Edited version of private ruling

Authorisation Number: 1011488986426

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Ruling

Subject: ABN application

Question

Is Mr X required to use his own ABN when invoicing your company:

§ as an employee or

§ not acting as employee of a registered business

Answer

§ Mr X is not required to use his own ABN when acting as an employee of a firm.

§ Mr X is required to use his own ABN when not acting as employee of a registered business.

Relevant facts and circumstances

You provide compensation to people.

Assessing these claims is based on a table of compensable injuries. Where the applicant submits a claim, the claim must then be supported by a written report from a suitable qualified writer.

In order to assist clients in choosing a writer, you engage individual professionals who are qualified in the assessment of this claim and then enter into contract with each person.

You state that often such individuals are already working as employees for companies who provide a range of counselling and or rehabilitation services or in other cases may be independent contractors working for various companies, sole traders or partnerships.

Further, you provided the following information:

§ you hired Mr X to provide a report on your clients and signed a contract between himself and the Director of your company.

§ Mr X is paid a fee that is set in legislation and he determines how to conduct the assessment report subject to his training and educational level as well as the terms and conditions of the contract.

§ Mr X has been invoicing your company the prescribed fee using the ABN of the company who claims Mr X is employed with.

You have provided a copy of the letter from Mr X employer advising the following:

that they have other employees as they have advised that running a practice in any other manner would be a breach of the Tax Act as the practice provides premises, a suitable working environment, referrals and all the equipment that is needed for a professional to operate. They have been informed that their employees cannot operate as sole operators or contractors as an audit is likely to lead to the decision that this is a breach of the Tax Act.

Mr X had been informed that he cannot utilise an ABN as he is an employee of the company.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999.

Reasons for decision

A supply is a taxable supply if all the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) are satisfied. Section 9-5 of the GST Act states the following:

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 Australia; 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.

(The asterisks in this ruling indicate terms defined under the GST Act. Those terms are discussed if they impact on this ruling.)

In this case, paragraph (a) in section 9-5 of the GST Act is satisfied because the activities of an authorised individual professionals amount to a supply of services and the payment from you is a consideration for it. Paragraph (c) is also satisfied because the supply is connected with Australia as it is made in Australia. Also, the supply is neither GST-free nor input taxed. Therefore, we only need to consider further paragraphs (b) and (d).

Enterprise

An enterprise is defined under section 9-20(1) of the GST Act to include an activity, or series of activities, done in the form of a business, or in the form of an adventure or concern in the nature of trade. However, under paragraph 9-20(2)(a) an enterprise does not include an activity, or series of activities, done:

by a person as an employee or in connection with earning *withholding payments covered by subsection (4) (unless the activity or series is done in supplying services as the holder of an office that the person has accepted in the course of or in connection with an activity or series of activities of a kind mentioned in subsection (1)) …

Therefore, paragraph 9-20(2)(a) excludes the activities of employees from the definition of enterprise. It also excludes the activities of 'office holders' from the definition of enterprise.

Registration

Under section 23-5 of the GST Act, you must be registered for GST if:

§ you are carrying on an enterprise; and

§ your annual turnover meets the registration turnover threshold of $75,000 (or $150,000 for non-profit bodies).

Hence, if you are carrying on an enterprise and your annual turnover meets the registration turnover threshold, you have satisfied the requirements of section 23-5 of the GST Act and you must register for GST.

Individual professionals as employees

As activities of employees are excluded from the definition of enterprise under paragraph 9-20(2)(a) of the GST Act, employees of a firm are not carrying on an enterprise in their own right. However, it should be noted that activities of employees still form part of the enterprise of the firm that employs them.

In the current case, the individual professional who is employed by a firm is not considered to be carrying on an enterprise in his own right when he is performing activities of a writer. Therefore, the individual professional is required to be registered for GST when the individual professional carries out the activities of a writer.

Where the individual professional is required to remit the payment from you to the individual professional's firm under an employment contract, it is considered that the supply of services to you is by the individual professional's firm. Where the employee individual professional's firm is registered or required to be registered for GST under section 23-5 of the GST Act, the firm's ABN will be provided to you.

Individual professional not working as an employee (e.g. a sole trader)

If the individual professional is carrying his own enterprise as a sole trader when accepting a position as a writer, the individual professional is doing so in the course or furtherance of his enterprise.

As the writer is being carried out by the sole trader himself, the sole trader is required to be registered for GST if he meets the registration requirements under section 23-5 of the GST Act. Therefore, the sole trader will provide the ABN to you.