Edited version of your private ruling

Authorisation Number: 1012527249627

Ruling

Subject: goods and services tax (GST) and auctions

Question 1

Is GST payable on the buyers' premiums that non-resident buyers pay?

Answer

No.

Question 2

Is GST payable on the sale of the goods to non-resident buyers where you are the owner vendor?

Answer

No.

Question 3

Is GST payable on the sale of the goods to non-resident buyers where you sell the goods as agent of behalf of the vendors?

Answer

No.

Relevant facts and circumstances

You are registered for GST.

You conduct an auction house business based in premises in Australia selling a range of goods including art, memorabilia, collectables and philately.

You sell the goods at auction clearances to a wide variety of Australian and overseas buyers. You usually sell the goods in the capacity as agent on behalf of Australian resident and overseas resident vendors. Sometimes you sell goods in the capacity of owner vendor.

You provide all auction house services in Australia.

You charge buyers a buyer's premium (commission).

Some of the buyers are non-residents.

Where the non-resident buyer is an individual, they are not physically present in Australia when you perform the auction clearance services. Where the non-resident buyer is a non-individual they are not in Australia in connection with your supplies of auction clearance services when you perform these services.

The goods are exported from Australia by the vendor to the non-resident buyer with an overseas address before or within 60 days after the earlier of the day on which the vendor receives any of the consideration for the supply or the day on which the vendor gives the invoice. However, where the supply of the goods to the non-resident buyer is for consideration that is provided in instalments, the contract requires the goods to be exported and the vendor exports them from Australia before, or within 60 days, after the earlier of the day on which the vendor receives any of the final instalment of the consideration for the supply or the vendor gives an invoice for that final instalment.

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 subsection 9-30(3)

A New Tax System (Goods and Services Tax) Act 1999 section 9-40

A New Tax System (Goods and Services Tax) Act 1999 subsection 38-185(1)

A New Tax System (Goods and Services Tax) Act 1999 subsection 38-190(1)

A New Tax System (Goods and Services Tax) Act 1999 subsection 38-190(3)

A New Tax System (Goods and Services Tax) Act 1999 subsection 57-5(1)

Reasons for decisions

Question 1

Summary

GST is not payable on the buyers' premiums that non-resident buyers pay because you make GST-free supplies of services to those buyers in return for the premiums.

These supplies are GST-free because:

· the things supplied are not goods or real property

· you make the supplies to non-resident entities that are not in Australia in relation to your supplies when the things supplied are done

· your supplies of the services are not supplies of work physically performed on goods situated in Australia when the work is done; and

· the supplies are not directly connected with real property situated in Australia.

Detailed reasoning

GST is payable by you on your taxable supplies.

An entity makes a taxable supply where the requirements of section 9-5 of the GST Act are met, which states:

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 Australia; and

(d) 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.

We consider that you supply auction clearance services to the buyers in return for the buyers' premiums. These services help the buyers to buy the goods.

You meet the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act. This is because:

· you supply the auction clearance services to the buyers for consideration (the buyer's premium)

· you supply these services in the course or furtherance of an enterprise that you carry on

· these supplies are connected with Australia, and

· you are registered for GST.

There are no provisions in the GST Act under which your supplies of these services are input taxed.

Therefore, what remains to be determined is whether these supplies are GST-free.

GST-free supplies of services etc consumed overseas

In accordance with item 2 in the table in subsection 38-190(1) of the GST Act (item 2) a supply of something other than goods or real property is GST-free where the supply is made to a recipient who is not in Australia when the thing supplied is done; and

(a) the supply is neither a supply of work physically performed on goods

situated in Australia when the work is done nor a supply directly connected with real property situated in Australia; or

(b) the non-resident acquires the thing in carrying on the non-resident's

enterprise, but is not registered or required to be registered for GST.

Subsection 38-190(3) of the GST Act provides that a supply covered by item 2 is not GST-free if:

(a) it is a supply under an agreement entered into with a non-resident; and

(b) the supply is provided, or the agreement requires it to be provided, to

another entity in Australia

Recipient not in Australia when the thing supplied is done

Paragraphs 31, 35, 37, 41, 43, 44, 49 and 50 of Goods and Services Tax Ruling GSTR 2004/7 provide the Australian Taxation Office (ATO) view on determining whether a supply is made to a recipient who is not in Australia for the purposes of item 2. They state:

Meaning of not in Australia for the purposes of item 2

31. The requirement that the non-resident in item 2, or the recipient in item 3, is not in Australia when the thing supplied is done is a requirement, in our view, that the non-resident or recipient is not in Australia in relation to the supply when the thing supplied is done.

Non-resident individuals

35. A non-resident individual is in Australia if that individual is physically in Australia. If a non-resident individual is physically in Australia and in contact (other than contact which is only of a minor nature) with the supplier, that presence is in relation to the supply.

Non-resident companies

37. A non-resident company is in Australia if that company carries on business (or in the case of a company that does not carry on business, carries on its activities) in Australia:

(a) at or through a fixed and definite place of its own for a sufficiently substantial period of time; or

(b) through an agent at a fixed and definite place for a sufficiently substantial period of time.

41. A non-resident company is in Australia in relation to the supply if the supply is solely or partly for the purposes of the Australian presence, for example, its Australian branch. If the supply is not for the purposes of the Australian presence but that Australian presence is involved in the supply, the company is in Australia in relation to the supply, except where the only involvement is minor.

Non-resident partnerships

43. A non-resident partnership is in Australia if that partnership carries on business (or in the case of a partnership that is in receipt of ordinary income or statutory income jointly, other activities which generate that income) in Australia:

(a) at or through a fixed and definite place of its own for a sufficiently substantial period of time; or

(b) through an agent at a fixed and definite place for a sufficiently substantial period of time.

44. A non-resident partnership is in Australia in relation to the supply if the supply is solely or partly for the purposes of the Australian presence, for example, its Australian branch. If the supply is not for the purposes of the Australian presence but that Australian presence is involved in the supply, the partnership is in Australia in relation to the supply, except where the only involvement is minor.

Non-resident trusts

49. We consider that a non-resident trust is in Australia if a trustee of that trust, acting in its capacity as trustee, carries on business (or in the case of a trustee that does not carry on business, carries on the trust's activities) in Australia:

(a) at or through a fixed and definite place of its own for a sufficiently substantial period of time; or

(b) through an agent at a fixed and definite place for a sufficiently substantial period of time.

50. A non-resident trust is in Australia in relation to the supply if the supply is solely or partly for the purposes of the Australian presence of that trust, for example, its Australian branch. If the supply is not for the purposes of the Australian presence but that Australian presence is involved in the supply, the trust is in Australia in relation to the supply, except where the only involvement is minor.

Supply provided to another entity in Australia.

Paragraphs 61 and 62 of Goods and Services Tax Ruling GSTR 2005/6 provide the ATO view on determining whether a supply is provided to another entity for the purposes of subsection 38-190(3) of the GST Act. They state:

61. Thus the expression 'provided to another entity' means, in our view, that in the performance of a service (or in the doing of some thing), the actual flow of that supply is, in whole or part, to an entity that is not the non-resident entity with which the supplier made the agreement for the supply. The contractual flow is to one entity (the non-resident recipient) and the actual flow of the supply is to another entity.

62. For example, if a supply of entertainment services is made to a non-resident company and in the performance of that service the employees are the entities that are entertained, the actual flow of that service is to another entity, each employee (see above where the meaning of 'another entity' is discussed). The supply is made to the non-resident company (the employer) and provided to another entity (each employee).

You supply auction clearance services to the buyers in return for the buyers' premiums.

Services are not goods or real property.

The non-resident individuals who pay the buyers' premiums are not physically in Australia when you perform the auction clearance services.

You advised that where the non-residents who pay the buyers' premiums are non-individuals, they are not in Australia in connection with the supplies of auction clearance services when you perform these services. We conclude from this that if the non-resident buyer is a non-individual, the supply of the services is not for the purposes of their Australian presence if any and their Australian presence if any is not involved with the supply.

Therefore, the services you supply in return for the buyers' premiums paid by the non-resident buyers are made to non-residents who are not in Australia in relation to the supplies of these services.

The supplies of these services are not supplies of work physically performed on goods situated in Australia when the work is done and are not supplies that are directly connected with real property situated in Australia.

You supply the services under an agreement with a non-resident. Therefore, the requirement of paragraph 38-190(3)(a) of the GST Act is met.

We consider that where you supply auction clearance services to a buyer in return for the buyer's premium, the actual flow of this supply would always be to the recipient of the supply - the buyer. This is because these auction clearance services help the buyer to buy the goods. Therefore, where you supply auction clearance services to a non-resident buyer in return for the buyer's premium, you would not be providing this supply to another entity for the purposes of paragraph 38-190(3)(b) of the GST Act.

As you satisfy the requirements of item 2 and subsection 38-190(3) of the GST Act does not apply, you make GST-free supplies of services in return for the buyers' premiums that the non-resident buyers pay.

Hence, you do not make taxable supplies in return for the buyers' premiums that non-residents pay. Therefore, GST is not payable by you on the buyers' premiums that non-resident buyers pay.

Question 2

Summary

GST is not payable where you sell goods as owner vendor to non-residents buyers, because the export GST exemption applies.

Detailed reasoning

You meet the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act. This is because:

· you sell the goods to the buyers for consideration

· you sell the goods in the course or furtherance of an enterprise that you carry on

· these supplies are connected with Australia, and

· you are registered for GST.

Where a supply would otherwise be input taxed and GST-free, the supply would generally be GST-free.

GST-free exports

Item 1 in the table in subsection 38-185(1) of the GST Act (item 1) provides that a supply of goods is GST-free if the supplier exports them from Australia before, or within 60 days (or such further period as the Commissioner allows) after:

(e) the day on which the supplier receives any of the consideration for the supply, or

(f) if, on an earlier day, the supplier gives an invoice for the supply - the day on which the supplier gives the invoice.

Item 2 in the table in subsection 38-185(1) of the GST Act (item 2) provides that a supply of goods is GST-free where consideration is provided in instalments under a contract that requires the goods to be exported, but only if the supplier exports them from Australia before, or within 60 days (or such further period as the Commissioner allows) after:

(a) the day on which the supplier receives any of the

final instalment of the consideration for the supply; or

(b) if, on an earlier day, the supplier gives an invoice

for that final instalment - the day on which

the supplier gives the invoice.

Where you sell goods as owner vendor to non-resident buyers, you export the goods from Australia before, or within 60 days after the earlier of the day on which you receive any of the consideration for the supply or the day on which you give the invoice.

However, where the non-resident buyer pays you in instalments, you export the goods from Australia before, or within 60 days, after the earlier of the day on which you receive any of the final instalment of the consideration for the supply or you give an invoice for that final instalment.

Therefore, where you sell goods as owner vendor to non-resident buyers, you make a GST-free export supply under item 1 or item 2.

Hence, under such circumstances, you do not make a taxable sale of the goods. Therefore, GST is not payable on your sale of the goods under such circumstances.

Question 3

Where you sell goods as agent for vendors to non-resident buyers, the vendors make GST-free export supplies for the same reasons as why you make GST-free export supplies to non-resident buyers when you as owner vendor sell goods to non-resident buyers.

Hence, under such circumstances, the vendors do not make a taxable sale of the goods. Therefore, GST is not payable by the vendors when they sell to non-resident buyers.

Additional information

Subsection 57-5(1) of the GST Act provides that GST payable on a taxable supply made by a non-resident through a resident agent is payable by the agent and is not payable by the non-resident.

Non-resident vendors make supplies of goods through you and you are a resident agent for those vendors. However, in these cases, you still will not have a GST liability on the sale of the goods provided that the export exemption applies or the sale of the goods is not taxable for some other reason (for example, the sale is not made in the course or furtherance of an enterprise that the vendor carries on).

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