Common issues for trainers include:
Training activities as an enterprise
As a trainer of racing animals, it is likely that you are conducting your training activities as an enterprise if you train animals for entities other than yourself in return for fees that more than cover your costs.
It is unlikely that you are conducting activities as an enterprise if you:
- conduct training activities as an employee (for example, you receive a wage and leave entitlements and your employer contributes to a superannuation fund on your behalf)
- only train racing animals for yourself, friends or family members without charging training fees, or
- conduct training activities as an individual or in partnership without charging training fees that more than cover your costs.
Working out GST turnover
If you are a trainer and you carry on an animal training enterprise, your training services are taxable supplies.
Your GST turnover includes all monetary and most non-monetary payments you receive for training. It also includes any tips or 'slings' you receive as a result of your training activities.
Accounting for GST on other expenses
As a trainer you generally enter into an arrangement with an owner of a racing animal to provide training services in return for a flat daily fee. On occasion, you may incur additional expenses in relation to an animal (such as vet or farrier expenses) while conducting your training activities and charge these expenses back to the owner.
Under some circumstances, you may be liable to account for GST on the recovery of such charges from the owner, however this will depend on whether or not you act:
- as an agent when incurring the expenses, that is, you pay the expenses on the owner's behalf and then seek a reimbursement from the owner for the full amount (including GST), or
- as a principal when incurring the expenses, that is, you pay the expenses as part of your training activities and you do not seek a reimbursement from the owner.
Trainers acting as an agent
If you enter into an agreement with the owner of a racing animal to provide training services only, the fee you charge is not intended to cover any expenses in addition to your training services. If you pay for any additional expenses (such as a vet, farrier and equipment), you will generally seek a full reimbursement for these expenses from the owner. This means:
- if you pay the additional expenses on the owner's behalf, you will seek a reimbursement for the full amount of those expenses including GST
- you can't claim a GST credit for the GST you have paid on the owner's behalf as the owner will reimburse you the GST amount, and
- any reimbursements you seek from the owner should be charged separately to your training fees.
Example: Costs incurred as an agent
Jane is carrying on an enterprise of training racing animals and is registered for GST. She has agreed with a horse owner that she will act as their agent in relation to any veterinary or farrier expenses. Jane has agreed with the owner that her fee will be a set amount per day for training the animal, plus any extra expenses that she incurs as an agent for the owner.
In the first month of training, Jane arranges for the animal to be shod and veterinary costs are incurred as the animal needed medical attention. This costs a total of $660.
At the end of the month, Jane charges the owner a $440 training fee and seeks reimbursement of $660 for the farrier and vet costs incurred on the owner's behalf.
Jane is making a taxable supply of her training services and is liable to account for GST of one-eleventh of $440. Jane is not liable to account for the GST on the $660 after receiving the reimbursement and she is not entitled to a GST credit for the farrier and veterinary expenses she paid as she will receive a full reimbursement from the owner.
End of example
Factors that may show you are an agent under an agency relationship include:
- any description of you as an agent, having authority to act for an owner, in an agreement (expressed or implied) between you and the owner
- any exercise of the authority that you are given to enter into legal relations with a third party
- whether you act in your own name in dealings for the owner
- whether you are paid for your services.
Trainers acting as a principal
If you enter into an agreement with the owner of a racing animal to provide training services, the fee you charge is generally intended to cover additional animal related expenses (such as vet, farrier and equipment). After paying these expenses, you will not generally seek a reimbursement from the owner as you have incurred the additional expenses as part of your enterprise rather than as an agent for an owner. This means:
- you can claim a GST credit for the GST you have paid in the cost of the additional expenses, and
- the training fees you charge include an amount to cover additional expenses.
Example: Costs incurred as a principal
Renee is carrying on an enterprise of training racing animals and is registered for GST. She has agreed with a horse owner to provide her training services for a set monthly fee that will cover both training expenses and additional animal related expenses such as veterinary and farrier fees.
In the first month of training Renee arranges for the animal to be shod and veterinary costs are incurred as the animal required medical attention. This costs a total of $660.
At the end of the month, Renee charges the owner a $1,100 (including GST) training fee. Renee is making a taxable supply of her training services, therefore she must pay GST to the value of one-eleventh of $1,100 ($100) to the ATO.
Renee is also entitled to claim a GST credit to the value of $60 (one-eleventh of $660) for the GST she has paid as part of the farrier and veterinary expenses.
End of example