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Edited version of private ruling
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Ruling
Subject: Consideration for a supply
Question
Whether goods and services tax (GST) is applicable to the commission payable under the deed of a deceased estate?
Answer:
Yes
Relevant facts:
You are registered for GST.
You account for GST on a cash basis.
You carry on an enterprise of administrating a deceased estate.
You are entitled to receive commission payable under the deed of a deceased estate.
You advised that you have received a commission and issued a tax invoice to the estate.
Relevant legislative provisions:
A New Tax System (Goods and Services Tax) 1999 Act section 9-40.
A New Tax System (Goods and Services Tax) 1999 Act section 9-5.
A New Tax System (Goods and Services Tax) 1999 Act paragraph 9-5(a).
Reasons for decision
Summary
You are entitled to receive commissions from a deceased estate in connection with your duties as an administrator. The commission is consideration for your administrative services.
Your supplies satisfy all the criteria in section 9-5 of the A New Tax System (Goods and Services Tax) 1999 Act (GST Act) and are therefore taxable under this section. You have GST liabilities under section 9-40 of the GST Act for your taxable supplies. Your GST liabilities would be 1/11th of the consideration received.
Detailed reasoning
Under section 9-40 of the GST Act you must pay GST on taxable supplies you made.
Under section 9-5 of the GST Act you make a taxable supply if:
· you make a supply for consideration
· the supply is made in the course or furtherance of an enterprise that you carry on
· the supply is connected with Australia, and
· you are registered, or required to be registered.
However, the supply is not a taxable to the extent that it is GST-free or input taxed.
You carry on an enterprise of administrating a deceased estate.
Under the deed of the estate, you are entitled to commission payable by the estate in connection with the administration of the estate. You confirmed that you have received a commission and you have provided a tax invoice to the estate.
The Australian Taxation Office's view on grants of financial assistance is provided in Goods and Services Tax Ruling GSTR 2000/11. We enclose a copy for your reference.
In this case the issue to consider is whether the commission paid under the estate deed satisfies paragraph 9-5(a) of the GST Act which is about consideration for a supply. Paragraph 46 of GSTR 2000/11 states:
A payment will be consideration for a supply if the payment is 'in connection with', 'in response to' or 'for the inducement' of a supply.
In addition paragraphs 80 to 81 of GSTR 2000/11 provide an explanation on the meaning of consideration for a supply. These paragraphs state:
80. Consideration for a supply need not be in connection with the supply. It may be 'in response to' or 'for the inducement of' a supply. Consideration which has these characteristics will usually also be in connection with the supply.
81. In determining whether consideration is in connection with, in response to, or for the inducement of a supply, regard needs to be had to the true character of the transaction. An arrangement between parties will be characterised not merely by the description which parties give to the arrangement, but by looking at all of the agreements entered into and the circumstances in which the agreements are made.
You are entitled to commission payable under the estate deed. We consider that the commission payable under the estate deed is in connection with your administrative duties or is an inducement to you to administer the estate. Therefore the commission paid was consideration for your services to the estate and there was a nexus between the commission and your duties as an administrator.
Taxable supply
The commission was consideration for your supplies of services. You provide the services in the course of your enterprise in Australia and you are registered for GST. Therefore, your supplies satisfy all the criteria in section 9-5 of the GST Act.
Please note there are no provisions in the GST Act which would make the supplies of your services GST-free or input taxed.
You have GST liabilities under section 9-40 of the GST Act and your GST liabilities would be 1/11th of this commission received.