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ATO Interpretative Decision

ATO ID 2001/215

Goods and Services Tax

GST and Bailment arrangement
FOI status: may be released

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  • 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 The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts.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 incorporates revisions made since original publication. View its history and amending notices, if applicable.

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 taxi company, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it charges a taxi driver for the use of its mini-bus?

Decision

Yes, the entity is making a taxable supply under section 9-5 of the GST Act when it charges a taxi driver for the use of its mini-bus.

Facts

The entity is a taxi company. The entity and the taxi driver enter into a bailment arrangement whereby the taxi driver pays the entity for the use of the entity's mini-bus. The payment is in the form of a percentage of the taxi driver's shift takings.

The entity is registered for goods and services tax (GST) and is supplying the right to use the mini-bus in the course or furtherance of its enterprise. The supply is connected with Australia.

Reasons For Decision

Under section 9-5 of the GST Act an entity makes a taxable supply if:

(a)
it makes a supply for consideration;
(b)
it makes the supply in the course or furtherance of an enterprise that the entity is carrying on;
(c)
the supply is connected with Australia; and
(d)
the entity is registered or required to be registered.

However, a supply is not a taxable supply to the extent that it is GST-free or input taxed.

In this case, requirements (b), (c) and (d) have been satisfied. Therefore, the issue is whether the entity is making a 'supply' for 'consideration' under paragraph 9-5(a) of the GST Act.

The existence of a 'supply' itself is an essential element in determining whether a transaction is a taxable supply under section 9-5 of the GST Act. A 'supply' is defined in paragraph 9-10(2)(e) of the GST Act to include a creation, grant, transfer, assignment or surrender of any right. In this case, entity is granting the right to use the mini-bus to the taxi driver. Therefore, the supply is the grant of a right to use the mini-bus.

History:
Paragraph amended on 31 August 2004. The reference to paragraph 9-10(2)(d) of the GST Act has been replaced with a reference to paragraph 9-10(2)(e) of the GST Act.

'Consideration' is defined in paragraph 9-15(1)(a) of the GST Act to include any payment, or any act or forbearance, in connection with a supply of anything. In this case, at the end of each shift, the taxi driver pays the entity a percentage of the shift takings for the use of the mini-bus. This bailment arrangement amounts to consideration for the purposes of paragraph 9-15(1)(a) of the GST Act. It does not matter whether the amount the taxi driver pays the entity for the use of the mini-bus is in the form of lease payments or as a percentage of the shift takings. Therefore, the entity is making a 'supply' for 'consideration' under paragraph 9-5(a) of the GST Act.

The entity is registered for GST and the supply satisfies the other positive limbs 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 under section 9-5 of the GST Act when it charges a taxi driver for the use of its mini-bus.

Date of decision:  3 May 2001

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 9-5
   paragraph 9-5(a)
   paragraph 9-10(2)(d)
   paragraph 9-15(1)(a)
   Division 38
   Division 40

Keywords
Goods & services tax
GST supplies and acquisitions
Connected with Australia
GST consideration
GST supply
Taxable supply

Siebel/TDMS Reference Number:  CW202229

Business Line:  Indirect Tax

Date of publication:  16 August 2001

ISSN: 1445-2782

history
  Date: Version:
You are here 3 May 2001 Original statement
  5 May 2022 Archived

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