ATO Interpretative Decision

ATO ID 2002/266 (Withdrawn)

Goods and Services Tax

• This ATO ID is a straight application of the law and does not contain an interpretative decision.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is the entity, a government department, entitled to an input tax credit under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it reimburses volunteers and people on work experience for their travel and incidental expenses?

Decision

No, the entity is not entitled to an input tax credit under section 11-20 of the GST Act when it reimburses volunteers and people on work experience for their travel and incidental expenses.

Facts

The entity is a government department.

In the course of its enterprise, the entity acquires the services of volunteers and people on work experience. The entity does not provide consideration for the acquisition of the services and is not liable to make withholding payments for the volunteers and people on work experience.

The supply of the services, by the volunteers and people on work experience, to the entity is not a taxable supply under section 9-5 of the GST Act and the entity does not hold a tax invoice for the acquisition of these services.

The entity does reimburse the volunteers and people on work experience for out of pocket expenses such as travel, accommodation and meals incurred in carrying out work for the entity.

The volunteers are not employees, associates of employees, agents, partners or company officers.

The entity is not a charitable institution, a trustee of a charitable fund, a gift deductible entity or a government school.

The entity is registered for goods and services tax (GST).

Reasons for Decision

Under section 11-20 of the GST Act, an entity is entitled to an input tax credit for any creditable acquisition that it makes. Section 11-5 of the GST Act provides that an entity makes a creditable acquisition if:

•

it acquires anything solely or partly for a creditable purpose;

•

the supply of the thing to it is a taxable supply;

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it provides, or is liable to provide, consideration for the supply; and

•

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

To satisfy the first element of section 11-5 of the GST Act, the entity must acquire the goods or services.

The entity does not make the travel and incidental acquisitions, rather the volunteers or people on work experience make the acquisitions. Furthermore, the entity is not providing, nor is it liable to provide, consideration for the supply. The consideration for the supply is provided by the volunteers or people on work experience. The entity then reimburses the volunteers or people on work experience.

However, a special rule under subsection 111-5(1) of the GST Act provides that in certain circumstances, a reimbursement is treated as consideration for an acquisition that is made from the employee, associate of an employee, agent, partner or company officer.

The volunteers and persons on work experience are not employees of the entity, nor are they associates of an employee, agents, partners or company officers. Therefore, subsection 111-5(1) of the GST Act does not apply to the reimbursements of travel and incidental expenses to volunteers and people on work experience.

Subsection 111-20(1) of the GST Act provides that if an entity makes, or is liable to make, certain withholding payments, then the individual to whom the entity makes such payments to, is considered to be the entity's employee and their activities that are in connection with earning such payments are considered to be activities performed as an employee.

Subsection 111-20(2) lists the specific withholding payments contained in Schedule 1 to the Taxation Administration Act 1953 (TAA) which relate to subsection 111-20(1) of the GST Act.

The entity is not making, nor is it liable to make, any withholding payments for volunteers and persons on work experience listed in Schedule 1 of the TAA. Therefore, subsection 111-20(1) of the GST Act does not apply to the reimbursements of travel and incidental expenses paid to volunteers and people on work experience.

Furthermore, the entity is not a charitable institution, a trustee of a charitable fund, a gift deductible entity or a government school. Therefore, section 111-18 of the GST Act does not apply in this case. As such, the entity is not entitled to an input tax credit under section 11-20 of the GST Act when it reimburses volunteers and people on work experience for their travel and incidental expenses.

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 9-5
   section 11-5
   section 11-20
   section 111-5
   subsection 111-5(1)
   subsection 111-20(1)
   subsection 111-20(2)

Keywords
Goods & services tax
GST special rules
Reimbursement of employees
GST supplies & acquisitions
Creditable acquisitions

Business Line:  GST

Date of publication:  22 March 2002

ISSN: 1445-2782