Edited version of private advice

Authorisation Number: 1051640762631

Date of advice: 27 February 2020

Ruling

Subject: Taxable payment reporting

Question

Is the delivery of unsolicited and unaddressed materials through letterbox delivery a courier service for the purposes of the Taxable Payments Reporting system?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 2019

Year ending 30 June 2020

The scheme commences on:

1 July 2018

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

The Company is primarily a commercial printer of advertising materials as well as magazines, books, and other materials. The Company is also a distributor, for some clients the Company only prints their advertising materials whereas with others they only distribute materials. The majority of deliveries are unsolicited deliveries (i.e. not addressed to any specific households). The materials are delivered to all households in a particular delivery area, other than those which have notification to the effect that they do not wish to receive unsolicited advertising material.

The Company's revenue is mainly achieved through separate contracts with commercial clients and the Company may or may not print those advertising materials that it contracts to deliver to households.

In most cases if the Company is both the printer and the distributor, it will still have separate contracts for the two components, and will raise separate invoices accordingly. Where there is a combined contract there is still a mechanism to separately identify those supplies.

If the Company is the distributor (but not the printer) the materials will be freighted by the advertising client from the third party printer's premises to the Company's premises. It is only in very rare cases that the Company has ever agreed under the distribution contracts to be responsible to collect the materials from a third party printer. If the Company is the printer then obviously no freight is required.

Once the materials are in a central place, the Company organises to freight those materials across the country for delivery. For example if the materials are printed in X the materials are sorted into the delivery portions required and freighted from the Company's premises to the individual premises of the Company's contacted distributors across Australia (using third party road freight contractors).

The majority of the Company's contracted distributors subcontract out the delivery of the materials to their contracted delivers. Once the Company's third party freight providers deliver the materials to the premises of the individual distributors these distributors then require their contracted delivers to pick up the materials or will deliver the materials to their delivers.

Depending on the size of the distribution area the Company's contracted distributor may have 5-100 contracted delivers.

In some smaller areas the distributor will deliver all of the materials themselves to the residential letter boxes.

More than X% of the gross turnover of the Company is generated from the delivery of advertising materials to householder letterboxes.

You have provided the following information in relation to the advertising materials that are delivered;

·         The materials for delivery are unsolicited and unaddressed. The sender (the advertising client) does not specify any particular individual or household to whom the materials are to be delivered and no particular individual or household has any particular rights to receive materials.

·         There are no security features attached to the deliveries.

·         Deliveries are not time specific and ordinarily take place over a specified window, typically 3 days.

·         Individual items for delivery are low value advertising materials and the amounts payable by advertising clients for each individual item delivered are modest.

·         The Company's service is generally limited to the delivery of catalogues and physically similar documentary items. The Company does not undertake parcel deliveries.

Reasons for decision

Taxable Payment Reporting System

Section 396-55 of the Tax Administration Act 1953 (TAA 1953) states that an entity mentioned in column 1 of an item in the table must prepare a report in the approved form setting out information about any transactions that relates to the supply of the relevant services. Where an entity that makes a supply of a courier service and has an ABN it must report payments made to its contractors who provide the service on their behalf in a Taxable Payment Annual Report (TPAR).

'Supply' takes its meaning from section 9-10 of A New Tax System (Goods and Services Tax) Act 1999.

LCR 2018/8: Expansion if the taxable payments reporting system to courier and cleaning services states (LCR 2018/8):

10. If a service you provide to your customer or client can be split into separately identifiable parts and at least one of these parts is a 'relevant service', then that part is a supply of a relevant service for the purposes of lodging a Taxable payments annual report (TPAR). (We refer to this as a mixed supply.)

11.If you provide a relevant service that is merely ancillary or incidental to another product or service you provide, then you are not supplying a relevant service for the purposes of lodging a TPAR. (We refer to this as a composite supply.)

Courier Services

The explanatory memorandum of the Treasury Laws Amendment (Black Economy Taskforce Measures No. 1) Bill 2018 provides:

The terms 'courier' and 'cleaning' are not defined, and are intended to take their ordinary meaning.

A courier service is intended to include any service where an entity collects goods from and delivers them to another place. These goods may include parcels, packages, letters, food, flowers or any other goods. The goods may also be transported by a number of different means, including by car, truck, van, motorcycle, motorised scooter, bicycle, on foot, or other means of transportation.

The Commissioner provides further explanation in LCR 2018/8 where it is considered that while the mode of transportation can be useful in identifying a courier activity, mode of transportation alone is not determinative. Courier services are usually door-to-door services that are often used for specialty deliveries or for small parcels or packages. Goods commonly transported using courier services include parcels, packages, letters and food. 'Courier service' includes activities where items or goods are collected from, and/or delivered to, any place in Australia using a variety of methods.

Furthermore example 6 of the LCR 2018/8 outlines a similar situation to that of the Companies;

Example 6 - transporting goods to a distribution centre for further delivery by couriers

24. Wow Couriers Pty Ltd operates a business (with an ABN) that provides delivery services Australia-wide. Wow Couriers uses contractors to transport shipping containers from docks to its distribution centres around Australia. This service is a freight service rather than a courier service, so Wow Couriers is not required to report payments it makes to contractors to provide these services in the 2018-19 income year.

25. Once the items arrive at the distribution centres, Wow Couriers' staff sort and batch the items, then local couriers are contracted to deliver the items to their individual intended recipients. The delivery of these items to the intended recipients is a supply of a courier service as Wow Couriers is now providing a door-to-door delivery service of numerous items to various recipients. Therefore Wow Couriers are required to report payments to the contractors who provide the courier service on their behalf, which occur on or after 1 July 2018, in a TPAR (unless a reporting exemption applies).

Application to your situation

The Company provides two types of services, the printing of materials and second, the distribution of unsolicited advertising materials. The delivery of the materials is subcontracted to distributors. It is clear from LCR 2018/8 that the Commissioner considers that a courier service includes any activity where an item or good is collected, and/or delivered to, any place in Australia using a variety of methods. The definition of courier service provide in the explanatory memorandum for the Treasury Laws Amendment (Black Economy Taskforce Measures No. 1) Act 2018 states that a courier service is intended to include any service where an entity collects goods from and delivers them to another place. The Commissioner considers that this is broad enough to capture the distribution of unsolicited advertising materials delivered to households.

In this case the Company either prints the advertising materials or they are delivered to the Company's premises where they are freighted to the distributors. The delivers of the materials then collect the materials from the distributor and deliver the materials to households in a designated area. In the situation where a distributor also undertakes deliveries themselves, their activity will also be considered a courier service, as they are contracted to deliver the materials to households within a specified area. Your situation is similar to example 6 outlined in LCR 2018/8 where the items are freighted to a central location and distributors then collect the items which are delivered to households. We acknowledge that the materials are unsolicited and unaddressed; however the explanatory memorandum provides that "A courier service is intended to include any service where an entity collects goods from and delivers them to another place", this is definition would capture the delivery of unsolicited and undressed materials to households.

The Company is contracted to deliver materials within their delivery network within a specified window. The services the Company provides its clients, being the delivery of unsolicited advertising materials to households is considered to be a courier service for the purposes of the Taxable Payments Reporting system.

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