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Edited version of your private ruling
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Ruling
Subject: goods and services tax (GST) and executor's commission.
Question
Is GST payable by you on the supply of executor's services for which you receive a commission?
Answer
Yes.
Relevant facts and circumstances
You conduct a farming business and are registered for GST.
You were appointed executor of the will of the late (certain individual) who had been both a client and close friend of yours for many years.
The individual passed away on a certain date and you have administered the estate such that it is ready to be distributed to various beneficiaries. The will provides for executor's commission to be calculated at the rate of (a certain rate) of the value of the estate and this will amount to approximately a certain amount of money to be paid to you from the estate.
Your activity of being executor of the deceased estate is a one-off activity.
You perform the executor's services in Australia only.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 subsection 7-1(1)
A New Tax System (Goods and Services Tax) Act 1999 section 9-5
A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-10(2)(b)
A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-25(5)(a)
A New Tax System (Goods and Services Tax) Act 1999 section 9-40
A New Tax System (Goods and Services Tax) Act 1999 section 9-20
A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-20(1)(a)
A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-20(1)(b)
A New Tax System (Goods and Services Tax) Act 1999 paragraph 184-1(1)(a)
A New Tax System (Goods and Services Tax) Act 1999 subsection184-1(2)
A New Tax System (Goods and Services Tax) Act 1999 subsection184-1(3)
Reasons for decision
Summary
GST is payable by you on the executor's commission as:
· you supply executor's services for consideration
· you supply these services in the course or furtherance of an enterprise that you carry on
· your supply of these services is connected with Australia
· you are registered for GST, and
· your supply of the services is not GST-free or input taxed.
The GST payable is 1/11th of the executor's commission that you receive.
Detailed reasoning
GST is payable by you on taxable supplies that you make.
You make a taxable supply where you satisfy the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), which states:
You make a taxable supply if:
· you make the supply for *consideration; and
· the supply is made in the course or furtherance of an *enterprise that
· you *carry on; and
· the supply is *connected with Australia; and
· you are *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.
(*Denotes a term defined in section 195-1 of the GST Act)
Supply for consideration
In accordance with paragraph 9-10(2)(b) of the GST Act, a supply includes a supply of services.
Subsection 184-1(3) of the GST Act provides that a legal person can have a number of different capacities in which the person does things. In each of those capacities, the person is taken to be a different entity. For example, in addition to his or her personal capacity, an individual may be sole trustee of one or more trusts.
You, in your capacity, as an individual are supplying executor's services to the trustee of the deceased estate for consideration (that is, the commission). Therefore, you satisfy the requirement of paragraph 9-5(a) of the GST Act.
Enterprise
Enterprise is defined in section 9-20 of the GST Act to include:
· an activity or series of activities in the form of a business (paragraph
· 9-20(1)(a) of the GST Act), and
· an adventure or concern in the nature of trade (paragraph 9-20(1)(b) of the GST Act).
Miscellaneous Taxation Ruling MT 2006/1 provides guidance on the meaning of enterprise for ABN purposes.
Paragraph 1 of Goods and Services Tax Determination GSTD 2006/6 provides that the principles in MT 2006/1 apply equally to the terms 'entity' and 'enterprise' and can be relied upon for GST purposes.
Paragraph 234 of MT 2006/1 provides guidance on the meaning of business and adventure or concern in the nature of trade. It states:
234. Ordinarily, the term 'business' would encompass trade engaged in, on a regular or continuous basis. However, an adventure or concern in the nature of trade may be an isolated or one-off transaction that does not amount to a business but which has the characteristics of a business deal.
Your activity of acting as executor for the deceased estate is an isolated and one-off activity. However, this activity has the characteristics of a business deal. Therefore, your activity of acting as executor for the deceased estate is at least an enterprise under paragraph 9-20(1)(b) of the GST Act if not an enterprise under paragraph 9-20(1)(a) of the GST Act. Hence, your supply of the executor services is made by you in the course or furtherance of an enterprise that you carry on. Therefore, you satisfy the requirement of paragraph 9-5(b) of the GST Act.
Connected with Australia
Your supply of the executor services is connected with Australia as you perform these services in Australia. Therefore, you satisfy the requirement of paragraph 9-5(c) of the GST Act.
GST registered
You are registered for GST. Therefore, you satisfy the requirement of paragraph 9-5(d) of the GST Act.
There are no provisions in the GST Act under which your supply of the executor services is GST-free or input taxed.
Therefore, you satisfy all the requirements of section 9-5 of the GST Act. Hence, GST is payable by you on the supply of your executor services.
The GST payable is 1/11th of the executor's commission.
The Australian Taxation Office cannot advise whether you can charge the deceased estate an additional amount above the 2% to cover your GST liability.
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