement. The banking charges relate to activities on the agent's bank account and are a cost to their business, which they then pass on to those whose properties they manage. If the charges to the owner's trust account form part of the consideration for the services performed by the agent, GST will be payable by the agent on these amounts.

    A discussion of the agency relationship and disbursements appears in GSTR 2000/37 commencing at paragraph 48.

    14.5.2 Will the charges to the owner's trust account be subject to GST? For example, agent's commission, lease preparation fees, FID, BADT, statement fees, transfer fees, cheque fees.

    For source of ATO view refer to GSTR 2000/37 Goods and services tax: agency relationships and the application of the law.

    ATO position

    Where an agent makes a taxable supply of services to the owner, the agent will be liable to remit 1/11th of the consideration received for the supply as GST. Consideration for the supply by the agent will include fees for services performed for example; agency commissions and lease preparation fees. The agent will be liable for GST on these amounts (assuming the requirements of section 9-5 of the GST Act are otherwise satisfied). Such charges to the owner's trust account will therefore be subject to GST.

    However, there may be other fees and charges that the agent has incurred on behalf of the owner, for which the agent is subsequently reimbursed. Such fees and charges are not considered to form part of the consideration for the services performed by the agent. Accordingly, the agent will not be liable for GST when these amounts are recovered from the owner. The terms of the agency agreement will determine whether a particular amount recovered from the owner forms part of the consideration for the supply of agency services (subject to GST), or is merely a reimbursement of costs incurred by the agent on behalf of the owner (not subject to GST). A payment is a reimbursement when the agent is compensated exactly (meaning precisely, as opposed to approximately) for an expense already incurred although not necessarily disbursed. In general, the owner considers the expense to be their own and the agent incurs the expenditure on behalf of the owner.

    It should be noted that where an agent incurs a cost that is reimbursed by the owner, the agent is not entitled to claim an input tax credit on the acquisition. Where an amount is incurred and not reimbursed, the cost will represent an ordinary operating cost of the agent's enterprise and an input tax credit will be available to the agent (assuming it is otherwise a 'creditable acquisition' for the agent). In summary, if the charges to the owner's trust account are reimbursements to the agent for costs incurred, GST will not be payable by the agent on these amounts. Therefore, these charges will not be subject to GST. If the charges to the owner's trust account form part of the consideration for the services performed by the agent, GST will be payable by the agent on these amounts.

    A discussion of the agency relationship and disbursements appears in GSTR 2000/37 commencing at paragraph 48.

    14.5.3 Does the consideration for a commercial property lease include payments made by the lessee for the lessor (for example, council rates and land tax)?

    Non-Interpretative - other reference (see GSTD 2000/10 Goods and services tax: are outgoings payable by a tenant under a commercial property lease part of the consideration for the supply of the premises?)

    ATO position

    For a discussion on outgoings payable by a tenant under a commercial property lease which represents part of the consideration for the supply of the premises refer to the GST Determination GSTD 2000/10.

    14.6 Commission

    14.6.1 Is an agent's commission for the sale of a property subject to GST if the sale contract was entered into before 1 July 2000, but settlement occurs on or after that date?

    For source of ATO view refer to GSTR 2000/7 - Goods and services tax: transitional arrangements - supplies, including supplies of rights, made before 1 July 2000 and the extent to which such supplies are taken to be made on or after 1 July 2000.

    ATO position

    The Transition Act states that GST is payable on a supply to the extent that it is made on or after 1 July 2000. In answering the question of whether a GST liability arises on a real estate agent's commission there are two questions to be answered. Firstly, what is the service, as identified in the agency sale agreement, provided by the agent and secondly, when is this service performed. The time of supply rule for services is that the supply is made when the services are 'performed'. 'Performed' is not defined in the Transition Act and should be given its ordinary meaning, which infers finality or completion of the service.

    The time that a service is performed will depend on the supply identified in each individual agreement. The supply provided by a real estate agent will be provided at a specific point in time and will not be made progressively over a period. Generally, this point in time will be upon settlement. However the agreement may identify the supply as being performed at an earlier point in time. An example of where a supply is identified as being at an earlier point in time is where the agent is engaged to 'inspect, value, market a property, provide an auctioneer and find a buyer at auction'. Here the supply is made when a buyer is found at auction. Another example is where the agent is engaged to 'find a ready willing and able purchaser'. Here, the supply would be made when such a purchaser is found. However, if other services are identified in the agreement, the supply may not be made until those other services, as identified in the agreement, are complete.

    The ATO considers that where an agreement provides that the agent is to sell the property, the supply of the agent's service is not complete until such time as the sale is complete, which is at settlement. Further, the receipt of consideration does not determine the point in time that the supply is made. Generally, clauses which relate to entitlement to fees are regarded as conditions surrounding payment and are often placed in agreements to protect a real estate agent's entitlement to commission in a competitive market. They do not affect the time of supply for GST purposes. Further, these clauses often do not permit the agent to receive the payment of the commission, they merely establish which agent is entitled to the commission.

    Where independent services, such as advertising or valuations, are performed before 1 July 2000 these will be regarded as separate supplies and not subject to GST.

    In conclusion, if the agreement provides that the agent is appointed to sell the property and settlement is on or after 1 July 2000, GST will apply. The fact that the contract becomes unconditional before 1 July 2000 does not mean the service is performed before 1 July 2000. It is to be noted that the ability of a real estate agent to recover the GST liability from the vendor will depend on the terms of the individual agreement. This is a question of contract law and is not governed by the GST legislation.

    14.7 Fees

    14.7.1 Which of the following fees charged by an agent are subject to GST: letting fees, lease preparation fee charged to the landlord, lease preparation fee charged to the tenant, statement and administration fee, property inspection fees?

    Non-interpretative- straight application of the law.

    ATO position

    If a real estate agent is registered for GST, all of the fees listed above will be consideration for taxable supplies. Letting fees charged to the landlords or tenants, lease preparation fees from both landlords and tenants, statement and administration fees and property inspection fees are all paid to the real estate agent as consideration for services provided and will all be subject to GST.

    14.7.2 GST treatment of fees charged by real estate agents for preparation of residential tenancy agreements

    For source of ATO view refer to GSTR 2000/37 Goods and services tax: agency relationships and the application of the law.

    ATO position

    If a real estate agent is registered for GST and the other requirements of section 9-5 of the GST Act are satisfied, the service provided by the real estate agent for the preparation of a residential tenancy agreement is a taxable supply. The agent has a GST liability of 1/11th of the price of the supply (for example, if an agent charges $33 for preparation of an agreement, the real estate agent will have a GST liability of $3 on the supply of the service).

    State legislation may place the landlord under a statutory obligation to provide the tenant with a copy of the unsigned and executed agreements. It may also entitle the landlord to seek reimbursement from the tenant for a portion of the preparation costs of the residential tenancy agreement.

    A real estate agent may prepare a residential tenancy agreement at the request of the landlord so that the landlord can comply with its obligations under State legislation. This will result in a separate contractual agreement between the landlord and the real estate agent. In this situation the real estate agent makes a taxable supply of services to the landlord. Consequently, it is the landlord, not the tenant who is liable for the consideration payable on the taxable supply.

    Any reimbursement made by the tenant is not consideration payable to the real estate agent for the supply made by the real estate agent to the landlord. Nor is the reimbursement made by the tenant consideration for any supply made by either the landlord or the real estate agent to the tenant. It is a payment made under the tenant's statutory obligation to the landlord.

    In practice, that reimbursement may, at the implied direction of the landlord, be paid to the real estate agent and retained by the real estate agent against the fee charged to the landlord for the preparation of the agreement. As a result, the amount of the reimbursement may become part of the consideration paid by the landlord for the supply made by the real estate agent to the landlord.

    As there is no supply of a lease preparation service by either the landlord or the real estate agent to the tenant, there is nothing in the GST law which would allow either the landlord or the real estate agent to 'gross up' the reimbursement to reflect GST. The amount of any reimbursement is a matter for State law.

    Example

    Peter owns a residential property in NSW that has been advertised for rental through a real estate agent, Lisa, who is registered for GST. Bob is interested in leasing the property. Lisa is asked by Peter to prepare a residential tenancy agreement. Lisa charges Peter $33 for her services. It is assumed that the requirements of section 9-5 of the GST Act are satisfied. The GST implications are as follows:

    As Lisa is making a taxable supply to Peter, her GST liability is $3 (1/11th of $33).

    The consideration of $33 is payable by Peter to Lisa. As residential accommodation is an input taxed supply, Peter cannot claim an input tax credit for the GST of $3 paid on the supply. Peter is entitled by NSW legislation to seek a reimbursement of up to $15 directly from Bob or he may allow Lisa to retain that amount from any payment made by the tenant to the agent in relation to the rented property.

    14.8 GST pricing issues

    Issues 14.8.1, 14.8.2 and 14.8.3 have been withdrawn as at 21 Jan 2004.

    For information about whether fees and prices should be quoted GST-inclusive or GST-exclusive, contact the Australian Competition and Consumer Commission (ACCC) on 1300 302 502.

    14.9 Withholding

    Issues 14.9.1 and 14.9.2 have been withdrawn as at 21 Jan 2004.

    For information about PAYG withholding requirements, refer to the ATO website at No ABN withholding - questions and answers.

    14.10 Non-resident property owners

    14.10.1 Is a resident agent for a non-resident owner of a commercial property liable for the GST on the lease of the property?

    Non-Interpretative- other reference (see paragraphs 97 to 115 of GSTR 2000/37 Goods and services tax: agency relationships and the application of the law).

    ATO position

    Yes, if the non-resident owner is registered (or required to be registered) for GST and the lease of the property is a taxable supply. For more information about the GST responsibilities of resident agents acting for non-residents, see GSTR 2000/37 (paragraphs 97 to 115).

    14.10.2 What is meant by 'resident agent' and 'non-resident'?

    Non-Interpretative- other reference (see GSTR 2000/37 Goods and services tax: agency relationships and the application of the law).

    ATO position

    A 'resident agent' means an agent that is an Australian resident for income tax purposes. 'Non-resident' means an entity that is not an Australian resident for income tax purposes.

    For more information about when a person is acting as agent or not, see GSTR 2000/37.

    14.11 Tax exempt property owners

    14.11.1 Is the GST treatment of a supply of property management services by an agent any different if the recipient of those services is an income tax exempt organisation (for example, a church)?

    Non-interpretative- straight application of the law

    ATO position

    No, it makes no difference if the recipient is an income tax exempt organisation. GST is payable if the provision of the services is a taxable supply.

    14.11.2 Are some commercial lessees GST exempt?

    Non-interpretative- straight application of the law

    ATO position

    No. The GST law does not provide a GST exemption for lessees of commercial properties. If the lease of the property is a taxable supply, GST applies even if the lessee is exempt from income tax (for example, a charitable organisation).

    14.12 Transitional issue and management agency authorities

    Issues 14.12.1 to 14.12.12 are concerned with matters that arose during the introduction of GST, and are adequately dealt with by GSTR 2000/16.

    These issues have been withdrawn as at 21 Jan 2004.

    14.13 Rent roll

    14.13.1 Is the sale of an agent's rent roll subject to GST?

    Non-Interpretative- other reference (see GSTR 2002/5 Goods and services tax: when is a 'supply of a going concern' GST-free?)

    ATO position

    Yes, if the agent selling the rent roll is registered or required to be registered for GST. (If the rent roll is sold as part of the sale of the agent's property management business, it may be GST-free as a supply of a going concern. For more information about GST-free supplies of going concerns, see GSTR 2002/5.)

    14.13.2 What is the GST treatment of the transfer of a real estate agent's rent roll?

    Issue 14.13.2 has been withdrawn as at 21 Jan 2004. It is already dealt with by Issue 14.13.1. For information about whether section 13 of the GST Transition Act will continue to apply to management agreements entered into as a result of a transfer of a rent roll, see GSTR 2000/16.

    14.14 General

    14.14.1 What information and advice should a managing agent give to tradespeople and contractors regarding the GST and the general income tax imposition where more than 80% of their income is received from the agent?

    Non-Interpretative - straight application of the law

    ATO position

    A managing agent should advise the tradespeople to contact the ATO for advice on GST and income tax matters. They can call the GST hotline on 13 24 78 and a client service representative will assist them by providing oral advice and if need be, provide a written response to the specific queries , to place an order for relevant booklets and/or fact sheets and to submit a request for a field visit. For income tax matters, they can call 13 28 61 for advice.

    14.14.2 Are commercial premises under residential leases and residential premises under commercial leases subject to GST?

    Non-Interpretative - straight application of the law

    ATO position

    It depends on the character of the premises being supplied as to whether GST is charged on a lease. If the character is that of residential premises (as defined) then section 40-35 of the GST Act or 40-70 of the GST Act may apply and the supply will be input taxed and no GST payable. However, if the premises are not residential then GST will apply. Refer to the GST Rulings GSTR 2012/5, which discusses residential premises and GSTR 2012/6 which discusses commercial residential premises. It is important to refer to the definition in the GST Act for the type of premises that are considered to be commercial residential premises as supplies of a lease of this type of premises will be subject to GST. If the lease meets all the criteria in the definition of a taxable supply, then GST will be applicable.

    14.14.3 When do the old taxes such as FID and BADT cease to operate?

    Non-Interpretative - straight application of the law

    ATO position

    The States and Territories have ceased to apply the following taxes:

    • Bed taxes - taxes levied on the cost of temporary residential accommodation - as from 1 July 2000.
    • Financial Institutions Duty - taxes levied on receipts at banks and other financial institutions and on the short term money market - as from 1 July 2001.
    • Stamp duty on quoted marketable securities - stamp duties levied on the sale of stocks and shares - as from 1 July 2001.

    As set out in the Intergovernmental Agreement of the Reform to the Commonwealth State Financial Relations, the following taxes may also cease to operate:

    • Debit tax - taxes on withdrawals from bank accounts with a cheque drawing facility - from 1 July 2005 - subject to a review by a Ministerial Council comprising Commonwealth, State and Territory Treasurers.
    • A review will be carried out by the Ministerial Council of the need to retain a range of business stamp duties by 2005. These duties include stamp duties on leases; mortgages, debentures, bonds and other loan securities; credit arrangements, instalment purchase arrangements and rental arrangements; cheques, bills of exchange and promissory notes; non-residential conveyances; and unquoted marketable securities.
    • An adjustment of gambling taxes by States and Territories will be made to take account of the impact of the GST on gambling operators.

    14.14.4 What will the agents have to supply to the ATO if a tenant or owner is being investigated?

    Non-interpretative- straight application of the law

    ATO position

    Subsection 353-10(1) in schedule 1 to the Taxation Administration Act 1953 provides that 'the Commissioner may direct a person to:

    (a) give to the Commissioner any information that the Commissioner requires;

    or

    (b) to produce to the Commissioner any documents in the custody or under the control of the person;

    for the purpose of enabling the Commissioner to apply the GST law in relation to the person on any other person.'

    The Commissioner pursuant to subsection 353-10(1), may direct an agent to provide any information or documents required by the Commissioner for the purposes of applying the GST law to the agent or any other entity (including the owner and the tenant).

    14.14.5 In the process of selling farming properties, plant and equipment is usually sold by way of a clearing sale. Assuming the vendor is registered for GST are the sales taxable supplies and therefore subject to GST?

    Non-interpretative- straight application of the law

    ATO position

    If the vendor is registered for GST, the sale of equipment at a clearing sale will still be in the course or furtherance of the enterprise that the vendor is carrying on. This is notwithstanding that the sales may be made in the process of terminating the farming business. The clearing sales are still supplies made in the course of the farming enterprise. Accordingly, the clearing sales are taxable supplies and will be subject to GST. The vendor will be liable to remit the GST on these supplies to the ATO.

    14.14.6 What is the effect of a GST clause in a MAA?

    Non-interpretative- straight application of the law

    ATO position

    The purpose and effect of a GST clause in an agreement will depend on the terms of the clause and the particular agreement. In general, the purpose of a GST clause is to allow the supplier (the agent) to increase the amount of the consideration by the amount required to cover the GST payable by the supplier on the supply.

    14.14.7 How will the GST affect the sale of properties in regard to the agent? Can the GST be handled outside of the trust account?

    Non-Interpretative- other reference (see GSTR 2000/37 Goods and services tax: agency relationships and the application of the law).

    ATO position

    Supplies made through agents are considered to be supplies made by the principal. Therefore, if the sale of the property is a taxable supply, it is the vendor who is liable to remit the GST on the supply and not the agent. The GST component of the sale price forms part of the sale proceeds and therefore the vendor is entitled to the funds. The total sale proceeds should be treated in accordance with existing trust account procedures.

    14.14.8 Is a GST registered entity entitled to an input tax credit for the purchase of a new holiday apartment (for which the vendor was liable for GST)?

    Non-Interpretative - straight application of the law.

    ATO position

    No. It is not a creditable acquisition under Division 11 of the GST Act. This is because the purchase of the apartment, being residential premises, is either of a private or domestic nature; or is for making input taxed supplies by way of sale or rental.

      Last modified: 01 Sep 2015QC 16496