Edited version of private advice

Authorisation Number: 1051825516437

Date of advice: 9 April 2021

Ruling

Subject: Tax treatment of supplies made by entity A

Question 1

Based on the facts and circumstances provided, are you operating as an "online marketplace" provider?

Answer

The GST Act does not define the term "online marketplace". As such we are unable to rule on this issue.

Question 2

Will you be required to declare the full charge of $92 received from the deaf person (user of your platform) as assessable income?

Answer

No

Question 3

Will you be entitled to claim a tax deduction for the remittance of $70 to the interpreter?

Answer

No

Question 4

Will your net assessable income be limited to the residual amount retained after receiving funds from the user and remitting the interpreters fee?

Answer

Yes

Question 5

Are you required to include a GST amount in the invoices you issue for the supply of translation services made by an interpreter to a National Disability Insurance Scheme (NDIS) participant that meet all four requirements listed in section 38-38 of A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Refer to the Reasons for Decision.

Question 6

Following on from Question 5, would the fact that you only provide the "marketplace" and not the actual interpreting service affect the GST treatment under section 38-38 of the GST Act?

Answer

No

Question 7

Would GST need to be added to the invoices if the requirements of section 38-38 of the GST Act were not satisfied and the interpreter was not registered or required to be registered for GST (that is, the interpreter is below the $75,000 GST turnover threshold)?

Answer

Refer to the Reasons for Decision.

Question 8

Are you entitled to claim input tax credits on the payments you make to the interpreter?

Answer

No

Question 9

Is the booking fee which is paid by the interpreter and forms part of the residual money retained by you, consideration for a taxable supply you make and therefore subject to GST?

Answer

Yes

Question 10

Do you have obligations for PAYG Withholding or Superannuation on the remittance of funds owed to the interpreters?

Answer

No

This ruling applies for the following periods:

1 July 2019 to 30 June 2020

1 July 2020 to 30 June 2021

The scheme commences on:

1 June 2019

Relevant facts and circumstances

Entity A (you) is registered for GST.

You are a private company in its start-up phase. You have developed an online application (App) designed to connect the deaf (hearing impaired) community with interpreters and for interpreters to make their interpretation services available to the deaf community. Both the deaf community and the interpreters are users of the App.

The use of your App is free until a booking is arranged or accepted/fulfilled.

When a hearing-impaired person who is a National Disability Insurance Scheme participant (NDIS participant) makes a booking for interpretation services through your App, the NDIS participant pays for the booking using your App.

You do not contract out the work of interpreting and do not do any of the interpreting work yourself.

You simply provide the platform and payment portal for the NDIS participant to engage the interpreter and for the interpreter to make his interpretation services available to the NDIS participant.

Each interpreter is strongly recommended to have their own ABN and insurance cover although it is not a prerequisite to use the App.

Interpreters have complete control over when they work. Interpreters can also choose which jobs to accept or reject.

The working flexibility of interpreters is articulated in the Terms and Conditions of your App.

You have provided the following as an example of the receipt and payment of funds from a transaction:

•         The payment by the deaf person to you for booking and receiving an interpretation service is $92. The NDIS participant receives funding from the NDIS.

•         The interpreter's fee for services provided directly to the deaf person is $74.40.

•         You charge the interpreter an App usage fee of $4.40. This usage fee is deducted from the interpreter's fee of $74.40.

•         You then remit a net amount of $70 to the interpreter which represents the fee for the translation services rendered to the NDIS participant less the App usage fee.

•         A remittance advice is issued to the interpreter for the funds transferred to the interpreter.

•         The residual amount of $22, (after receiving the $92 from the deaf person less the $70 remitted to the interpreter) is your income from this transaction.

Further to a request for further information you have stated via email dated XXXX the following:

•         You are not a registered NDIS provider.

•         From the $22 income you make on the transaction, $4.40 represents the fee you charge the interpreters for using your App. The remaining $17.60 represents booking/usage fee the NDIS participant is charged for your services of opening up the marketplace for the NDIS participant to access interpreters directly through your App.

•         The functions undertaken by you in a transaction are:

o   Ensure all interpreters using the platform are appropriately qualified and have the necessary credentials

o   Create a secure marketplace for the deaf users and interpreters

o   Ensure all bookings are billed appropriately and paid using the correct NDIA line items

o   Manage invoicing and speed of delivery

o   Hold the interpreters' payment and ensure it is appropriately managed

o   Distribute the income to the interpreters

•         List of the activities that your App will undertake to facilitate each transaction.

o   Creation of invoice

o   Facilitate payment of invoice

o   Reconciliation of invoice

o   Hold interpreter payment

o   Distribute income to the interpreters

•         You have provided a copy of the Terms and Conditions that the deaf person and the interpreters will be subject to in order to use your App.

Via email dated XXXX you have further stated the following:

•         You are not an agent for the interpreters

•         The written agreement as required by section 38-38 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) is between the NDIS participant, in this instance the hearing-impaired users, and the interpreters.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section 38-38

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

Reasons for decision

Question 1

Practice Statement Law Administration PSLA 2008/3 Provision of advice and guidance by the ATO (PSLA 2008/3) explains the forms of advice the ATO provides about the application of laws administered by the Commissioner.

Paragraph 75 of PSLA 2008/3 states:

75. A private ruling is a written expression of the Commissioner's opinion on how a relevant provision applies, or would apply, to a particular entity in relation to a specified scheme, arrangement or transaction. It provides the taxpayer with advice on how the Commissioner will apply the tax law (which includes its administration or collection) to their particular circumstances...

The relevant law in this case is the GST Act. An "online marketplace" is not a defined term in the GST Act nor is there any provision in the GST Act that can be applied to rule on this issue.

Question 2

Section 6-5 of the ITAA 1997 states your assessable income includes income according to ordinary concepts. If you are an Australian resident, your assessable income includes the ordinary income you derived directly or indirectly from all sources, whether in or out of Australia, during the income year.

In working out whether you have derived an amount of ordinary income, and (if so) when you derived it, section 6-5(4) of the ITAA 1997 states you are taken to have received the amount as soon as it is applied or dealt with in any way on your behalf or as you direct.

You provide the platform and payment portal for a hearing-impaired person to engage an interpreter and an interpreter to offer their services to a hearing-impaired person.

Each interpreter is strongly recommended to have their own ABN and insurance cover although it is not a prerequisite to use the App.

Interpreters have complete control over when they work. Interpreters can also choose which jobs to accept and reject.

You have provided the following as an example of the receipt and payment of funds from a transaction.

•         The payment by the hearing-impaired person to you for booking and receiving an interpretation service is $92 for up to one hour.

•         The interpreter's fee for services provided to the hearing-impaired person is $74.40 per hour.

•         You charge the interpreter a usage fee of $4.40 for usage of your App for bookings up to two hours and $8.80 for bookings over two hours.

•         After each service is provided by an interpreter over your platform you issue an invoice to the service recipient (hearing-impaired person) on behalf of the interpreter and yourself.

•         The invoice will itemise the interpreter's payment and your payment of $17.60 booking fee and include any applicable GST.

•         The recipient forwards payment to you from which you deduct your booking fee of $17.60 and then pass on to the interpreter their fee less the usage charge you charge them (either $4.40 if less than 2 hours or $8.80 if over 2 hours (including GST)).

•         Your gross payment for say a one-hour booking would be $17.60 plus $4.40 inclusive of GST ($22.00).

You are considered to be collecting payment on behalf of the interpreter. Therefore, only the amount received as an App usage fee from the service recipient and interpreter are considered your assessable income. From a payment of $92 you would include an amount of $22 (less GST you remit to the Tax Office via your Business activity statement), in your income tax return under business income.

Question 3

Section 8-1(1) of the ITAA 1997 states:

You can deduct from your assessable income any loss or outgoing to the extent that:

(a)  it is incurred in gaining or producing your assessable income; or

(b)  it is necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income.

As you are merely collecting payment on behalf of the interpreter, the payment you make to the interpreters is not an expense incurred by you. You are therefore unable to claim a deduction for this payment.

Question 4

It has already been established in Question 2 that your assessable income will be the booking fee of $17.60 plus the fee you receive from the interpreter for using your platform. In the case of a one hour booking this amount would be $17.60 plus $4.40 = $22.00 (less the GST you remit to the Tax Office).

Question 5

Section 9-5 of the GST Act states:

You make a taxable supply if:

(a)  you make the supply for * consideration; and

(b)  the supply is made in the course or furtherance of an * enterprise that you * carry on; and

(c)   the supply is * connected with the indirect tax zone; and

(d)  you are * registered, or * required to be registered.

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

(* terms are defined in the GST Act)

Section 38-38 of the GST Act provides that certain supports provided to NDIS participants are GST-free. Section 38-38 of the GST Act provides that a supply to a NDIS participant is GST-free if all of the following requirements are met:

1. the NDIS participant has a NDIS plan in effect (paragraph 38-38(a) of the GST Act);
2. the supply is of reasonable and necessary supports that are specified in the statement of supports in the participant's NDIS plan (paragraph 38-38(b) of the GST Act);
3. there is a written agreement between the supplier and the NDIS participant (or another person) (paragraph 38-38(c) of the GST Act); and
4. it is a supply covered by one of the schedules in the GST-free Supply (National Disability Insurance Scheme Supports) Determination 2017 (NDIS Determination) (paragraph 38-38(d) of the GST Act).

For a supply to be GST-free, as well as meeting the other three requirements outlined above, your supply to the NDIS participant must be of a kind covered by the NDIS Determination. The NDIS Determination applies to supplies made on or after 1 July 2017 but before 1 July 2021.

Schedule 1 and Schedule 2 of the NDIS Determination state as follows:

Schedule 1-Supplies of supports that are GST-free*

*subject to meeting the requirements set out in section 3 of this Determination

Schedule 2-Supplies of supports that are GST-free if they are listed in other determinations*

*subject to meeting the requirements set out in section 4 of this Determination

In your case, you have told us that you supply an App that facilitates the supply of interpretation services by an interpreter directly to an NDIS participant being the hearing-impaired person. That is, you simply provide the platform and payment portal for NDIS participants to engage interpreters and for interpreters to make their services available to the NDIS participants. You do not contract out the work of interpreting and you do not do any of the interpreting work yourself.

For each completed transaction undertaken through your App, there are three supplies being made, which are:

(1)  your supply of booking/administration services, through the usage of the App, to the NDIS participant (in your example you charge $17.60 for this supply);

(2)  your supply of booking/administration services, through the usage of the App, to the interpreter (in your example you charge $4.40 for this supply); and

(3)  the supply of interpretation services by the interpreter directly to the NDIS participant (in your example a fee of $74.40 is charged for this supply).

Supply of usage of the App

Your supplies of booking/administration services through the usage of the App by the NDIS participants and the interpreters do not fall within any of the items listed in Schedule 1 and Schedule 2 of the NDIS Determination. Further, Clause 7.3 of the T&C which refers to the T&C as a "Service Agreement" for the purposes of making a booking under an NDIS plan, is not sufficient to satisfy the written agreement requirement in paragraph 38-38(c) of the GST Act in relation to the supplies you make.

Therefore, your supplies of the usage of the App to the NDIS participants and to the interpreters do not meet the requirements of section 38-38 of the GST Act. These supplies will meet the requirements of section 9-5 of the GST Act and are therefore taxable supplies subject to GST.

Supply of interpretation services

The supply of the interpretation services by an interpreter who is registered for GST, to an NDIS participant, is a listed supply in Schedule 1 of the NDIS Determination. Where all the other requirements of section 38-38 of the GST Act are also met by the interpreter, the supply of interpretation services by the interpreter to the NDIS participant will be GST-free under section 38-38 of the GST Act.

Where the interpreter is not registered or required to be registered for GST, section 9-5 of the GST Act will not apply and hence any interpretation services provided by the interpreter will not be subject to GST.

Invoice for $92

You have given us an example of a transaction where an invoice for $92 will be issued by you to the NDIS participant. Of this amount, $74.40 is the fee that the interpreter charges the NDIS participant for the interpretation services.

The supply of the interpreting services is not made by you. It is made by the interpreter to the NDIS participant directly. Further, you have told us and the T&C say, that you are not an agent for the interpreter.

Therefore, you should not be issuing an invoice for the interpreting services of the interpreter. It is the interpreter that will need to invoice the NDIS participant for the $74.40. Whilst this may be facilitated through the App, the invoice has to be issued by the interpreter.

Your supply to the NDIS participants and the interpreters is the usage of your App. In the example you have provided, the consideration you receive from these supplies is $22. As your supply of the usage of the App is not GST-free and is a taxable supply, you will need to remit GST of 1/11 of $22 to the ATO.

Question 6

As discussed in Question 5, your supply of the usage of your App or the "marketplace" as you put it, does not come within the requirements of disability support provided to NDIS participants under section 38-38 of the GST Act. Therefore, your supply of the usage of the App is not a GST-free supply.

Question 7

As discussed in Question 5, the fees you charge the NDIS participant and the interpreter for the usage of the App are taxable supplies and would be subject to GST. Your invoices to the NDIS participant and the interpreter will need to show the GST amount included in your fees.

Where the interpreter is not registered and is not required to be registered (because the interpreter is below the $75,000 GST turnover threshold), the supply of interpretation services would not meet the requirements of section 9-5 of the GST Act and therefore would not be taxable supplies and would not be subject to GST.

Question 8

The $70 represents the net money you have collected on behalf of the interpreter. You are merely passing on this money to the interpreter and it does not represent payment for any acquisition you have made from the interpreter. As such, you are not entitled to any input tax credits in relation to the $70.

Question 9

The $4.40 represents the fee you charge the interpreter for the usage of your App. As your supply of the App is a taxable supply, the consideration you receive for this supply will be subject to GST.

You will need to issue a tax invoice to the interpreter for the $4.40 showing the GST component of $0.40.

You will also need to issue a tax invoice to the NDIS participant for the $17.60 showing the GST component of $1.60.

The amount of GST you will remit to the ATO in relation to the $22 consideration you receive from the transaction, is 1/11 of the $22.

Question 10

The entity that creates and offers the app for clients to use interpreter services does not create withholding obligations for work or services under Subdivision 12-B of Schedule 1 to the Taxation Administration Act 1953 (copied below).

Subdivision 12 - B - Payments for work and services

Table of sections

12-35 Payment to employee

12-40 Payment to company director

12-45 Payment to office holder

12-47 Payment to religious practitioners

12-50 Return to work payment

12-55 Voluntary agreement to withhold

12-60 Payment under labour hire arrangement, or specified by regulations

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