ATO Interpretative Decision
ATO ID 2003/1057 (Withdrawn)
Goods and Services Tax
GST and adult entertainment servicesFOI status: may be released
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This ATO ID is withdrawn and is replaced by ATO ID 2004/186This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 the entity, a supplier of adult entertainment services, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when a dancer, engaged by the entity, performs a lap dance or striptease for a customer or customers?
Decision
Yes, the entity is making a taxable supply under section 9-5 of the GST Act when a dancer, engaged by the entity, performs a lap dance or striptease for a customer or customers.
Facts
The entity operates an establishment which supplies adult dancing services as part of its total entertainment package. The entity is registered for goods and services tax (GST).
The entity engages dancers to perform in their establishment.
The entity enters into an agreement with each dancer for a supply of that dancer's services to the entity. That agreement sets out the terms and conditions under which the parties will operate and enables the entity to control each dancer's behaviour in regard to such issues as compliance with drug and prostitution laws.
The entity also controls which dancers are allowed to perform at the establishment.
The customers can watch the dancers on stage or can approach an employee of the entity directly and request one of the dancers to provide a private lap dance or strip tease for a price. The entity's staff can assist with selecting a dancer who provides private dances to the customer or customers. The entity provides the venue for the private performance. The entity also has a cashier who collects and processes the payments for the private performances.
The entity sets the prices of the lap dances and establishes with the dancer its percentage of the price charged to the customer.
Payments by the customers using credit card or EFTPOS go directly into the entity's account and a receipt is issued under the entity's trading or business name. The entity retains its percentage of the lap dance fee and then distributes the dancer's percentage (generally by way of cash).
The dancers may perform lap dances at a number of clubs in any one night. Subject to the entity's ability to control who performs at the club, the dancers choose where and when they lap dance.
Reasons for Decision
Section 9-5 of the GST Act provides that an entity is making a taxable supply where:
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- it makes a supply for consideration; and
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- the supply is made in the course or furtherance of an enterprise that it carries on; and
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- the supply is connected with Australia; and
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- it is registered, or required to be registered.
However, a supply is not taxable if it is GST-free or input taxed.
The first requirement in section 9-5 of the GST Act is that an entity must make a supply for consideration. When a customer requests a lap dance or striptease, they approach the entity. The entity organises the lap dance or striptease and receives payment from the customer. The entity provides the venue and the dancers and organises the private dances. The entity is supplying the customer with a service. However, it needs to be determined whether the amount paid by the customer is consideration for the entity's service.
The entity sets the prices of the lap dances and stripteases. The entity also provides the means for collecting and processing the payments from the customer. Payments by the customer using credit card or EFTPOS go directly into the entity's account and a receipt is issued under the entity's trading or business name. The payment by the customer is for the supply of services by the entity.
The entity is registered for GST and its supply is made in the course of its enterprise and is connected with Australia. In addition, the supply is not input taxed under any of the provisions in Division 40 of the GST Act nor is it GST-free under Division 38 of the GST Act. Accordingly, all the requirements in section 9-5 of the GST Act are satisfied.
Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when a dancer, engaged by the entity, performs a lap dance or striptease for a customer or customers.
Note: As the lap dance/striptease fee is consideration for the entity's supply of services, the entity has a GST liability equal to 1/11th of the total fee received (section 9-70 of the GST Act)
Date of decision: 6 November 2003
Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
section 9-5
section 9-70
Division 38
Division 40
Keywords
Goods and services tax
GST supplies & acquisitions
Taxable supply
ISSN: 1445-2782
| Date: | Version: | |
| 6 November 2003 | Original statement | |
| You are here | 25 February 2004 | Archived |