Edited version of your written advice

Authorisation Number: 1051304932353

Date of advice: 10 November 2017

Ruling

Subject: GST and employer contributions

Question – 1

Does an obligation arise for an agent to provide a tax invoice to the employer under section 153-15 of A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer – 1

Section 153-15 of the GST Act states:

(1) If you make a *taxable supply through an agent, an obligation to issue a *tax invoice relating to the supply:

(a) arises whether the *recipient makes a request for a tax invoice to you or the agent; and

(b) is complied with if either you or the agent gives the recipient a tax invoice within 28 days after the request.

(2) However, you and the agent must not both issue separate *tax invoices relating to the supply.

(3) This section has effect despite section 29-70 (which is about tax invoices).

(terms marked with asterisks (*) are defined in section 195-1 of the GST Act)

Where the principal is not making a taxable supply in relation to the contributions made under the Deed, a tax invoice is not required to be issued by the principal (or by an agent) for this contribution. Accordingly, if the agent is acting as an agent of the principal in regards to the collection of the employer contributions, based on the fact that the principal is not making a taxable supply in regards to the employer contributions the agent is not required to issue a tax invoice to the employer for these contributions.

Note: given that a tax invoice is not required to be issued for the contribution we have not determined in this case whether the agent is acting as an agent of the principal in this case.

Question – 2

Does the Agreement satisfy section153-50 and section 153-55 of the Act, thereby resulting in the agent being treated as making a taxable supply to the employer, the consideration for which is the contribution by the employer to the principal?

Answer – 2

The Commissioner of Taxations’ views in regards to section 153-50 are provided in goods and services tax ruling, Goods and Services Tax: agency relationships and the application of the law (GSTR 2000/37) which states as follows:

Principals and intermediaries as separate suppliers and/or acquirers under Subdivision 153-B

74. Section 153-50 provides that entities may enter into an arrangement under which an intermediary is treated as a separate supplier and/or acquirer. That is, the intermediary is treated as a principal in its own right. Further, nothing in this section prohibits supplies that are not taxable supplies and acquisitions that are not creditable acquisitions from being included in such an arrangement. This includes supplies and acquisitions that are GST-free, input taxed or certain payments of an Australian tax or Australian fee or charge. Also, the nature of these supplies and acquisitions, as between the principal and the third party, is not changed by entering into a Subdivision 153-B arrangement. For example, an acquisition by a principal from a third party that is not a creditable acquisition will not be deemed to be a creditable acquisition because of the arrangement.

74A. Even though supplies that are not taxable supplies may be included in a Subdivision 153-B arrangement, section 153-55, which is about the effect of these arrangements on supplies, only applies to the taxable supplies covered by the arrangement. Similarly, section 153-60, which is about the effect of these arrangements on acquisitions, only applies to the creditable acquisitions covered by the arrangement. For supplies other than taxable supplies and acquisitions other than creditable acquisitions, the parties account for them as being from principal to principal for GST purposes. As sections 153-55 and 153-60 do not apply in this circumstance, the parties need to account for those supplies and/or acquisitions in the arrangement separately from the supply of intermediary services. These consequences are explained in this Ruling at paragraphs 83A to 83M for supplies and paragraphs 91A to 91L for acquisitions.

75. There is a view that subsection 153-60(1) operates to change an acquisition that is not a creditable acquisition of the principal from a third party into a creditable acquisition of the intermediary from the third party. It is suggested that this provision can be interpreted that way because the word ‘creditable’ was not used to describe the type of acquisition at the beginning of the subsection. While we recognise in the previous paragraph that an arrangement under section 153-50, that specifies kinds of acquisitions, may happen to cover acquisitions by a principal that are not creditable acquisitions, the clear objective of Subdivision 153-B is to facilitate the effective payment of GST liabilities and the effective claiming of GST credit entitlements where intermediary relationships exist. Accordingly, we consider that subsection 153-60(1), when read with the provisions of section 153-55 about taxable supplies, should be interpreted as only applying to creditable acquisitions

The effects of the arrangements on supplies that are not taxable supplies

83A. Where supplies that are not taxable supplies are the only things included in an arrangement under Subdivision 153-B, the effect is that the principal makes a supply to the intermediary that is not a taxable supply and the intermediary makes a supply to the third party that is not a taxable supply. The calculation in section 153-55, which reduces the payment the intermediary makes or is liable to make to the principal for taxable supplies, is not applicable. This section only applies to arrangements where the principal makes a taxable supply to a third party through an intermediary. As the supplies are not taxable supplies, the acquisitions by the intermediary and the third party are not creditable acquisitions.

83B. The intermediary makes a taxable supply of intermediary services to the principal if the requirements of section 9-5 are met. The intermediary is liable for the GST on its supply of intermediary services and the principal is entitled to an input tax credit for its creditable acquisition of intermediary services.

It has been established that the principal is not making a taxable supply in relation to the contributions made by the employers. Accordingly, given that the nature of the treatment of the contribution will not change whether or not there was an arrangement that falls with section 153-B of the GST Act between the principal and an agent, a tax invoice is not required to be issued for the contributions. Therefore, we have not determined in this Private Ruling whether or not the arrangement between the principal and the agent is one that falls within section 153-B of the GST Act.

Question – 3

Is there any other taxable supply by the agent relating to the employer contributions it collects on behalf of the principal (excluding the service fee which is accepted is a taxable supply)?

Answer – 3

We are not of the view that there are other taxable supplies made by the agent relating to the employer contributions (including the grants being given by the principal to the employers).

Relevant facts and circumstances

The agent has an Agreement (the Agreement) with the principal to collect and remit monies due to the principal from employers.

These monies are payable to the principal under an industrial agreement between the employer and another entity. The amounts payable by employers to the principal are based on set rates.

The agent has been advised that the principal is not making a taxable supply in relation to the employer contributions.

The Agreement specifically appoints the agent as the agent of the principal to provide the services set out in the Agreement. These services are set out as the collection of money on behalf of the principal, the remittance of money to the principal, and such other services as required to perform the agents’ obligations under the Agreement. The Agreement also specifies further in relation to the agents’ obligations under the Agreement in relation to the calculation of the amount payable by the employer each month, the invoicing and collection of amounts due and the payment of amounts collected to the Fund.

In exchange for performing its services, the agent is to be paid a fee by the principal as per the Agreement.

The Agreement sets out the amount to be collected by the agent from each employer per week per employee.

Under the Agreement the agent is entitled to retain its service fee (plus GST) and amounts up to grants previously made by the agent to the principal as per the Agreement. These retention amounts are treated as the payment of the service fee and a reduction of grants previously made.

Relevant legislative provisions

Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999

Section 153-15 of the A New Tax System (Goods and Services Tax) Act 1999

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).