ATO Interpretative Decision
ATO ID 2001/290
Goods and Services Tax
GST and Tax InvoicesFOI status: may be released
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is the entity, a solicitor, required to issue a tax invoice under subsection 29-70(2) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) to an insurer, where the insurer requests a tax invoice in respect of legal services provided by the entity to an injured worker?
Decision
No, the entity is not required to issue a tax invoice under subsection 29-70(2) of the GST Act, to an insurer where the insurer requests a tax invoice in respect of legal services provided by the entity to an injured worker.
Facts
The entity is a solicitor. The entity represented an injured worker in a worker's compensation claim against the injured worker's employer. This legal service was a taxable supply under section 9-5 of the GST Act.
The injured worker was successful in their claim for compensation. As such, the employer's insurer was liable to pay out the compensation claim. This pay out included an amount to cover the legal costs of the injured worker (ie the entity's fees).
The insurer has requested that the entity supply it with a tax invoice in relation to the services supplied by the entity to the injured worker. The insurer has requested that the tax invoice be made out in their name.
The entity is registered for goods and services tax (GST).
Reasons for Decision
One of the requirements for a recipient of a supply to claim an input tax credit is that they must hold a tax invoice (subsection 29-10(3) of the GST Act). Under subsection 29-70(2) of the GST Act, the supplier of a taxable supply must give a tax invoice, for the supply, to the recipient of the supply, if requested by the recipient to do so.
Therefore, in order to determine whether the entity is required to issue a tax invoice to the insurer, it is necessary to establish who is the recipient of the entity's services.
Section 195-1 of the GST Act defines recipient, in relation to a supply, as the entity to which the supply was made.
In this case, the entity is making a taxable supply of legal services to the injured worker. Therefore, although the employer's insurer is, in effect, paying the legal fees of the injured worker, the recipient of the supply is the injured worker. Therefore, as the insurer is not the recipient of the supply, the entity is not required to issue a tax invoice under subsection 29-70(2) of the GST Act, to the insurer.
Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
section 9-5
subsection 29-10(3)
subsection 29-70(2)
section 195-1
Keywords
Goods and services tax
GST invoices
Tax invoices
ISSN: 1445-2782