Edited version of your written advice

Authorisation Number: 1012814670314

Ruling

Subject: GST and appropriations

Question 1

Are the payments to government related entities for providing information the provision of consideration?

Answer

No. The payments are not the provision of consideration pursuant to subsection 9-17(3) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

Therefore, no GST will be payable on the supply.

Question 2

Are payments to entities that are not government related entities, for providing information, the provision of consideration?

Answer

Yes. The payments are the provision of consideration pursuant to section 9-15 of the GST Act.

Therefore, GST will be payable on the supply where all the requirements of a taxable supply are satisfied including that the entity is registered for GST.

Relevant facts and circumstances

You are a government entity registered for GST. You administer the collection of information.

You pay the funds out of an appropriation.

You have entered into a contract with Entity A for them to manage and coordinate the collection of information from government related entities (GRE's) and entities that are not government related entities (non GRE's). Entity A is not a government entity and is registered for GST.

Entity A completes all the data analysis and prepares various reports.

The contract with Entity A provides them with two types of payments:

1. a pool of funding to cover the payments for the information, and

2. payment to Entity A for the management of the data and its other obligations as set out in the contract.

Entity A, pay the payments for the information on your behalf.

The payments are calculated on the cost to provide the information.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section 9-5

A New Tax System (Goods and Services Tax) Act 1999 Section 9-15

A New Tax System (Goods and Services Tax) Act 1999 Subsection 9-17(3), and

A New Tax System (Goods and Services Tax) Act 1999 Section 11-5.

Reasons for decision

In this reasoning, please note:

• all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)

• terms marked with an asterisk are defined in section 195-1 of the GST Act

• all reference materials, published by the Australian Taxation Office (ATO), that are referred to are available on the ATO website ato.gov.au

It must first be established whether you or Entity A are making the payments to the GRE's and the non GRE's.

Paragraphs 48 and 49 of Goods and Services Tax Ruling GSTR 2000/37 Goods and Services Tax: agency relationships and the application of the law provides guidance on agency relationship and disbursements and states:

Agency relationship and disbursements

48. Agents may incur expenses on a client matter both as an agent of the client and as a principal in the ordinary course of providing their services to the client. For example, in most cases, even though agreements between solicitors and clients may not use the term agent or agency, it is clear that the clients have authorised the solicitors to act on their behalf in the particular matter. When the solicitor acts as an agent for the client, the general law of agency applies so that the solicitor is 'standing in the shoes' of the client.

49. If a disbursement is made by a solicitor and incurred in the solicitor's capacity as a paying agent for a particular client, then no GST is payable by the solicitor on the subsequent reimbursement by the client. This is because the goods or services to which the disbursement relates are supplied to the client, not to the solicitor, by a third party. Also, the reimbursement forms no part of the consideration payable by the client for the supply of services by the solicitor. However, if goods or services are supplied to the solicitor to enable the solicitor to perform services supplied to the client, GST is payable by the solicitor on any reimbursement by the client of expenses incurred on those goods or services, whether the reimbursement is separately itemised or included as part of the solicitor's overall fee. This is because the reimbursement is part of the consideration payable by the client for services supplied by the solicitor….

In this case, the agreement with Entity A in relation to the funding for the payments provides that:

1. The funding for the payments is part of a Consolidated Revenue Fund.

2. The funding provided by you to Entity A for the payments to the GRE's and the non GRE's does not form part of the payment you are making for the supply of services by Entity A. It is separate and distinct.

3. Entity A has to account for the expenditure of the funds to you.

4. Any interest earned on the funds held by entity A for payments to the GRE's and non GRE's belongs to you.

5. The payments made by Entity A to the GRE's and the non GRE's are made on your behalf.

Therefore, we consider that the payments are made by Entity A in their capacity as a paying agent for you and not in their capacity as a principle in the course of providing the agreed services to you.

As such, you are making the payments to the GRE's and the non GRE's.

Now that we have established that you are making the payments we must determine if those payments are the provision of consideration.

Subsection 9-17(3) states:

A payment is not the provision of consideration if:

(a) the payment is made by a *government related entity to another government related entity for making a supply; and

(b) the payment is:

(i) covered by an appropriation under an *Australian law; or

…

(c) the payment is calculated on the basis that the sum of:

(i) the payment (including the amounts of any other such payments) relating to the supply; and

(ii) anything (including any payment for any act or forbearance) that the other government related entity receives from another entity in connection with, or in response to, or for the inducement of, the supply, or for any other related supply;

does not exceed the supplier's anticipated or actual costs of making those supplies.

The payment from you to a GRE is:

• from a GRE (you) to another GRE for the entity making a supply of information

• covered by an appropriation

• calculated on the basis that the payment does not exceed the anticipated costs to the entity providing the information.

The payment from you to a GRE will not be the provision of consideration because all of the requirements of subsection 9-17(3) are satisfied. Without the provision of consideration the supply by the GRE to you cannot be a taxable supply under section 9-5. Therefore, no GST will be payable by the GRE on their supply.

You will also not be entitled to input tax credits under section 11-5 as the supply to you is not a taxable supply.

Question 2

Subsection 9-17(3) cannot apply to the payments made by you to the entities that are not GRE.

Section 9-15(1) states:

Consideration includes:

(a) any payment, or any act or forbearance, in connection with a supply of anything; and

(b) any payment, or any act or forbearance, in response to or for the inducement of a supply of anything.

Section 9-10 provides that a supply includes the provision of advice or information.

The payment from you to an entity that is not a GRE is consideration for the supply of information.

Therefore, the payment is the provision of consideration.

Where the supply of the information from the entity to you satisfies all the requirements of a taxable supply, the payment from you to the entity will include GST.

Section 9-5 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.

There are no circumstances whereby the supply of the information by the entity can be input taxed or GST-free. Paragraphs (a), (b) and (c) of section 9-5 will be satisfied as the supply of information is for consideration in the course of an enterprise in Australia.

Therefore, where the entity is registered for GST the supply of the information to you will be a taxable supply and you will be required to pay GST on the supply. The entity will be required to report the GST on the supplies it makes to you.

You will also be entitled to input tax credits under section 11-5 for your acquisition of the information from the entities that are not GRE that are registered for GST.

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