Edited version of your private ruling

Authorisation Number: 1012571559434

Ruling

Subject: goods and services tax (GST) and vouchers

Question 1

Are you making a financial supply?

Answer

No.

Question 2

Are redeemable vouchers being issued to the customers?

Answer

No.

Question 3

Are you required to be registered for GST?

Answer

You will be required to be registered for GST if your GST turnover reaches $75,000. The commission income is included in the calculation of GST turnover. The amounts credited to the customers' account on the website are not included in this calculation.

Question 4

Is GST payable on the supplies of the 'vouchers'?

Answer

No

Question 5

Is the commission you receive subject to GST?

Answer

No

Relevant facts and circumstances

You are not registered for GST.

You act as the Australian agent for a non-resident foreign company. Your role is to collect funds for passing on to the foreign company. You stated that these funds are collected from the sale of 'vouchers'. You perform these services in Australia using an Australian bank account.

The foreign company does not have a presence in Australia.

A customer of the foreign company logs onto the website,(website name), which is owned by the foreign company (the foreign company). You stated that from there, the customer purchases 'vouchers' when can later be exchanged for services. These 'vouchers' are purchased in parcels at a specific dollar value (eg so many credits at a certain price per credit).

The services supplied to the customers are based around photo editing and manipulation which is performed by an entity located in an overseas country.

Each customer has an account with the foreign company through the website, which keeps track of the 'vouchers' purchased, used and how many are remaining. The amount of the 'voucher' is credited to a log in on the website.

You stated that each customer redeems their 'vouchers' for services by ordering through the website. The final product is sent to the customer directly from the country in which the foreign company is located.

Once the credits have been used, the customer will need to purchase more credits to 'redeem' for photo editing and manipulation services.

When a customer 'purchases vouchers' through the website, an invoice is prepared by the foreign company and sent directly to the customer.

However, there are a few customers who you specifically prepare invoices for. When the customer requires more 'vouchers', they contact you and you prepare an invoice for a certain number of credits with a corresponding dollar value. These invoices are sent by you to the customer and the customer's account is updated on the website. In these instances, you are still acting on behalf of the foreign company.

The invoices issued to the customers state 'Description - something credits'.

On occasion, you assist customers in processing their purchases on the website for them. The customers in these cases, instead of just processing via the website themselves, phone you up and you do it for them. The customer is still issued an invoice from the foreign company in these cases.

The work you do in Australia is for PR purposes and is always on behalf of the foreign company.

For the 'sales of vouchers' made via the website and those that you assist with directly, you receive the customer's money into your bank account in Australia. You transfer these funds to the foreign company each period, but you keep a fixed percentage as a commission

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 9-25(5)

A New Tax System (Goods and Services Tax) Act 1999 subsection 9-25(6)

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

A New Tax System (Goods and Services Tax) Act 1999 section 23-5

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 40-5(1)

A New Tax System (Goods and Services Tax) Act 1999 subsection 84-5(1)

A New Tax System (Goods and Services Tax) Act 1999 subsection 84-10(1)

A New Tax System (Goods and Services Tax) Act 1999 subsection 84-12(1)

A New Tax System (Goods and Services Tax) Act 1999 Division 100

A New Tax System (Goods and Services Tax) Act 1999 subsection 100-5(1)

A New Tax System (Goods and Services Tax) Act 1999 subsection 100-25(1)

A New Tax System (Goods and Services Tax) Act 1999 subsection 188-10(1)

A New Tax System (Goods and Services Tax) Act 1999 subsection 188-15(1)

A New Tax System (Goods and Services Tax) Act 1999 subsection 188-20(1)

A New Tax System (Goods and Services Tax) Regulations 1999 subregulation 40-5.09(3)

Reasons for decisions

Question 1

Summary

You are not making a financial supply because you are not supplying an interest in or under a matter mentioned in an item in subregulation 40-5.09(3) of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations).

Detailed reasoning

For a supply to be a financial supply, it must be a supply of an interest in or under a matter mentioned in an item in the table in subregulation 40-5.09(3) of the GST Regulations.

These items are as follows:

· a bank account

· a debt, credit arrangement or right to credit

· a charge or mortgage over real or personal property

· a superannuation fund or approved deposit fund

· an annuity or allocated pension

· a life insurance policy

· a guarantee

· certain indemnities

· credit under a hire purchase agreement in a certain situation

· currency or an agreement to buy or sell currency

· securities

· a derivative

You are not supplying an interest in or under a matter mentioned in an item in subregulation 40-5.09(3) of the GST Regulations.

Therefore, you are not making a financial supply.

Question 2

Summary

When a customer pays money, they are transferring money to an account (indirectly through you) thereby creating a credit to that account and that money is to be used for future supplies. Therefore, in accordance with paragraph 50 of GSTR 2003/5, they are not being supplied with a voucher.

Detailed reasoning

GST is payable by you on your taxable supplies.

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:

(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.

(*Denotes a term defined in section 195-1 of the GST Act)

Subsection 100-5(1) of the GST Act states:

A supply of a *voucher is not a *taxable supply if:

(a) on redemption of the voucher, the holder of the voucher is

entitled to supplies up to the *stated monetary value of the

voucher; and

(b) the *consideration for supply of the voucher does not exceed

the stated monetary value of the voucher.

Subsection 100-25(1) of the GST Act defines voucher. It states:

A voucher is any:

(a) voucher, token, stamp, coupon or similar article; or

(b) *prepaid phone card or facility:

the redemption of which in accordance with its terms entitles the

holder to receive supplies in accordance with its terms. However, a

postage stamp is not a voucher.

Goods and Services Tax Ruling GSTR 2003/5 provides the Australian Taxation Office (ATO) view on the meaning of vouchers for the purposes of Division 100 of the GST Act.

Paragraphs 49 and 50 of GSTR 2003/5 discuss credits to an account. They state:

49. A credit to an account, by transferring money to the account, where that money is to be used for future supplies, is not a supply. This is the case even though a card or thing resembling a voucher may be given to create the credit or enable access or use of the credit in the account.

50. The supplier of the facility for the account is not supplying a voucher, nor is it making a supply of money. The supplier of the facility for the account is not making a taxable supply; and it is not providing consideration for a taxable supply.

When a customer pays money, they are transferring money to an account (indirectly through you) thereby establishing a credit to an account and that money is to be used for future supplies. Therefore, in accordance with paragraph 50 of GSTR 2003/5, they are not being supplied with a voucher.

Question 3

Summary

You are required to be registered for GST if your GST turnover reaches $75,000. Your commission income is included in the calculation of your GST turnover.

Detailed reasoning

Section 23-5 of the GST Act explains when an entity is required to be registered for GST. It states:

You are required to be registered under this Act if:

(a) you are *carrying on an *enterprise; and

(b) your GST turnover meets the *registration turnover

threshold.

You are carrying on an enterprise. Therefore, you meet the requirement of paragraph 23-5(a) of the GST Act.

Subsection 188-10(1) of the GST Act sets out when a GST turnover meets a particular turnover threshold. It states:

You have a GST turnover that meets a particular *turnover threshold

if

(a) your *current GST turnover is at or above the turnover

threshold, and the Commissioner is not satisfied that your

*projected GST turnover is below the turnover threshold; or

(b) your projected GST turnover is at or above the turnover

threshold.

Subsection 188-15(1) of the GST Act sets out how to calculate current GST turnover. It provides that your current GST turnover at a time during a particular month is the sum of the values of all the supplies that you have made, or are likely to make, during the 12 months ending as at the end of that month, other than:

(a) supplies that are input taxed; or

(b) supplies that are not for consideration; or

(c) supplies that are not made in connection with an enterprise

that you carry on.

Subsection 188-20(1) of the GST Act sets out how to calculate projected GST turnover. It provides that projected GST turnover at a time during a particular month is the sum of the values of all the supplies that you have made, or are likely to make, during that month and the next 11 months, other than:

(a) supplies that are input taxed; or

(b) supplies that are not for consideration; or

(c) supplies that are not made in connection with an enterprise

that you carry on.

In accordance with subsection 9-25(5) of the GST Act, supplies of things other than goods or real

property are connected with Australia if:

· the thing supplied is done in Australia,

· the supply is made through a permanent establishment the supplier operates in Australia, or

· certain other requirements are met.

You are supplying services to the foreign company and services are not goods or real property.

Your supplies of services to the foreign company are connected with Australia because you perform these services in Australia.

There are no other exclusions from the calculation of GST turnover that apply in your case.

Therefore, the commission you receive for your services is included in the calculation of your GST turnover.

The amounts credited to the customers' accounts when a 'voucher' is issued are not included in the calculation of your GST turnover because these amounts are not consideration for any supply that you make.

If your GST turnover reaches $75,000, you will meet the requirement of paragraph 23-5(b) of the GST Act.

Hence, if your GST turnover reaches $75,000 (which hinges on the level of commission income you receive and expect to receive), you will meet both requirements of section 23-5 of the GST Act. Therefore, you will be required to be registered for GST under such circumstances (this will be the case even if you only make GST-free supplies).

Question 4

In accordance with paragraph 49 of GSTR 2003/5, a credit to an account, by transferring money to the account, where that money is to be used for future supplies is not a supply. In your case, the customer's money is transferred to an account thereby establishing a credit to the account and that money is to be used for future supplies. Hence, in accordance with paragraph 49 of GSTR 2003/5, the supplier of the facility for the account - the foreign company is not making a supply in return for the money. Therefore, GST is not payable on the supplies of the 'vouchers'.

Question 5

Summary

The commission you receive is not subject to GST because it is consideration for a GST-free supply under item 2 in the table in subsection 38-190(1) of the GST Act, which deals with supplies of services to non-residents who are not in Australia.

Detailed reasoning

In accordance with item 2 in the table in subsection 38-190(1) of the GST Act, a supply of something other than goods or real property to a non-resident who is not in Australia when the thing supplied is done is GST-free if:

(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.

However, subsection 38-190(3) of the GST Act provides that a supply covered by item 2 in the table in subsection 38-190(1) of the GST Act is not GST-free if:

(a) it is a supply under an agreement entered into, whether directly or indirectly, with a non-resident; and

(b) the supply is provided, or the agreement requires it to be provided, to another entity in Australia.

You are supplying payment collection and transfer services and agency and representative services to the foreign company in return for the commission and you are providing these services to the foreign company. Services are not goods or real property. The foreign company is a non-resident which is not in Australia.

Your supply of the services is not a supply of work physically performed on goods situated in Australia when the work is done nor is it a supply that is directly connected with real property situated in Australia.

Hence, you make a GST-free supply to the foreign company in return for the commission. Therefore, GST is not payable on the commission.

Additional information

The supplies of the services that the customers order are not connected with Australia because they are performed overseas and they are not supplied though a permanent establishment the foreign company maintains in Australia. Therefore, GST is not payable by the foreign company on its supply of these services.

However, if the requirements of subsection 84-5(1) of the GST Act are met, GST will be payable on the supply of these services. Subsection 84-5(1) of the GST Act states:

A supply of anything other than goods or *real property that is:

(a) a supply not *connected with Australia, or

(b) a supply connected with Australia because of paragraph

9-25(5)(c).

is a taxable supply if:

(c) the *recipient of the supply acquires the thing supplied solely

or partly for the purpose of an *enterprise that the recipient

*carries on in Australia, but not solely for a *creditable purpose; and

(d) the supply is for *consideration; and

(e) the recipient is *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.

Where a supply is taxable under subsection 84-5(1) of the GST Act, the customer is liable to pay the GST (to the ATO) instead of the supplier.

The amount of GST on such a supply is 10% of the price of the supply.

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