| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your written advice
Authorisation Number: 1012748233303
Ruling
Subject: GST and total receipts
Question 1
1. When your clerk deducts their commission from your total fee receipts, including in that deduction a GST component, are you required to include in your GST return what your clerk has deducted as commission (the clerk's fees)?
Answer
Yes
Question 2
2. Should the GST payable on your clerk's fee be added to the input tax credits owing to you by the ATO?
Answer
Yes
The scheme commences on:
The scheme has commenced
Relevant facts and circumstances
You are registered for the goods and services tax.
You operate, at the bar, through a barrister's clerk.
The clerk organises briefs, sends out accounts and pays fees into your bank account. The clerk also deducts their fees from your fee receipts, including in that deduction a GST component.
In addition the clerk pays amounts on your behalf such as telephone and subscriptions which include a GST component.
In your application for a ruling you informed us of the following:
• there is no qualitative difference between, on the one hand where your clerk has deducted his fees and on the other hand, where you clerk has deducted payments they have made on your behalf to third parties. In either case, all those deductions are made from the total proceeds due to you;
• your total proceeds, in this case, $x,xxx.xx need to be included in your total receipts. You are liable for GST namely, $xxx.xx in respect of this total amount;
• the GST of $xx.xx payable on your clerk's fee of $xxx.xx is then to be added to the GST which is to be included in the GST credits owing to you by the ATO;
• whether or not you made the payment direct or through an agent or your clerk has deducted the payment as money you owe them, substantively you have made the payment;
• it does not matter that your clerk has not passed the money to you, where money has come in being your fees you are entitled to the money;
• your clerk has to charge you GST whether or not you pay them direct or they deduct what they are owed in commission from your fees;
• the total fees your clerk collects should be included in your business receipts, including the entire GST component on those fees and that the GST component of what your clerk has deducted from your fees is then to be treated like any other business expense where you have paid GST. It is to be included in what the Australian Taxation Office should credit you for GST you have paid.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 sections 9-40, 9-70, 11-15, 11-20, 11-25.
Reasons for decision
Question 1
When your clerk deducts their commission from your total fee receipts, including in that deduction a GST component, are you required to include in your GST return what your clerk has deducted as commission (the clerk's fees)?
Detailed reasoning
The GST Act provides at section 9-40 that you must pay the GST payable on any taxable supply that you make.
In this case you informed us that you made taxable supplies the total proceeds of which were $xxxx.xx.
Section 9-70 of the GST Act provides that the amount of GST on a taxable supply is 10% of the value of the taxable supply. Further section 9-75 of the GST Act explains that the value of a taxable supply is the price x 10/11.
As stated above you have to pay GST on all taxable supplies that you make. This means that you have to include all receipts obtained from making taxable supplies in your GST return including the commission your clerk deducted, as their payment, from your total receipts at label G1 of your activity statement.
Question 2
Should the GST of $xx.xx payable on your clerk's fee of $xxx.xx be added to the input tax credits owing to you by the ATO?
Summary
Yes
Detailed reasoning
Section 11-20 of the GST Act provides that you are entitled to input tax credits for any creditable acquisition that you make.
Section 11-25 of the GST Act provides that the amount of the input tax credit for a creditable acquisition is an amount equal to the GST payable on the supply of the thing acquired.
You make a creditable acquisition under section 11-5 of the GST Act if you acquire anything 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 11-15 of the GST Act provides that you acquire a thing for a creditable purpose to the extent that you acquire it in carrying on an enterprise. The acquisition will not be creditable to the extent that it relates to the making of input taxed supplies or is of a private or domestic nature.
This means that as you acquired the clerk's services for a creditable purpose you are therefore entitled to an input tax credit of $xx.xx on your clerk's fee of $xxx.xx.
Copyright notice
© Australian Taxation Office for the Commonwealth of Australia
You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).
