Edited version of private ruling

Authorisation Number: 1011924490447

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Ruling

Subject: GST and Electricity Rebate Agreement

Question 1

Have you made a creditable acquisition where you pay amounts to the retailers (Retailers) under the Agreement?

Answer

Yes, subject to certain exceptions.

Question 2

Do you hold valid tax invoices in respect of your acquisitions from the Retailers such that you are entitled to claim input tax credits for the creditable acquisitions made?

Answer

Yes

Relevant fact

· You are a government entity and are registered for goods and services tax (GST).

· Your tasks are to provide a range of public services to the community which includes funding to support participation by seniors in the community.

· Your stated objectives are:

o For clients: improved well being, safety, health and participation of residents, particularly for vulnerable and disadvantaged people.

o For communities: improves sustainability, liveability, prosperity and cohesion of the communities.

o For partners: improved capability, sustainability and productivity of community and other services and systems.

· The Government Rebate Scheme was introduced to :

o Provide a rebate on the cost of services supplied to eligible concession cardholders. The majority of eligible card-holders are pensioners or seniors. The participants are required to complete an application form and lodge it with the Retailers in order to determine the eligibility of the participants.

o You administer the scheme. The rebate is delivered to participants by the Retailers by deducting the value of the rebate entitlement from the amount payable by the participants. The participants are required only to pay the price on the invoice issued to them (net of the rebate).

o The Retailers have entered into an Agreement (the Agreement) with you. The Retailers are responsible for receiving and processing the applications and providing the rebates on the terms and conditions set out in the Agreement.

o The Retailers issue tax invoices to you, which detail the total value and number of rebates on a monthly basis. The Agreement states that the payment by you to the Retailers will be subject to GST and the Retailers remit GST on the consideration received from you.

· To date, you have not claimed input tax credits in respect of the tax invoices issued by the Retailers.

· You have provided a sample copy of the tax invoice by a Retailer for the claims.

THE AGREEMENT

Key concepts

This Agreement employs a number of key concepts.

· The Retail Entity agrees to:

- receive and process the applications for the Rebate; and

- pay the Rebate to Rebate Customers

· You agree to reimburse the Retail Entity for any Rebate validly paid to a Rebate Customer.

· Any customer may make an application.

· If a customer:

- has made an application to a Retail Entity

- holds an account with the Retail Entity; and

- meets the Eligibility Criteria, then the customer is a Rebate Customer.

Retail Entity's obligations before receipt of and on an Application

The Retail Entity must inform each Customer of the result of their Application within a reasonable time of the application. To avoid doubt, if an application is successful, a Retail Entity will be taken to have complied with the Agreement if the Retail Entity applies the Rebate to the Customer's first bill after the determination of the application.

Payment of Rebate

Rebates

The Retail Entity must deduct the amount of the Rebate from the amount payable by a Rebate Customer on account of Customer Retail Services provided to the Rebate Customer. The Rebate cannot be used to reduce the amount payable by the Rebate Customer for any other goods or services.

Retrospective Rebates - less than 12 months

If an application includes a claim for the Rebate to be given retrospectively and the Customer meets the criteria, the Retail Entity must give the Rebate Customer the Rebate for the period during the 12 month period immediately preceding a successful application for which the Rebate Customer met the criteria.

Retrospective Rebates - greater than 12 months

If an Application includes a claim for the Rebate to be granted for a retrospective period exceeding 12 months, the Retail Entity must:

· to the extent the claim relates to the 12 month period immediately preceding a successful application, and

· to the extent the claim relates to the period exceeding 12 months preceding a successful application:

- refer the claim to you for determination;

- on request, provide all reasonable assistance to you to enable you to determine whether the claim should be accepted or rejected; and

- give the Rebate Customer the Rebate for the period you inform the Retail Entity in writing that the Rebate Customer is entitled to the Rebate.

Rebate Rate for retrospective Rebates

The terms and conditions of this Agreement apply to the provision of retrospective Rebates and the Rebate Rate payable for the retrospective period will be the current Rebate Rate applicable at the time the Rebate is given.

Carry-over of retrospective Rebate

· If the Retail Entity is required to give a Rebate in respect of a retrospective period and the amount of the Rebate exceeds the Rebate Customer's next bill (after any deduction for the Rebate for the current period), the Retail Entity must still credit the Rebate Customer with the entire Rebate. Such credit may be carried forward on the Rebate Customer's bill.

· If a Rebate Customer ceases to be a Customer of the Retail Entity and there remains a credit on the Rebate Customer's account, the Retail Entity must use its best endeavours to pay the Rebate Customer an amount equal to the remaining credit by cheque, electronic funds transfer or any other means agreed with the Rebate Customer

Avoiding multiple Rebates

· If an application claims a Rebate for a period for which the Retail Entity did not provide Customer Retail Services to the Rebate Customer then the Retail Entity must:

- refer the claim to you to confirm that the Rebate Customer has not received a Rebate for some or all of the period for which the Rebate is claimed; and

- if you advise the Retail Entity that the Rebate Customer has already received a Rebate for a period, the Retail Entity must not credit the relevant Rebate Customer with a Rebate for that period.

· To enable you to carry out your role of preventing multiple Rebates being paid, the Retail Entity agrees that, if the Retail Entity receives a request from you to verify whether a person has claimed a Rebate from the Retail Entity, the Retail Entity will, within a reasonable period not being longer than 15 Business Days, inform you:

- whether the Retail Entity has provided a Rebate, whether directly or indirectly, to the person who now directly or indirectly claims the Rebate, as notified by you.

- if so, for what periods.

Claims for reimbursement

Reimbursement

In consideration of the Retail Entity giving the Rebate, you will reimburse the Retail Entity for any Rebate validly given to a Rebate Customer in accordance with the terms of this Agreement. Claims

· The Retail Entity must, after the end of each month, submit its Claim for the preceding month to you.

· The Claim submitted must include a claim by the Retail Entity for administration fee in respect of the Rebate scheme.

Payment of Claim

You must pay the Retail Entity:

- the amount of each correctly rendered Claim; or

- if a Claim is not correctly rendered, an amount equal to the undisputed portion of the Claim, not submitted in writing, is not signed by an authorised person of

Reasons for decision

Question 1

Summary

You have made a creditable acquisition where you pay amounts to the Retailers under the Agreement. However, payments of retrospective rebates are not consideration for a creditable acquisition made from the Retailers.

Detailed reasoning

Goods and Services Tax Ruling 2006/9 (GSTR 2006/9) examines the meaning of 'supply' in the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) which also has relevance to acquisitions.

Of particular relevance in this case, paragraphs 53-56 of GSTR 2006/9 state:

53. The meaning of 'acquisition' in section 11-10 is the corollary of the meaning of supply in section 9-10. Subsection 11-10(1) provides that, 'An acquisition is any form of acquisition whatsoever'. Subsection 11-10(2) refers to the thing acquired, such as goods, services or a right, and the means by which the thing is acquired, such as its receipt or acceptance.

54. To make an acquisition you have to be the 'recipient' of the supply of the thing you are acquiring. Although the term 'recipient' does not appear in Division 11, it is defined in section 195-1 to mean the entity to which the supply was made. This definition suggests that there is a supplier, a recipient and that something is passed from the supplier to the recipient.

55. The supplier and the recipient have to be different entities because an entity cannot make a supply to itself. Also, the recipient has to be identified, as you cannot make a supply to the world at large. However, a supply can be made for no consideration.

Creditable acquisitions and input tax credits

56. If you make an acquisition and the other requirements of section 11-5 are met then the acquisition is a creditable acquisition. However, if you are not the recipient of the supply you will not have made a creditable acquisition, even if you provide consideration for the supply.

It is first necessary to determine whether you are a recipient of a supply when you make a payment to a Retailer under the Agreement. Where no supply is made to you in return for the payment, it is considered that you only make a third party payment and the payment is not made for any acquisition by you.

In this case, we need to establish whether there are two separate supplies made by the Retailer being:

· the supply made by the Retailer to the customer who is eligible under the Agreement for the account amount to be reduced by the Rebate - supply 1.

· the supply made to you for the consideration of the Rebate amount - supply 2.

Supply 1 is not within the scope of the Ruling and is not discussed further.

As stated in paragraph 221B of the draft Addendum GSTR 2006/9DA, the Commissioner considers that the following factors, in combination, may point to a supply being made by the supplier to the payer under a tripartite arrangement that involves the supplier providing a service or good to the customer and where there is no binding obligation between the payer and the supplier to provide the services or goods to the customer:

· There is a pre-existing framework or agreement between the payer and the supplier which contemplates that the parties act in a particular manner in respect of supplies that are to be provided by the supplier to particular third parties or a class of third parties.

· The pre-existing framework or agreement identifies a mechanism by which the particular third parties or the class of third parties are to be identified such that the supplies provided to them come within the scope of the framework.

· The pre-existing framework or agreement specifies that the payer is under an obligation to pay the supplier if the supplier provides a relevant supply to a third party and also sets out a mechanism by which such payment is authorised.

· The framework or agreement and the mechanism for authorising the payment are in existence before the supplier provides the supply to the third party (i.e. the supplier knows in advance that the payer is obliged to pay some or all of the consideration where that supply is provided to the third party)

· The supplier provides the supply to the third party in conformity with the pre-existing framework or agreement between the parties; and

· The obligation of the payer to make payment pursuant to the pre-existing framework or agreement is not an administrative arrangement to pay on behalf of the third party for a liability owed by the third party to the supplier. Rather, once the supply becomes a supply to which the framework or agreement applies, the framework or agreement establishes a liability owed by the payer (not the third party) to the supplier in the event that the supplier provides the relevant supply to the third party.

Paragraph 221G of the draft Addendum to GSTR 2006 adds further:

Ultimately, it is a question of fact and degree whether a supply to the payer can be identified (and for which the payment is consideration). The factors listed at paragraph 221B of this Ruling provide a guide, but are not conclusive or prescriptive. It is conceivable that despite all of the listed factors being present, there may be some other relevant factor that points to the payment not being consideration for a supply to the payer. Conversely, if one of the listed factors is not fully met, this does not necessarily preclude identifying the payment as being consideration for a supply to the payer.

Where the above conditions are present there may be two supplies. These are the supply of service to the eligible concession cardholders and the supply to you of the service to the eligible concession cardholders.

Pre existing framework

The Agreement sets out the terms and conditions governing the parties (the Retailer and you) and requires the Retailer to act in a particular manner with respect to the supplies provided to the third party.

A clause of the Agreement provides that the Retailer, who is the service provider to the eligible concessional cardholders (Rebate Customers), agrees to receive and process the applications for the Rebate; and pay the Rebate to Rebate Customers.

Under a clause a Customer becomes a Rebate Customer when all of the following are met, they:

· apply for the Rebate

· hold an account with the Retailer

· meet the Eligibility Criteria

Under a clause of the Agreement, the Retailer must deduct the amount of the Rebate from the amount payable by a Rebate Customer on account of the service provided by the Retailer. This Rebate cannot be used to reduce the amount payable by the Rebate Customer for any other goods or services.

Under a clause of the Agreement, the approval must be made before the Retailer applies the Rebate to the Customer's first bill after the determination of the application. That is, the authorisation process is set out in advance of the supply, by which the obligation arises for you to make the Rebate payment to the Retailer.

Mechanism for identifying eligible recipients

The Eligibility Criteria are provided in the Agreement. This section lists the following concessional cards: Pensioner Concession Card, Repatriation Health Card for All Conditions (Gold Card) and State Government Seniors Card.

A Schedule to the Agreement also provides the Retailer with a verification process to verify the eligibility of the applicants.

Payer required to pay supplier, established mechanism for making this payment

A clause of the Agreement provides for the mechanism for making payments to the supplier.

A clause of the Agreement provides that you will reimburse the Retailer for any Rebate validly given to a Rebate Customer.

A clause of the Agreement provides for the mechanism of how, when the Retailer can submit their claims. This clause also confirms the payment of an administration fee to the Retailer (details in an item in a Schedule to the Agreement).

Supplier knows that if the supply is made to the third party that the agency will pay

Under a clause of the Agreement, you are required to pay the Retailer the Rebate and the administration fee when claims are made by the Retailer in accordance with clause 7 of the Agreement.

Supplier provides the supply in accordance with the pre-existing framework or agreement.

Under the Agreement and in association with specific legislation the Retailer is required to make supplies of services to customers and accepts that it receives the full payment for the supply of services to the Rebate Customer from two payers, the Rebate Customer and you together.

You acquire from the Retailer who provides a supply to the Rebate Customer (who meets the requirements of the Agreement) - the supply of a service. The supply is acquired by you in implementation of the Scheme which is a government policy for assistance of the concessional cardholders.

The supply by the Retailer is not just a supply to the Rebate Customer, there is another supply to you, the supply of the service to the Rebate Customers for consideration being the Rebate amount.

Not an arrangement to pay on behalf of the third party for a liability already owed by the third party.

The amount (reduced by the Rebate) of the service account to the Rebate Customer is the liability of the Rebate Customer. The Agreement is not an arrangement for you to pay the Rebate Customer's liability. Under the Agreement, you are only liable for the Rebate amount which as been deducted from the amount payable by the Rebate Customer, and the Agreement does not provide for the assignment of the Rebate Customer's liability to you.

THE EXCEPTIONS

Under a number of clauses of the Agreement the Retailer is required in specific circumstances to give the Rebate retrospectively to a Rebate Customer. The retrospective period is a period 12 months or more immediately preceding a successful application for the Rebate.

A clause also provides for the payment of the Rebate to the Rebate Customers for a period for which the Retailer did not provide the service to the Rebate Customer.

However, where the Rebate is made retrospectively, the Retailer did not provide the services to the customer in conformity with the pre-existing agreement as:

· As listed in paragraph 221B of GSTR 2006/9DA, one factor taken into account in determining whether a supply is made to a payer (you) under a tripartite agreement when the supply of goods or services is made to a third party is that the supplier (Retailer) knows in advance that the payer is obliged to pay some or all of the consideration where that supply is made provided to the third party. This factor is not satisfied. Although this is only one factor to be taken into account we do not consider that the circumstances which give rise to a retrospective Rebate are an example of where you are a party to a tripartite arrangement as at the time of the supply you are not obliged to pay anything.

· The payment by you to the Retailer is an administrative arrangement to pay on behalf of the customer for a liability owed by the customer to the customer.

Where the Rebate is made retrospectively we do not consider that the Retailer has made a supply to you. The payment for the Rebate in relation to the retrospective claim is a third party payment. The amount on the customer's account (the retrospective claim) is the liability of the Customer, as the supply is made to the Customer only.

Taxable supply

Under section 11-5 of the GST Act you make a creditable acquisition if you acquire something solely or partly for a creditable purpose, the supply of the thing to you is a taxable supply, you provide or are liable to provide consideration for the supply, and you are registered or required to be registered (section 11-5 GST Act).

The payment made by you to the Retailers under the Agreement is consideration for a creditable acquisition that you made from those Retailers if all of the requirements under section 11-5 of the GST Act are met. As you are registered for GST, the following questions need to be addressed:

1. is there an acquisition which is solely or partly for a creditable purpose? (par (a));

2. does the acquisition arise from a supply to you which is a taxable supply? (par (b)); and

3. do you provide, or are you liable to provide, consideration for the taxable supply? (par (c)).

· Under section 11-15 of the GST Act, you make a creditable acquisition of the service provided to the Rebate Customers because:

o As a government entity, activities done in the implementation of the government policy, the Scheme, is considered to be made in carrying its enterprise pursuant to paragraph 9-20(1)(g) of the GST Act.

o It is considered that the acquisition does not relate to making supplies that would be input taxed or is of a private or domestic nature.

· The acquisition arises from a supply from the Retailer. This supply is a taxable supply as all of the requirements under section 9-5 of the GST Act are met:

o The Retailer makes the supply for consideration

o The supply is made in the course of their enterprise

o The supply is connected with Australia; and

o The Retailer is registered for GST

o The supply is not GST-free or input taxed under the GST Act or any other Acts.

· Under the Agreement, you agree to pay the Rebate to the Retailer for the supply of services as discussed above. The payment is consideration for a taxable supply under subsection 9-15(1) of the GST Act

In conclusion, the payment made by you to the Retailers under the Agreement is consideration for a creditable acquisition that you made from those Retailers.

Question 2

Summary

You hold valid tax invoices as the sample tax invoice meets all the requirements of a tax invoice under section 29-70 of the GST Act.

Detailed reasoning

We have reviewed the copy of the tax invoice. It is considered that the information provided by the tax invoice complies with the requirements under section 29-70 of the GST Act.

o The tax invoice was issued by the supplier of the supply.

o It is in the approved form.

o The supplier's identity and the supplier's ABN.

o The recipient's identity and their address.

o What is supplied, including the quantity (if applicable) and the price of what supplied:

Rebate claims,

Number of claims per category and cost:

Pensioner Concession Card Holders XXX

Repatriation Card Holders XXX

Seniors Card Holders XXX

Proprietor Rebate Given XXX

Administration Cost XXX

o The date the document is issued:

o The amount (if any) GST is payable in relation to each supply to which the document relates XXXXX.

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