Edited version of your written advice

Authorisation Number: 1013091253189

Date of advice: 15 September 2016

Ruling

Subject: Goods and services tax (GST) and tax invoices

Question

Can you as an agent of a performer issue a tax invoice to a third party customer where the performer is not registered or required to be registered for GST?

Answer

No. You must not issue a tax invoice for a supply of a performance to a third party customer in cases where the performer is not registered or required to be registered for GST. Any invoice issued for this supply must not be referred to as a 'tax invoice' and must not specify a GST component in relation to the performance fee.

Relevant facts and circumstances

You are registered for GST.

Your enterprise is an entertainment agency. You find work for performers. You handle all aspects of the performance booking including collecting the performance fee on the performer's behalf.

Some of the performers are not registered or required to be registered for GST.

You are described as agent, having authority to act for a performer, in an agreement between you and the performer. A worksheet you send to the performer (performer's contract), which details the terms of a performance contract, refers to you as agent.

You have authority from a performer to enter into a performance contract with the third party customer on behalf of the performer, thereby binding the performer to perform.

You are involved in the negotiation of the terms of the performance contract.

You do not bear any significant commercial risk in regards to a performance, for example, the risk of any loss that might be made on the performance or payment of damages to the third party customer if the performer fails to perform.

When you accept a booking for a performance, you use your agency letterhead, but the performer's name and ABN appears on the booking confirmation and invoice you issue to the thirty party customer.

You receive a specified percentage commission from the performer for finding work for them. This is referred to as an agent's commission in the worksheet you send to the performer.

You negotiate the price between the performer and third party customer which includes the commission the performer pays you, but it is the performer's decision whether they agree on the price the third party customer pays.

You create a worksheet (venue contract) and send the worksheet to the third party customer. The worksheet states 'This worksheet is a legal document confirming you have contracted the performer stated. To cancel this contract a letter in writing must be forwarded to the Agency'.

You send a worksheet to the performer which states 'This worksheet is a legal document confirming you have been contracted as below. To cancel this contract a letter in writing must be forward to the Agency'. The worksheet refers to the third party customer as the employer (rather than referring to you as the employer of the performer).

If a performance contract is signed, it is signed by the performer and the third party customer.

You do not purchase a performance for an agreed fee and on-sell the performance for a higher fee.

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 subsection 29-70(2)

A New Tax System (Goods and Services Tax) Act 1999 subsection 153-15(1)

Reasons for decision

Summary

A tax invoice must not be issued for a supply of a performance to a third party customer in cases where the performer is not registered or required to be registered for GST. This is because that supply is not subject to GST.

Detailed reasoning

In accordance with subsection 29-70(2) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), the supplier of a taxable supply must within 28 days after the recipient of the supply requests it, give to the recipient, a tax invoice for the supply, unless it is a recipient created tax invoice.

Whether there is a requirement to issue a tax invoice for a supply of a performance to a third party customer will depend on whether either you or the performer is making a taxable supply, for GST purposes, to that third party

A supplier makes a taxable supply under section 9-5 of the GST Act if:

(a) the supplier makes the supply for consideration

(b) the supply is made in the course or furtherance of an enterprise that the supplier carries on

(c) the supply is connected with the indirect tax zone (Australia), and

(d) the supplier is registered or required to be registered for GST.

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

Goods and Services Tax Ruling GSTR 2000/37 Goods and services tax; agency relationships and the application of the law (GSTR 2000/37), at paragraph 10 discusses the principal of agency. It provides that an entity may be authorised by another party to do something on that party's behalf. Generally, the authorised entity is called an agent. The party who authorises the agent to act on their behalf is called the principal.

GSTR 2000/37, at paragraphs 11 and 12 defines agency. They state:

11 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.

12. The principal is bound by the acts of an agent as a result of the authority given to the agent. In cases of actual authority, the relationship between a principal and an agent is a consensual one so that no party can claim to be a principal's agent unless both parties consent to the creation of the agency.

GSTR 2000/37 at paragraph 15 discusses acts done by an agent on behalf of a principal. It states:

15. When an agent uses his or her authority to act for a principal, then any act done on behalf of that principal is an act of the principal. Also, a principal is not bound by acts that are not within the expressed, implied or ostensible authority conferred on the agent. However, the principal may ratify or confirm an unauthorised dealing.

GSTR 2000/37 at paragraph 45 discusses how supplies can be made by a principal through an agent. It states:

45. Divisions 57 and 153 apply when a principal makes a relevant transaction (i.e., taxable supply, taxable importation, creditable acquisition or creditable importation) through an agent. The word 'make' and its derivatives, such as 'made', are used in the GST Act, inter alia, to connect the thing being transacted in the course of an entity's enterprise with the paying or receiving of consideration. 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.

GSTR 2000/37, at paragraphs 28 and 29 sets out factors that indicate an agency relationship. They state:

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 named; 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.

The following circumstances indicate that you act in an agency capacity for a performer and the performer makes supplies through you as agent to third party customers:

• You are described as agent, having authority to act for a performer, in an agreement between you and the performer. A worksheet you send to the performer, which details the terms of a performance contract, refers to you as agent.

• You have authority from a performer to enter into a performance contract with the third party customer on behalf of the performer, thereby binding the performer to perform.

• You are involved in the negotiation of the terms of the performance contract,

• You do not bear any significant commercial risk in regards to a performance, for example, the risk of any loss that might be made on the performance or payment of damages to the third party customer if the performer fails to perform.

• When you accept a booking for a performance, you use your agency letterhead, but the performer's name and ABN appears on the booking confirmation and invoice you issue to the thirty party customer.

• You receive a specified percentage commission from the performer for finding work for them.

This is referred to as an agent's commission in the worksheet you send to the performer.

• You negotiate the price between the performer and third party customer which includes the commission the performer pays you, but it is the performer's decision whether they agree on the price the third party customer pays.

• You create a worksheet and send the worksheet to the third party customer. The worksheet states 'This worksheet is a legal document confirming you have contracted the performer stated. To cancel this contract a letter in writing must be forwarded to the Agency'

• You send a worksheet to the performer which states 'This worksheet is a legal document confirming you have been contracted as below. To cancel this contract a letter in writing must be forward to the Agency'. The worksheet refers to the third party customer as the employer (rather than referring to you as the employer of the performer).

• If a performance contract is signed, it is signed by the performer and the third party customer.

• You do not purchase a performance for an agreed fee and on-sell the performance for a higher fee.

Therefore, you do not purchase a performance and on-supply it to a third party customer.

When you issue an invoice to a third party customer, you do so on behalf the performer as an administrative arrangement.

The supply of the performance to the third party customer is not subject to GST where the performer (the supplier) is not registered or required to be registered for GST.

As the supply of the performance to the third party customer is not subject to GST under the circumstances in question, a tax invoice must not be issued for that supply. Any invoice you give to a third party customer on behalf of the performer under the circumstances in question must not contain the heading 'tax invoice' and must not specify a GST component amount in relation to the performance fee. If the invoice contains a GST component field in relation to the performance fee, the amount shown at that field should be zero.

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).