1051260235744 | Legal database

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This edited version has been archived due to the length of time since original publication.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: 1051260235744

Date of advice: 28 July 2017

Ruling

Subject: Taxable supplies

Question 1

Do certain entities (CE) make a supply to you as a result of a certain arrangement (CA) you have entered into with them?

Answer

Yes, CE makes a supply under the CA (see reasons for decision below).

Question 2

Do you make a creditable acquisition from CE under section 11-5 of A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No, you do not make a creditable acquisition where there is no taxable supply (see reasons for decision below).

Relevant facts and circumstances

You are a major enterprise involved in industrial activity regulated by the government. Your activities regularly require you to take certain actions and access certain areas which do not belong to you. In the process of doing this you obtain permissions from the government to give effect to your industrial activity. As part of continuing your activities you regularly need to enter into agreements with unrelated parties (such as CE in this case), and it is sometimes necessary for you to make certain payments under certain agreements (as per CA in this case.

You have already obtained advice from the Taxation Office clarifying the nature of those payments and you are now requesting advice about whether certain new clauses of your CA with those unrelated third parties would change the characterisation previously advised, in relation to the two questions posed in this private binding advice. You advise that the new clauses are being inserted into the CA for the purposes of convenience and to avoid the need for renegotiation of such agreements when the situation may change in the future, you said that no additional amount is payable to CE.

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 9-10.

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

Reasons for decision

Question 1:

Have CE made a supply to you?

Yes. A supply, pursuant to section 9-10 of the GST Act. includes (amongst other things) a grant, assignment or surrender of real property, a creation, grant, transfer, assignment or surrender of any right, and an entry into, or release from, an obligation to do or refrain from doing anything.

The term 'supply’ does not only apply to the actual subject of the transaction – the thing that passes from supplier to recipient – but also covers the action by which the subject of the supply passes from one entity to another. Paragraph 9-5(a) uses the term 'make’ in the phrase 'you make a supply’ and so it follows that there is a requirement for the supplier to take some action or to cause the supply to be made. That is CE must take some positive action or do something for the supply to occur.

In your situation where you are acting according to the relevant legislation, there is a supply from CE. However, we also need to consider if this is a taxable supply under section 9-5.

Question 2:

Have CE made a taxable supply?

No. In determining whether the supply is a taxable supply, all the requirements under section 9-5 must be satisfied. You stated that 'no additional amount is payable to CE. Consequently there is no consideration provided by you for this consent, and paragraph 9-5(a) is not satisfied. Therefore even though CE makes a supply to you this is not a taxable supply.

Section 11-20 of the GST Act outlines the circumstances under which you make a creditable acquisition. Paragraph 11-5(b) provides that for an acquisition to be creditable it must be a taxable supply. Consequently since we have indicated above that CE is not making a taxable supply to you the requirement in paragraph 11-5(b) is not satisfied. Therefore you are not making a creditable acquisition under section 11-5 of the GST Act.

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