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This edited version has been archived due to the length of time since original publication.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.

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Edited version of your written advice

Authorisation Number: 1013068427268

Date of advice: 9 August 2016

Ruling

Subject: GST and supply of agency services

Question 1

Is the payment that you received from the Australian purchaser consideration for a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when you sold the goods to the purchaser on behalf of the owner under the Agency Agreement you have with the owner?

Advice

No, the payment that you have received from the purchaser is not consideration for a taxable supply under section 9-5 of the GST Act when you sold the goods on behalf of the owner under the Agency Agreement because all the requirements in section 9-5 of the GST Act are not satisfied.

Question 2

Is the commission that you received from the owner consideration for a taxable supply under section 9-5 of the GST Act in regard to the sales of the owner's goods under the Agency Agreement?

Advice/

Yes, the commission that you have received from the owner is consideration for a taxable supply under section 9-5 of the GST Act in regard to the sales of the owner's goods under the Agency Agreement.

Relevant facts

You are registered for the goods and services tax (GST) and carry on your business in Australia.

You have entered into an Agency Agreement with an Australian individual who is not registered for GST. In the agreement you agreed that you will act as a Commission agent for the sale of the goods owned by the individual (referred as principal in the agreement). You will receive a commission on completion of the sale.

In the Agency Agreement you and the principal agree that you will only act as an agent and you do not hold the goods in your own right. You will sell the goods on behalf of the owner and you do not set the sale price of the goods.

You sold the goods to an Australian purchaser. The purchaser issued you with a Recipient Created Tax Invoice (RCTI) for your sale. You have given us with a copy of the RCTI that shows the total price and a GST component.

Relevant legislative provisions

A New Tax system (Goods and Services Tax) Act 1999 section 9-5

Reasons for decisions

Question 1

Summary

The sale of the goods to the purchaser is not a taxable supply under section 9-5 of the GST Act since the owner of the goods is not registered for GST. The payment you receive from the purchaser is therefore not consideration for a taxable supply.

Detailed reasoning

GST is payable on a taxable supply. A supply is a taxable supply under section 9-5 of the GST Act if:

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

From the information received, you have made an agency sale when you sell the goods on behalf of the owner as their agent to the purchaser.

For commercial law purposes, an agent is a person who is authorised, either expressly or impliedly, by a principal to act for that principal so as to create or affect legal relations between the principal and third parties.

When an agent is authorised to undertake a transaction on behalf of the principal, thereby binding the principal to the legal effects of the transaction, then the transaction is made by the principal through the agent.

Under the GST Act the supplier is generally responsible for determining the GST status of its supply. Accordingly, it is your responsibility to determine the GST status of the sale that you made on behalf of the principal when selling the goods to the purchaser. You must also provide this information to the principal because the principal is bound by the legal effect of your action.

GST status of supply made through you

One of the requirements of a taxable supply is that the supplier is registered for GST.

You advised that the principal is not registered for GST. In this instance paragraph 9-5(d) of the GST Act is not satisfied and GST would not be applicable to the supply of goods made by you to the purchaser.

The payment you received from the purchaser is therefore not consideration for a taxable supply. You will need to notify the principal that they will not be liable for GST on this sale as they are not registered for GST.

Further you will need to notify the purchaser that they cannot issue you with an RCTI since the supply was not a taxable supply

Question 2

Summary

The commission you received for your supply of agency services to the principal is a taxable supply under section 9-5 of the GST Act

Detailed reasoning

From the information received your supply of agency services to the principal is a taxable supply under section 9-5 of the GST Act as:

You are therefore liable to pay GST for your supply of agency services to the principal.

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