ATO Interpretative Decision
ATO ID 2001/474
Goods and Services Tax
GST and payments for seconded employees-
With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, 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.This document has changed over time. View its history.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is a government related entity, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it receives payment for the secondment of its employees to a non-government entity?
Decision
Yes, the government related entity is making a taxable supply under section 9-5 of the GST Act when it receives payment for the secondment of its employees to a non-government entity.
Facts
The entity is a government related entity (entity). It has reciprocal arrangements for the secondment of its employees to a non-government entity (recipient).
The secondment to the entity does not change the employment status of the entity's employees.
The entity enters into agreements to charge the recipient the antispiated costs of employing the seconded employees during the duration of the secondments. Tha calculation takes into account the salaries of the employees, plus the relevant on-costs such as annual leave, long service leave, payroll tax, workers compensation, superannuation, use of entity's motor vehicles and mobile pghone and the entity's administration costs.
The entity is registered for goods and services tax (GST). The supply of the services that are provided by the entity's seconded employees are connected with Australia.
The payment by the recipient is not covered by an appropriation under Australian Law.
Reasons for Decision
Under section 9-5 of the GST Act, an entity makes a taxable supply if:
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- it makes a supply for consideration;
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- the supply is made in the course or furtherance of an enterprise that it carries on;
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- the supply is connected with Australia; and
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- it is registered, or required to be registered.
The existence of a 'supply' itself is an essential element in determining whether the transaction is a taxable supply under section 9-5 of the GST Act.
Section 9-10 of the GST Act discusses the meaning of the word 'supply' for GST purposes. Paragraph 9-10(2)(b) of the GST Act states that a supply includes a supply of services. In this case, it is considered that the entity makes a supply of services that are performed by the seconded employee when it seconds its employees to the recipient.
The term 'consideration' is defined in section 195-1 of the GST Act and for a supply or acquisition, means any consideration , within the meaning given by section 9-15, in connection with the supply or acquisition.
Paragraph 9-15(1)(a) of the GST Act includes any payment, or any act or forbearance, in connection with a supply of anything as consideration.
The entity has entered into a written agreement with the recipient which specifies an amount to be paid for the secondment of the employee. Therefore, the payment that the entity receives is consideration for the supply of its employees' services.
Subsection 9-20(1) of the GST Act defines an enterprise as an activity, or series of activities, which include such things as 'in the form of a business'.
The supply made by the entity to the recipient is in the course or furtherance of its enterprise. The entity carries on activities in the form of a business, and the provision of the services of its employees constitute a supply made in connection with those activities.
The entity is registered for GST and the transaction is a 'supply' that fulfils all of the requirements of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply of services under 9-5 of the GST Act when it receives payment for the secondment of its employees to another entity.
Amendment History
| Date of amendment | Part | Comment |
|---|---|---|
| 8 November 2013 | Reason for decision
Legislative references Related ATO ID's |
Updated for changes in the appropriations legislation which included adding the definition of the term 'consideration' in section 195-1 of the GST Act. |
Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
section 9-5
section 9-10
paragraph 9-10(2)(b)
paragraph 9-15(1)(a)
subsection 9-20(1)
Division 38
Division 40
Section 195-1
ATO ID 2013/54
Keywords
Goods and services tax
GST supplies and acquisitions
GST consideration
GST enterprise
GST supply
Taxable supply
Appropriation
ISSN: 1445-2782
| Date: | Version: | |
| 13 September 2001 | Original statement | |
| You are here | 8 November 2013 | Updated statement |