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Edited version of your written advice
Authorisation Number: 1012840418173
Date of advice: 16 July 2015
Ruling
Subject: GST and bitcoin
Question 1
Does Entity A make a taxable supply or a taxable importation under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it transfers the thing to the Customer?
Answer
No.
Question 2
Is GST payable by Entity A under Division 84 of the GST Act in the above transaction?
Answer
No.
Question 3
Does Entity A make any other taxable supply in the above transaction?
Answer
Yes, Entity A makes a taxable supply of agency services to the Customer when it acts as agent for the Customer in the above transaction.
Relevant facts and circumstances
• Entity A is registered for goods and services tax (GST) and trades through a Website.
• The Website connects buyers and sellers of the specified thing and is itself not party to any Trade. It facilitates the Trade as a software platform and takes its own commission.
• Any person who wishes to buy or sell the thing through the Website must register with the Website and accept the Website's Terms of Use.
• Entity A does not own or operate the Website.
• Entity A uses this Website to place its advertisements and to find Customers who want to buy the specified thing.
• A Customer can buy the specified thing through that Website. The specified thing is not goods.
• The Customer is an Australian resident for tax purposes and is present in Australia at the time of the transaction.
• When the Customer places an order on the Website, the Customer is also required to enter into an agreement with Entity A and accept the terms of that agreement (Entity A's agreement).
• Entity A proposes to buy the thing as agent, on behalf of the Customer.
• Entity A's agreement provides that:
• Entity A provides buyer's agency services for the Customer.
• The Customer appoints Entity A as its agent for the sole purpose of acquiring the thing under the order.
• The Customer directs and authorises Entity A to acquire the thing on their behalf and at the agreed price.
• Entity A does not act as agent for any supplier of the thing.
• Entity A charges the Customer a fee (Commission) for its services.
• Entity A only acquires the thing from overseas suppliers when buying the thing on behalf of the Customer. Those suppliers have their own differing terms and conditions which Entity A must agree to and accept when purchasing the thing from them.
• The overseas suppliers which Entity A uses to acquire the thing on behalf of the Customer do not have terms that require Entity A to only act as a principal and do not prohibit or preclude Entity A from acting as agent in their written agreement, when dealing with them.
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 Division 13;
A New Tax System (Goods and Services Tax) Act 1999 Division 84; and
A New Tax System (Goods and Services Tax) Act 1999 Section 84-5.
Reasons for decision
Question 1
Taxable supply
Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states that 'you' make a taxable supply if
• you make the supply for consideration;
• the supply is made in the course of furtherance of an enterprise that you carry on;
• the supply is connected with Australia;
• you are registered or required to be registered for GST; and
• the supply is neither GST-free nor input taxed.
Under the GST legislation, a supply is a supply of any form of supply whatsoever. Therefore, a supply of the thing to the Customer would constitute a supply.
A supply made by 'you' is a taxable supply where the requirements of section 9-5 of the GST Act are met. The expression 'you' in the GST Act applies to an entity generally. Therefore, it is necessary to identify who is actually making the supply.
Entity A has submitted that under a written agency agreement with its Customer, it is acting as agent for the Customer in the transaction.
Whether an agency relationship exists will depend upon the arrangements between the parties and the conduct of the parties. Goods and Services Tax Ruling GSTR 2000/37 discusses the general law in relation to agency relationships. GSTR 2000/37 at paragraphs 28 and 29 provides for consideration a list of factors which may indicate an agency relationship.
Agency relationships
Factors that indicate an agency relationship
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:
• 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;
• any exercise of the authority that you are given to enter into legal relations with a third party;
• whether you bear any significant commercial risk;
• whether you act in your own name;
• 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
• whether you decide the price of things that you might sell to third parties.
29. In some situations, these factors may be difficult to establish. For example, situations may arise where:
• the existence of a principal is disclosed but not names; or
• the existence of a principal is not disclosed to third parties.
However, documents used by the parties and the conduct of the parties may still indicate the existence of an agency relationship.
Based on the above factors, we consider that the terms of the agreement between Entity A and the Customer, the substance of the dealings between the relevant parties and the total factual circumstances surrounding the transaction, indicate that an agency relationship exists between Entity A and the Customer, for the acquisition of the thing.
The principal is bound by the acts of an agent as a result of the authority given to the agent.
When an agent uses their authority to act for a principal, then any act done on behalf of that principal is an act of the principal.
When Entity A acquires the thing from another entity (Entity B), this act is considered to be an act performed by the Customer. As a result, it is the Customer, and not Entity A that is making the acquisition of the thing from Entity B.
Also, as Entity A does not acquire the thing, Entity A cannot be viewed as having acquired the thing to on supply the thing, in its own right, to the Customer in that transaction. As such, the supplier of the thing is Entity B and not Entity A.
As a result, Entity A does not make a taxable supply of the thing when it provides the thing to the Customer.
Taxable importation
Taxable importation under Division 13 of the GST Act relates to goods that are imported into Australia. In this case the thing is not goods. Accordingly, Division 13 of the GST Act is not applicable to the transaction conducted by Entity A. As a result, Entity A does not make a taxable importation in the transaction.
Question 2
Division 84 of the GST Act is about supplies of things other than goods or real property taking place outside Australia. Division 84 of the GST Act does not apply as Entity A is not the recipient of the supply from the overseas supplier to the Customer.
Entity A acquires the thing as agent, on behalf of the Customer and is not the recipient of the supply. As such, section 84-5 of the GST Act does not apply. Entity A does not make a taxable supply under section 84-5 of the GST Act.
Question 3
The supply of agency services by Entity A meets all the requirements for a taxable supply under section 9-5 of the GST Act. Therefore, Entity A will be making a taxable supply of agency services to its customers when it acquires the thing as agent on their behalf, from the overseas suppliers.
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