| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your written advice
Authorisation Number: 1051244938413
Date of advice: 05 July 2017
Ruling
Subject: GST and Agency Services
Question 1
Is GST payable on the commission you charge for your agency services?
Answer
Yes.
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
● You are registered for GST.
● You have not made any sales till date as you are establishing your business.
● You will be acting as agent to sell to the market.
● Your role will be to aggregate so all settlements can be managed under one name.
● The electricity will be instantaneously used/sold through the market. All electricity is traded through the grid.
● The price of electricity is constantly changing. With the customer’s meter data you will have the output regularly and the spot market price in dollars per kilowatt for the corresponding period. From this you will calculate the value of energy generated by each customer for each period. This is then tallied and sent to the customer on an invoice.
● The invoice will show the total and the price achieved less your commission and a fixed charge for your services.
● The funds will be deposited into the customer’s account.
When is GST payable
GST is payable on taxable supplies to the extent that it is not a GST-free or input taxed supply.
You make a taxable supply if:
(a) you make the supply for consideration; and
(b) the supply is made in the course or furtherance of an enterprise that you carry on; and
(c) the supply is connected with the indirect tax zone; and
(d) you are registered, or required to be registered.
Your agency services do not fall into any categories relating to GST-free and input taxed supplies.
To determine if your agency services are a taxable supply, we need to confirm if you are making the supply in your own right or as an agent of your customers. Therefore, we will look into GST Ruling 2000/37 (GSTR 2000/37) which discusses agency relationships in regards to GST.
Agency services
GSTR 2000/37 states, among other things, that an agent is a person who is authorised by the principal to act for that principal. When an agent uses his or her authority to act for a principal then any act done on behalf of that principal is an act of the principal. There are different types of agency relationships explained in the ruling and one type is a 'special agency arrangement’ which is discussed at paragraph 17 of GSTR 2000/37. This paragraph states:
17. Agent can be classified according to the extent of authority conferred by the principal. Special agents have authority to act for some special occasion or purpose that is not within the ordinary course of business or a profession. For example, Mike appoints Graeme as his agent for the purpose of obtaining a motor vehicle. The only authority given to Graeme as an agent is to obtain the motor vehicle.
In your case you are acting as a special agent for your customers to sell their surplus energy.
Factors indicating an agency relationship
Paragraph 28 of GSTR 2000/37 states that in most cases, any relevant documentation about the business relationship, the description used by the parties and the conduct of the parties establish the existence of an agency relationship. Therefore, the following factors may show that you are an agent under an agency relationship, although no single factor (by itself) is determinative:
● any description of you as an agent, having authority to act for another party, in an agreement (expressed or implied) between you and the other party;
● any exercise of the authority that you are given to enter into legal relations with a third party;
● whether you bear any significant commercial risk;
● whether you act in your own name;
● whether you are remunerated for your services by way of commissions and whether you are entitled to keep any part of your remuneration secret from another party; and
● whether you decide the price of things that you might sell to third parties.
In your case:
● your agency agreement states you will act as agent;
● you will exercise this authority to sell on the customer’s behalf;
● while selling, you will bear some commercial risk;
● you will be aggregating for your various customers and selling it under your name on the market; and,
● you will deduct a commission when you invoice your client.
In your case, we consider that the terms of the agreement between you and the customer indicate that an agency relationship exists for the sale of the excess energy. You also meet the factors of making a taxable supply since:
● you are supplying agency services for a commission and a fixed charge (which is your consideration);
● you are carrying on an enterprise;
● you are providing the agency services in Australia;
● and you are registered for GST purposes.
This means that you are making a taxable supply of agency services and the commission and any other charges to your customers will attract GST. Please note, as you will be selling on behalf of the customer, the GST treatment of the sale will depend if the customer is registered for GST purposes.