Edited version of your private ruling

Authorisation Number: 1012448102334

Ruling

Subject: GST and agents

Question 1

Is a separate entity acting as your agent in the management of the hall?

Answer

Yes

Question 2

Should receipts/invoices be issued in your name and Australian Business Number (ABN), with goods and services tax (GST) collected on the hall hire, and claimed on relevant expenditure?

Answer

See reasons for decisions below

Question 3

Where a separate entity manages a hall in their own right and not as your agent and is registered for GST, is it permissible for the organisation to declare the income and expenditure and account for GST on their Business Activity Statement (AS)?

Answer

See reasons for decisions below

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 a Local Government organisation registered for GST.

· You operate a number of venues (halls) that are available for use by the community.

· Due to geographical and resourcing constraints, the management of the halls (hiring, collection/return of keys, minor maintenance), is conducted a separate entity.

· The invoices and receipts are issued in your name with your ABN.

· The separate entity collects revenue for the hire of the hall, and also pays for day-to-day expenses associated with the hall (cleaning, electricity etc).

· The separate entity operates the halls under an Agreement, which specifies how the hall must be run.

· The Agreement sets out the roles and responsibilities of both the separate entity and you in the arrangement.

· The Agreement also provides the formula for payment of a 'commission' to the separate entity for the management of the hall.

· The halls are not leased to the separate entity. You retain ownership and ultimate control over the halls.

· The separate entity is an external party not related to you.

· The separate entity may be an organisation in their own right and may be registered for GST.

Relevant legislative provisions

All references are to the A New Tax System (Goods and Services Tax) Act 1999:

Section 9-5

Reasons for decision

Issue 1

Question 1

Summary

The separate entity is acting as an agent for you in the management of the hall.

Detailed reasoning

Goods and Service Tax Ruling GSTR 2000/37: agency relationships and the application of the law (GSTR 2000/37) discusses the meaning of a agent/principal relationship for the purposes of the GST Act.

Paragraph 10 of GSTR 2000/37 states in part:

10. An intermediary may be authorised by another party to do something on that party's behalf. Generally, the intermediary is called an agent. The party who authorises the agent to act on their behalf is called the principal...'

Furthermore, paragraph 11 of GSTR 2000/37 states:

11. For commercial law purposes, an agent is a person who is authorised, either expressly or impliedly, by a principal to act for that principal so as to create or affect legal relations between the principal and third parties.¹

Paragraph 28 of GSTR 2000/37 explains the factors that indicate an agency relationship exists. While each factor is indicative of an agency relationship, no single factor in isolation is determinative. It states:

28. 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:

o 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;

o any exercise of the authority that you are given to enter into legal relations with a third party;

o whether you bear any significant commercial risk;

o whether you act in your own name;

o 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

o whether you decide the price of things that you might sell to third parties.

An agency relationship will exist between you and the separate entity where the separate entity is:

· described as an agent, or given the authority to act for you;

· exercising the authority to bind you when hiring the halls to third parties;

· not bearing any significant commercial risk when managing and hiring the halls;

· acting on your behalf;

· paid a commission by you when undertaking its activities under the Agreement.

You and the separate entity enter into a formal agreement relating to the management of the halls. This is provided for in the Agreement between you and the separate entity. The Agreement explains the obligations and responsibilities of both the separate entity and you.

Although the separate entity is not described as an agent, there a written agreement between you and the separate entity.

When assessing whether an agency relationship exists between you and the separate entity, relevant clauses within the Agreement provide evidence of that fact.

The agreement indicates that you give the authority to the Committee/Club to manage and hire the hall.

A clause of the agreement also states that you engage the separate entity to manage the hall and to carry out such services and activities relating to the daily management of the hall as may be appropriate.

A schedule of the agreement provides the responsibilities of both parties relating to the hall. Under the listing one of the provisions is that the separate entity will use your Tax Invoice/Receipt books to issue receipts for all hire hall."

Other clauses of the Agreement provide that the separate entity is entitled to allocate a percentage of the Net Surplus at the end of each financial year for the continuing operation and management of, and improvements to, the hall and the activities under a separate clause.

The Agreement also provides that the separate entity must return to you a percentage of its Net Surplus for the financial year, within sixty (60) days of the end of the financial year except in the situation referred to in a different clause.

Net Surplus is defined in the Agreement.

This would indicate that the separate entity receives a 'commission' as payment from you.

A further clause of the Agreement provides that you at your discretion may require the separate entity to hire or refuse to hire the hall to any person or group if such refusal is not discriminatory and does not breach any legislation;

Other clauses of the agreement also provide that you must:

· develop a standard hire policy and a hire agreement including a Booking Form and Conditions of Hire. Every hirer must sign a booking form which indemnifies the separate entity and youand agrees to abide by the conditions of hire;

· provide you with a copy of the hire policy and hire agreement. You may make amendments at your discretion;

Based on the facts provided, it is reasonable to conclude the separate entity is acting as an agent for you when managing the hall including the hiring of the hall to third parties.

As an agent for you the separate entity does not make a supply. You are the principal and the separate entity is making the supply on your behalf. Thus you are required to account for the GST on the hire fees.

Question 2

Summary

As the separate entity is acting as your agent, tax invoices can be issued in their own name (if registered for GST) or if not registered for GST then they should be issued in your name and ABN, with GST collected on the hall hire where applicable, and claimed on relevant expenditure.

Detailed reasoning

For the reasoning outlined in Question 1 as the separate entity is acting as your agent in the hire of the halls, the separate entity may issue a tax invoice in their own name if they are registered for GST or if not registered for GST then it must be issued in your name with your ABN.

Section 153-15 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states:

(1) If you make a *taxable supply through an agent, an obligation to issue a *tax invoice relating to the supply:

(a) arises whether the *recipient makes a request for a tax invoice to you or the agent; and

(b) is complied with if either you or the agent gives the recipient a tax invoice within 28 days after the request.

(2) However, you and the agent must not both issue separate *tax invoices relating to the supply.

Note: Asterisked terms are defined in the Dictionary at section 195-1 of the GST Act.

The issuing of tax invoices for taxable supplies made through an agent is explained in detail in paragraphs 61 to 66 of GSTR 2000/37 as follows:

61. Paragraph 29-70(1)(a) requires that the principal (as the supplier) must issue a tax invoice for a taxable supply. However, if a principal makes a taxable supply through an agent, section 153-15 allows either a principal or an agent, but not both, to issue the tax invoice. A principal may be liable to a penalty, under the Taxation Administration Act 1953, if the principal and agent both issue separate tax invoices for the same taxable supply.

62. Subsection 29-70(2) requires that if the principal (as the supplier) has not issued a tax invoice and the recipient of the supply requests one, it must be issued within 28 days of that request. In agency relationships, this obligation arises when the recipient makes a request to either the principal or the agent, and is complied with if either the principal or the agent gives the recipient a tax invoice within 28 days after the request.

63. Section 29-70 requires that a tax invoice:

· must set out the ABN of the entity that issues it which can either be that of the principal or the agent (paragraph 29-70(1)(b)); and

· must set out the price of the supply (paragraph 29-70(1)(c)); and

· must contain such other information as regulation 29-70.01 of A New Tax System (Goods and Services Tax) Regulations 1999 (the GST regulations) specifies (paragraph 29-70(1)(d)); and

· must be in the approved form (paragraph 29-70(1)(e)).

64. There is an argument that subsection 153-15(1) only varies the requirements of subsection 29-70(2) about who can issue the tax invoice. However, the Commissioner considers that the better view is that subsection 153-15(1) also varies the requirements set out in paragraphs 29-70(1)(b) about the issuers ABN and 29-70(1)(d) about information required under the regulations.

65. Regulation 29-70.01 of the GST regulations states, inter alia, that the tax invoice must contain the name of the supplier. However, where an agent issues the tax invoice, that document is a tax invoice and it meets the requirements of subsection 29-70(1) if it sets out:

· the principals name and ABN without the agents name and ABN as the supplier and issuer of the tax invoice; or

· the agents name and ABN as the supplier and issuer, instead of the principals name and ABN as the supplier.

66. You may act as an agent for more than one principal in a single dealing with a customer. In addition to supplies you make as an agent on behalf of your principals, you may also make a separate supply on your own account. In these situations, you may issue the one tax invoice that shows details for all of the supplies that you make.

Therefore, where a separate entity is acting as an agent and is registered or required to be registered for GST the agent may issue a tax invoice in either the principal's name, and ABN or in their own name and ABN.

Where an agent is unregistered and the agent is issuing a tax invoice on behalf of their principal the only option available for the tax invoice to be valid is that it includes the name and ABN of the principal. Where the information on an invoice does not contain the name and the corresponding ABN of the supplier it will not be a valid tax invoice. This in turn will effect the recipient's entitlement to claim input tax credits as they must firstly hold a valid tax invoice.

Paragraph 20 of GSTR 2000/37 also explains the attribution principles in an agency relationship as follows:

Attribution

20 Where a principal makes a taxable supply or a creditable acquisition through an agent, the GST payable by the principal or the input tax credit to which the principal is entitled would be attributable according to the basic attribution rules set out in sections 29-5 and 29-10 unless a special attribution rule applies. Similarly, the principal would attribute a decreasing adjustment according to the basic attribution rules set out in section 29-20 unless a special attribution rule applies.

21. However, to properly attribute any input tax credits or decreasing adjustments according to those basic rules, a principal may need to know information about when consideration is provided, when an invoice is issued or whether an adjustment is required. If a principal does not obtain this information until after the end of the relevant tax period in which attribution would normally occur, the application of the basic attribution rules may impose an unreasonable burden on the principal. Accordingly, the Commissioner has made a determination under section 29-25 to alter the attribution rules for principals who rely on an agent for information required to account for GST. A copy of that determination is attached to Goods and Services Tax Ruling GSTR 2000/29 as Schedule 4.

22. Also, sections 153-5 and 153-10 provide that either the principal or the agent may hold the relevant tax invoice or adjustment note when the principal gives the Commissioner a GST return for the relevant tax period.

Question 3

Summary

Where a separate entity manages the hall and the management of the hall is done as your agent, you are required to account for GST on funds raised through those activities. Where the separate entity conducts manages the hall in its own right, and the separate entity is registered, or required to be registered for GST, then the separate entity would need to account for this on their own BAS

Detailed reasoning

As discussed at question 1, where a separate entity manages the hall and the management of the hall is done as your agent, you are required to account for GST on funds raised through those activities. Where the separate entity conducts manages the hall in its own right, and the separate entity is registered, or required to be registered for GST, then the separate entity is the principal and the separate entity is making the supply on their own behalf and therefore would need to account for this on their own BAS as the separate entity is managing the hall as part of their own enterprise and not as your agent.

However, if the separate entity is managing the hall in its own right, and the separate entity is not registered, or required to be registered for GST, there are no GST obligations in relation to that event. This means that neither the separate entity nor you are required to remit GST, or are entitled to claim an input tax credit for the GST included in the price of any acquisitions made in connection with the management of the hall.

¹ 1 International Harvester Company of Australia Proprietary Limited v. Carrigan's Hazeldene Pastoral Company (1958) 100 CLR 644.

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