ATO Interpretative Decision

ATO ID 2001/474

Goods and Services Tax

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Issue

Is the entity, a government agency, 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 another entity?

Decision

Yes, the 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 another entity.

Facts

The entity is a government agency. It has reciprocal arrangements for the secondment of its employees to another entity.

The secondment to the recipient does not change the employment status of the entity's employees. The entity continues to pay the employees as if the employees were still working for them. In some instances, the employees may be entitled to the use of a motor vehicle and/or mobile phone supplied by the entity, even though the employees are working for the other entity.

The amount that is paid for the secondment of the entity's employees are detailed in a written agreement that the entity enters into with the recipient. The amount paid includes the salary of the employees, the costs for annual and long service leave and workers' compensation premiums. If the employees are entitled to a motor vehicle and/or mobile phone, then these costs may also be included.

The entity is registered for goods and services tax (GST). The transaction is connected with Australia.

Reasons for Decision

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

•

it makes a supply for consideration;

•

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 when it seconds its employees to the recipient.

'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. 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.

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

Keywords
Goods and services tax
GST supplies and acquisitions
GST consideration
GST enterprise
GST supply
Taxable supply

Siebel/TDMS Reference Number:  CW235563

Business Line:  Indirect Tax

Date of publication:  17 October 2001

ISSN: 1445-2782