ATO Interpretative Decision
ATO ID 2013/54
Goods and Services Tax
GST and payments for seconded employees
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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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 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 government entity?
Decision
No, the payment received is not consideration for a supply.
Facts
The entity is a government agency. It has reciprocal arrangements for the secondment of its employees to other government agencies (recipient).
The entity is registered for good and services tax (GST). The transaction 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 for the salaries of the employees, plus the relevant on-costs such as annual leave, long service leave, payroll tax, workers compensation and superannuation. The entity also charges a 5% administration fee.
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 employee is working for the recipient.
Reasons for Decision
Under section 9-5 of the GST Act an entity makes a taxable supply if:
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- it makes a supply for consideration,
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- 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.
However, the supply is not a taxable supply to the extent that it is GST-free or input-taxed.
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.
The term 'consideration' is defined in section 195-1 of the GST Act and refers to the application of section 9-15 of the GST Act. Relevantly paragraph 9-15(1)(a) of the GST Act includes any payment, or any act or forbearance, in connection with a supply as consideration.
Section 9-17 of the GST Act provides that certain payments and other things are not consideration. Subsection 9-17(3) of the GST Act provides that a payment is not the provision of consideration if:
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- the payment is made by a government related entity for making a supply, and
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- the payment is covered by an appropriation under an Australian law or ..., and
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- the payment is calculated on the basis that the sum of:
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- the payment (including the amounts of any other payments) relating to the supply, and
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- anything (including any payment for any forbearance) that the other government related entity receives from another entity in connection with, or in response to, or for the inducement of, the supply, or for any other related supply,
- does not exceed the suppliers anticipated or actual costs of making those supplies.
In this case the requirements of subsection 9-17(3) of the GST Act are satisfied. The supply of payments received by one government agency from another government agency for the secondment of its employees does not constitute consideration.
As these payments do not constitute consideration, the supplies to which they relate do not satisfy the requirements of section 9-5 of the GST Act. Therefore, these supplies are not taxable supplies.
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
ATO ID 2001/474
Keywords
Good and services tax
GST supplies and acquisitions
GST consideration
GST supply
taxable supply
ISSN: 1445-2782
| Date: | Version: | |
| You are here | 14 October 2013 | Original statement |
| 28 February 2014 | Updated statement |