ATO Interpretative Decision

ATO ID 2001/725

Goods and Services Tax

• 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 The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts.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.

Issue

Is the entity, an Australian investor, 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 a rebate from a tax agent for investing in a particular investment fund?

Decision

Yes, the entity is making a taxable supply under section 9-5 of the GST Act when it receives a rebate from the tax agent for investing in a particular investment fund.

Facts

The entity is an Australian investor. It engages a tax agent to provide it with taxation and investment advice. The tax agent recommends and arranges for the entity to invest in a particular investment fund.

The tax agent receives a commission from the investment fund for introducing the entity to the fund. There is an agreement between the entity and the tax agent whereby if the entity agrees to invest in a particular investment fund recommended by the tax agent, the tax agent will rebate either all or part of the commission that it receives, to the entity.

The entity is registered for goods and services tax (GST). The entity makes the investment in the course of an enterprise that the entity carries on in Australia.

Reasons for Decision

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

•

it makes the supply for consideration;

•

it makes the supply in the course or furtherance of an enterprise that it carries on;

•

the supply is connected with Australia; and

•

it is registered, or required to be registered for GST.

The issue in this case is whether there is a 'supply' for 'consideration'.

Section 9-10 of the GST Act defines 'supply'. Subparagraph 9-10(2)(g)(i) of the GST Act states that a supply includes an entry into an obligation to do anything. In this case, the agreement between the entity and the tax agent is an entry into an obligation by the entity to invest in a particular investment fund. Therefore, the entity is making a supply as defined in subparagraph 9-10(2)(g)(i) of the GST Act.

'Consideration' is defined in subsection 9-15(1) of the GST Act to include any payment, act or forbearance in connection with, in response to or for the inducement of a supply of anything. In this case, the tax agent pays part or all of the commission that it receives from the investment fund to the entity for investing in that particular investment fund. This rebate is consideration as defined in subsection 9-15(1) of the GST Act.

The entity is registered for GST and the supply meets the other positive 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 under section 9-5 of the GST Act when it receives a rebate from the tax agent for investing in a particular investment fund.

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 9-5
   section 9-10
   subparagraph 9-10(2)(g)(i)
   subsection 9-15(1)
   Division 38
   Division 40

Keywords
Goods & services tax
GST supplies & acquisitions
GST consideration
GST supply
Taxable supply

Siebel/TDMS Reference Number:  CW144011

Business Line:  Indirect Tax

Date of publication:  30 November 2001

ISSN: 1445-2782