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Edited version of your written advice
Authorisation Number: 1012907377200
Date of advice: 5 November 2015
Ruling
Subject: GST and auctions
Question
How does the GST apply to the following scenarios?
Scenario 1
Seller is a non-resident located overseas and is not registered or required to be registered for GST in Australia and following applies:
• You import a thing into Australia worth $225,000,
• You sell the thing at auction to a resident buyer as an agent for the non-resident seller for $225,000,
• You invoice on your letterhead,
• Resident buyer pays you the purchase price of the thing $225,000,
• You pay the non-resident seller $225,000 less your sales commission.
Scenario 2
Seller is a non-resident located overseas and is required to be registered for GST in Australia and following applies:
• You import the thing into Australia worth $225,000,
• You sell the thing at auction to a resident buyer as an agent for the non-resident seller for $225,000,
• You invoice on your letterhead,
• Resident buyer pays you the purchase price of the thing $225,000,
• You pay the non-resident seller $225,000 less your sales commission.
Scenario 3
Seller is a resident and is not registered or required to be registered for GST in Australia and following applies:
• Seller consigns the thing to the company and you act as agent for the resident seller,
• You sell the thing at auction to a resident buyer as an agent for $225,000,
• You invoice on your letterhead,
• Resident buyer pays you the purchase price of the thing $225,000,
• You pay the resident seller $225,000 less your sales commission.
Scenario 4
Seller is a resident and is registered or required to be registered for GST in Australia and following applies:
• Seller consigns the thing to the company and you act as agent for the resident seller,
• You sell the thing at auction to a resident buyer as an agent for $225,000,
• You invoice on your letterhead,
• Resident buyer pays you the purchase price of the thing $225,000,
• You pay the resident seller $225,000 less your sales commission.
Answer
Refer to reasons for decision
Relevant facts and circumstances
You are a company registered for GST and are in the business of performing auctions. You have clients both in an outside of Australia who make supplies through you that are taxable or not taxable depending on the circumstances. You receive a commission for what you sell at auction.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) 1999 Division 57-5,
A New Tax System (Goods and Services Tax) 1999 Section 9-5,
A New Tax System (Goods and Services Tax) 1999 Section 13-1,
A New Tax System (Goods and Services Tax) 1999 Section 15-5,
A New Tax System (Goods and Services Tax) 1999 Section 188-10,
A New Tax System (Goods and Services Tax) 1999 Section 188-20,
A New Tax System (Goods and Services Tax) 1999 Subsection 38-190(1), and
A New Tax System (Goods and Services Tax) 1999 Subsection 42-5(1).
Reasons for decision
Scenario 1
Seller is a non-resident located overseas and is not registered or required to be registered for GST in Australia
In this scenario, you import the thing, as an agent. Where the Customs value is at or below $1000, it will be a non-taxable importation (subsection 42-5(1) of the GST Act) and there will be no GST liability on the importation. However, where the Customs value is greater than $1000 there will be a GST liability.
Where a seller is not registered or required to be registered for GST in Australia they will not make a creditable importation (section 15-5 of the GST Act) and will not be able to claim input tax credits.
When you auction the thing, as an agent, it is the seller's circumstances that will determine if the supply of the thing is taxable or not. That is, does the seller make a taxable supply, through you as agent, pursuant to section 9-5 of the GST Act.
Section 9-5 of the GST Act provides that you make a taxable supply if:
• You make a supply for consideration, and
• The supply is made in the course or furtherance of an enterprise that you carry on, and
• The supply is connected with the indirect tax zone (Australia), and
• You are registered or required to be registered for GST in Australia.
However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.
In this scenario, the non-resident seller is not registered or required to be registered for GST in Australia, as such they will not satisfy section 9-5 of the GST Act and the supply of the thing will not be taxable.
Therefore, the supply of the thing of $225 will not have GST included in the price.
Your supply of auctioneering services, as an agent, will satisfy section 9-5 of the GST Act. As you make a supply for consideration, a commission, the supply is made in the course of the enterprise that the enterprise you carries on, the supply is connected with the indirect tax zone, as it is done in the indirect tax zone, and you are registered for GST in Australia. However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.
There is no provision that would result in the supply being input taxed. However, your supply of providing auctioneering services will be GST-free provided the non-resident is not in Australia when the service is done, and the effective use or enjoyment takes place outside of Australia (item 3 in the table under subsection 38-190 (1) of the GST Act).
Scenario 2
Seller is a non-resident located overseas and is required to be registered for GST in Australia
In this scenario, you import the thing, as an agent. Where the Customs value is at or below $1000, it will be a non-taxable importation (subsection 42-5(1) of the GST Act) and there will be no GST liability on the importation. However, where the Customs value is greater than $1000 there will be a GST liability and the seller will make a taxable importation (section 13-1). Furthermore, where a seller is required to be registered for GST in Australia, they will make a creditable importation (section 15-5 of the GST Act) and will be entitled to an input tax credit.
However, there is an exception where you act as agent for a non-resident that is registered or required to be registered for GST in Australia under Division 57-5 of the GST Act. This Division effectively makes resident agents acting for non-residents responsible for the GST consequences of what the non-residents do through their resident agents.
In particular, subsections 57-5(1) and 57-10(1) of the GST Act provide that GST payable on a taxable supply or a taxable importation made by a non-resident through a resident agent is payable by the agent, and is not payable by the non-resident. This is the same for any input tax credit entitlement on a creditable acquisition or a creditable importation made by a non-resident through a resident agent is claimable by the agent and not the non-resident.
When you auction the thing, as an agent, it is the seller's circumstances that determine if the supply of the thing is taxable or not. That is, does the seller make a taxable supply, through you as agent, pursuant to section 9-5 of the GST Act.
Please refer to scenario one for an explanation of section 9-5 of the GST Act.
In this scenario, the non-resident seller will satisfy section 9-5 of the GST Act as they make a supply for consideration, the supply is made in the course of the enterprise that the non-resident seller carries on, the supply is connected with the indirect tax zone, as it is done in the indirect tax zone, and the non-resident seller is required to be registered for GST in Australia.
However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. There are no provisions that would result in the supply being GST-free or input taxed. Hence the non-resident seller's supply of the thing will be a taxable supply.
Therefore, the supply of the thing will have GST included in the price. To ensure you provide the amount of $225, less your commission, to your client you will need to include an amount for the GST component (for example, $225 x .1 = $22.50. The price will then be $247.50).
You, as agent (in your name and ABN), can issue the tax invoice on behalf of the seller to the purchaser of which will be for $247.50 (GST inclusive).
Your supply of auctioneering the thing as an agent will satisfy section 9-5 of the GST Act. As you make a supply for consideration, a commission, the supply is made in the course of the enterprise that the enterprise you carries on, the supply is connected with the indirect tax zone, as it is done in the indirect tax zone, and you are registered for GST in Australia.
However, your supply of providing auctioneering services will be GST-free provided the non-resident is not in Australia when the service is done, and the effective use or enjoyment takes place outside of Australia (item 3 in the table under subsection 38-190 (1) of the GST Act).
For an entity to be required to be registered for GST in Australia it will be because they met the GST turnover threshold. That is to say their current and projected GST turnover is at or above the turnover threshold presently set at $75,000 (section 188-10 of the GST Act).
Generally, your current GST turnover, in a particular month, is the sum of the values of all the supplies (only include supplies connected with the indirect tax zone,) you have made or are likely to make during 12 months, ending at the end of the month (section 188-15 of the GST Act). And your projected GST turnover, generally, is the sum of the values of all the supplies (only include supplies connected with the indirect tax zone,) you have made or are likely to make during the month and the next 11 months, ending at the end of the month (section 188-20 of the GST Act).
Scenario 3
Seller is a resident and is not registered or required to be registered for GST in Australia
When you auction the thing, as an agent, it is the seller's circumstances that will determine if the supply of the thing is taxable or not. That is, does the seller make a taxable supply, through you as agent, pursuant to section 9-5 of the GST Act.
Please refer to scenario one for an explanation of the meaning of section 9-5 of the GST Act.
In this scenario, the resident seller is not registered or required to be registered for GST in Australia, as such they will not satisfy section 9-5 of the GST Act and the supply of the thing will not be taxable.
Therefore, the supply of the thing of $225 will not have GST included in the price.
Your supply of auctioneering services, as an agent, will satisfy section 9-5 of the GST Act. As you make a supply for consideration, a commission, the supply is made in the course of the enterprise that the enterprise you carries on, the supply is connected with the indirect tax zone, as it is done in the indirect tax zone, and you are registered for GST in Australia.
However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. There are no provisions that would result in the supply being GST-free or input taxed. Hence the resident seller's supply of the painting will be a taxable supply.
Scenario 4
Seller is a resident and is registered or required to be registered for GST in Australia
When you auction the thing, as an agent, it is the seller's circumstances that will determine if the supply of the thing is taxable or not. That is, does the seller make a taxable supply, through you as agent, pursuant to section 9-5 of the GST Act.
Please refer to scenario one for an explanation of section 9-5 of the GST Act
In this scenario, the resident seller is registered or required to be registered for GST in Australia, as such, they will satisfy section 9-5 of the GST Act. As they make a supply for consideration, the supply is made in the course of the enterprise that the resident seller carries on, the supply is connected with the indirect tax zone, as it is done in the indirect tax zone, and the resident seller is registered or required to be registered for GST in Australia.
However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. There are no provisions that would result in the supply being GST-free or input taxed. Hence the resident seller's supply of the thing will be a taxable supply.
Therefore, the supply of the thing will have GST included in the price.
To ensure you provide the amount of $225, less your commission, to your client you will need to include an amount for the GST component (for example, $225 x .1 = $22.50. The price will then be $247.50).
You, as agent (in your name and ABN), can issue the tax invoice on behalf of the seller to the purchaser of which will be for $247.50 (GST inclusive).
Your supply of auctioneering services, as an agent, will satisfy section 9-5 of the GST Act. As you make a supply for consideration, a commission, the supply is made in the course of the enterprise that the enterprise you carries on, the supply is connected with the indirect tax zone, as it is done in the indirect tax zone, and you are registered for GST in Australia.
However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. There are no provisions that would result in the supply being GST-free or input taxed. Hence the resident seller's supply of the painting will be a taxable supply.
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