ATO Interpretative Decision

ATO ID 2013/54

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 The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts.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.
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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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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.


Is a government agency, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services tax) Act 1999 when it receives a payment for the secondment of its employees to another government entity?


No, the payment received is not the provision of consideration for a supply.


The entity is a government related entity. It has reciprocal arrangements for the secondment of its employees to other government related entities (recipient).

The entity is registered for good and services tax (GST). The supply of the services that are provided by the entity's seconded employees is connected with Australia.

The secondment to the recipient does not change the employment status of the employees.

The entity continues to pay the salaries of the employees.

The entity enters into agreements to charge the recipient the anticipated costs of employing the seconded employees during the duration of the secondments. The 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 the entity's motor vehicles and mobile phones and the entity's administration costs.

The payment by the recipient is covered by an appropriation under an Australian Law.

Reasons for Decision

All legislative references in this document are to the GST Act.

The existence of a 'supply' itself is an essential element in determining whether the transaction is a taxable supply under section 9-5.

Section 9-10 discusses the meaning of the word 'supply' for GST purposes. Paragraph 9-10(2)(b) 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.

The term 'consideration' is defined in section 195-1 and for a supply or acquisition, means any consideration, within the meaning given by sections 9-15 and 9-17, in connection with the supply or acquisition.

Paragraph 9-15(1)(a) includes any payment, or any act or forbearance, in connection with a supply as consideration.

Section 9-17 provides that certain payments and other things are not consideration. Relevant to these facts, subsection 9-17(3) provides that a payment is not the provision of consideration if:

the payment is made by a government related entity to another government related entity for making a supply, and
the payment is covered by an appropriation under an Australian law, and
the payment satisfies the non-commercial test.

The first two tests are satisfied, as indicated in the facts above.

Paragraph 9-17(3)(c) sets out the non-commercial test and to satisfy this requirement, the amount of the payment must be calculated on the basis that the sum of the following does not exceed the anticipated or actual cost of making those supplies:

the payment or payments relating to the supply; and
anything else the supplier receives from other entities in connection with, or in response to, or for the inducement of the supply or related supplies.

The entity has only received the payment from the recipient in regards to the supply of services by its seconded employees.

The term 'cost' includes the entity's direct and indirect costs of making the supplies. It does not include a return on capital or concepts of cost which are measured based on opportunity cost or forgone revenue.

The basis of the calculation of the payment was to cover the anticipated costs that would be payable by the entity as a result of continuing to employ the employees during the secondment period. The anticipated costs include both direct costs such as the salary of the employee and also indirect costs such as the costs of administration.

As the payment is based on anticipated costs, it is not necessary to subsequently review the calculation once the actual cost of making the supply is known.

In this case the requirements of subsection 9-17(3) are satisfied and therefore the payment is not the provision of consideration.

As these payments do not constitute consideration, the supplies to which the payment relates do not satisfy the requirements of section 9-5. Therefore, these supplies are not taxable supplies.

Amendment History

Date of amendment Part Comment
28 February 2014 Issue, Decision, Facts Reason for Decision To clarify the application of the legislation.

Date of decision:  14 October 2013

Legislative References:
A New tax system (Goods and Services Tax) Act 1999
   section 9-5
   section 9-10
   paragraph 9-15(1)(a)
   subsection 9-17(3)
   section 195-1

Related ATO Interpretative Decisions
ATO ID 2001/474

Good and services tax
GST supplies and acquisitions
GST consideration
GST supply
taxable supply

Siebel/TDMS Reference Number:  1-4XINCM4

Business Line:  Indirect Tax

Date of publication:  18 October 2013

ISSN: 1445-2782

  Date: Version:
  14 October 2013 Original statement
You are here 28 February 2014 Updated statement