Edited version of private ruling

Authorisation Number: 1011728860234

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Ruling

Subject: Transactions

Question 1

Are you entitled to input tax credits under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) in relation to your acquisitions of services provided by Entity for which you pay an annual fee?

Answer:

Yes, you are entitled to the input tax credits. The supplies of services by Entity are taxable supplies to you and constitute creditable acquisitions.

Question 2

Are the Charges collected by Entity and paid to you, consideration for a taxable supply by you under section 9-5 of the GST Act?

Answer:

No, GST is not payable in relation to the charges collected by Entity on your behalf.

Question 3

Are you making taxable supplies of services to Entity under section 9-5 of the GST Act?

Answer:

Yes, the services you provide are taxable supplies of services under section 9-5 of the GST Act.

Question 4

If the answer to Question 3 is yes, is Entity authorised to issue recipient created tax invoices (RCTIs) for taxable supplies of services provided by you?

Answer:

Yes, Entity is authorised to issue RCTIs for taxable supplies of services you provide.

Relevant facts and circumstances

You were established under legislation (Act).

Your primary functions are to:

a) acquire and distribute things

b) provide services

c) charge customers for relevant services

d) manage customer enquiries, service requests and complaints

e) perform functions as a service provider and

f) anything else likely to complement or enhance the above functions.

You have negotiated a Service Level Agreement (SLA) with Entity relating to services and charges.

You are registered for GST and account for GST on an accruals basis.

You requested a private ruling for service charging related matters, including whether Entity is authorised to issue RCTIs.

Under the Act, Entity acts as your delegate for particular functions.

You provide services to Entity.

Entity provides services to you to facilitate the collection of client contributions.

Under the SLA the specific amounts are paid to you on a monthly, in arrears, basis.

You may impose conditions enforceable by Entity.

The charge payable to you is collected by Entity on your behalf and, under the SLA, the charges are paid to you on a monthly, in arrears, basis.

Under the SLA, Entity has agreed to pay you for providing services.

Under the SLA, you have agreed to pay specific annual amounts to Entity as consideration for the related services they provide to you, which includes collecting charges on your behalf.

Reasons for decision

Question 1

Are you entitled to input tax credits under section 11-20 of the GST Act in relation to your acquisitions of services provided by Entity for which you pay an annual fee?

Summary

Yes, you are entitled to the input tax credits.

The supplies of services by the Entity are taxable supplies and constitute creditable acquisitions to you. The annual payments you make to Entity represent consideration for the services they provide.

The payments for these services are not included in any determination of the Treasurer which would deem the payment not to be the provision of consideration for a supply.

Detailed reasoning

Under section 11-20 of the GST Act, you are entitled to claim input tax credits for any creditable acquisition that you make.

Section 11-5 of the GST Act provides that you make a creditable acquisition if:

a) you acquire anything solely or partly for a creditable purpose; and

b) the supply of the thing to you is a taxable supply; and

c) you provide, or are liable to provide, consideration for the supply; and

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

To be entitled to claim input tax credits all of the above requirements must be satisfied.

Section 11-10 of the GST Act gives the meaning of acquisition and provides that an acquisition is any form of acquisition whatsoever, including an acquisition of services or a receipt of advice or information.

It is paragraph (b) of section 11-5 of the GST Act which is controversial in the present circumstances: was the supply of the service to you a taxable supply?

The requirements that must be satisfied for a supply to be a taxable supply are set out under section 9-5 of the GST Act. The section provides that an entity makes a taxable supply if:

a) the entity makes the supply for consideration

b) the supply is made in the course or furtherance of an enterprise that the entity carries on

c) the supply is connected with Australia, and

d) the entity is registered or required to be registered for GST.

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

You are entering into a SLA with Entity. You have delegated particular functions to Entity and have agreed to reimburse them annual payments for the services they provide.

Under the SLA Entity has agreed to provide services to assist you to undertake your functions. You have agreed to pay Entity in accordance with the service fee agreement attached to the SLA.

These activities satisfy the positive requirements of section 9-5 of the GST Act in that:

1. the services are provided by Entity for consideration in the form of the agreed annual payment

2. the supplies of services are made by Entity in the course or furtherance of their enterprise

3. the supplies are connected with Australia because the services are performed in Australia, and

4. Entity is registered for GST.

There are no circumstances in the provision of the services which would make the supplies either GST-free under Division 38 of the GST Act or input taxed under Division 40 of the GST Act. The annual payment is not identified in the Assistant Treasurer's Determination under Division 81 of the GST Act. Therefore the supplies of services by Entity under the SLA are taxable supplies to you.

In addition, you have acquired these services in carrying out your functions under the Act and as part of your enterprise activity. You are liable to provide the consideration in accordance with the SLA and you are registered for GST.

As such, the supplies of services under the SLA constitute creditable acquisitions under section 11-5 of the GST Act.

Accordingly, you are entitled to claim input tax credits, under section 11-20 of the GST Act, for the creditable acquisition of services provided by Entity.

Question 2

Are your Charges collected by Entity and paid to you, consideration for a taxable supply by you under section 9-5 of the GST Act?

Summary

GST is not payable in relation to the charges collected by the Entity on your behalf.

In collecting the Charges, the Entity is acting as your agent rather than exercising a delegated function. The Charges are included in a determination of the Treasurer which deems the charge is not the provision of consideration for a supply. Therefore, the requirements of section 9-5 of the GST Act are not satisfied.

Detailed reasoning

The requirements that must be satisfied for a supply to be a taxable supply are set out under section 9-5 of the GST Act, as detailed above.

Section 9-39 of the GST Act identifies special rules in relation to making taxable supplies. Item 8 in the table in section 9-39 of the GST Act provides that where there is a payment of taxes, fees and charges, the special rules in Division 81 of the GST Act may apply.

Subsection 81-5(1) of the GST Act provides that the payment of any Australian tax, fee or charge or the discharging of a liability to make such a payment is treated as the provision of consideration for a supply made by the entity charging the payment.

However, subsection 81-5(2) of the GST Act provides that the payment of any Australian tax, fee or charge that is specified in a written determination of the Treasurer is not the provision of consideration for a supply.

An Australian tax, fee or charge is defined in section 195-1 of the GST Act as:

§ a tax imposed under Australian law; or

§ a fee or charge imposed under an Australian law and payable to an Australian government agency.

Australian government agency has the meaning given by section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) to mean:

§ the Commonwealth, a State or a Territory; or

§ an authority of the Commonwealth or of a State or a Territory.

You and Entity are Australian government agencies as defined.

The Assistant Treasurer has determined, under Schedule 1 to the A New Tax System (Goods and Services Tax) (Exempt Taxes, Fees and Charges) Determination 2011 (No.1), that your Charges are not the provision of consideration. These contributions were included in previous determinations.

Pursuant to the provisions of the Act, you have a SLA with Entity relating to charges. You will delegate particular functions to Entity and agree to reimburse it annual payments for the services it provides.

Entity will also act as your agent in collecting charges on your behalf.

Entity collects the amount payable on your behalf. Under the terms of the SLA, the charges are to be paid to you on a monthly, in arrears, basis.

Because Entity is collecting the Charges as your agent, the charges are covered by the Assistant Treasurer's Determination. The charges payable to you are not the provision of consideration for purposes of the GST Act.

Because the charge is not consideration for a supply, the requirements of section 9-5 of the GST Act are not met. The supplies made by you for the charge are not taxable supplies.

Therefore, the charges collected by Entity are not consideration for taxable supplies. GST is not payable for the services you provide. Neither are these charges taxable in the hands of Entity when it acts as your agent.

Question 3

Are you making taxable supplies of services to Entity under section 9-5 of the GST Act?

Summary

Yes; services you provide, are taxable supplies of services under section 9-5 of the GST Act.

The fees paid to you by the Entity for the services you provide are not included in the Treasurer's determination under Division 81 of the GST Act. Neither are the services GST-free or input taxed. Accordingly, the consideration you receive is for taxable supplies of services.

Detailed reasoning

As stated above, the requirements that must be satisfied for a supply to be a taxable supply are set out under section 9-5 of the GST Act.

The first requirement for a taxable supply is that you make a supply for consideration and, as noted above, you make a supply for consideration unless the payments of government taxes, fees and charges are excluded from the GST by a determination of the Treasurer under Division 81 of the GST Act.

The Assistant Treasurer has determined that the fee is not the provision of consideration under Schedule 1 to the A New Tax System (Goods and Services Tax) (Exempt Taxes, Fees and Charges) Determination 2011 (No.1).

In carrying out delegated functions, Entity is performing services for which they are responsible and for which fees are payable.

The issue that arises is whether the consideration you receive relates to a supply of services or is a payment covered by the Assistant Treasurer's determination.

The services are detailed in the SLA.

You have agreed to provide Entity with the services involved in carrying out their delegated functions under the Act. As consideration for these services, Entity has agreed to pay you the amount of the fee.

In our view, the consideration you receive is payment for the services you provide to Entity rather than a fee. Accordingly, the payment is not included in the Assistant Treasurer's Determination.

Therefore, your supplies of services are made for consideration and satisfy the positive requirements of section 9-5 of the GST Act.

There is nothing in the circumstances of the activities which would make the supplies of the services either GST-free under Division 38 or input taxed under Division 40 of the GST Act.

Accordingly, when you provide services to Entity you are making taxable supplies under section 9-5 of the GST Act.

Question 4

If the answer to Question 3 is yes, is Entity authorised to issue RCTIs for the taxable supplies of services provided by you?

Summary

Yes, the Entity is authorised to issue RCTIs for taxable supplies of services you provide to the Entity.

Supplies made to registered government related entities are included in a Commissioner's determination authorising the issuing of RCTIs provided certain requirements are satisfied. You are making taxable supplies of services and the relevant conditions will be satisfied.

Detailed reasoning

Subsection 29-70(1) of the GST Act provides that a tax invoice for a taxable supply must be issued by the supplier, unless it is a RCTI.

Subsection 29-70(3) of the GST Act defines a RCTI as a tax invoice belonging to a class of tax invoices that the Commissioner has determined in writing may be issued by the recipient of a taxable supply.

Under A New Tax System (Goods and Services Tax) Act 1999 Classes of Recipient Created Tax Invoices Determination (No.1) 2000 (Determination No1) the Commissioner has determined that three classes of tax invoices may be issued by a recipient of a taxable supply provided they satisfy the requirements detailed in the determination.

The three classes of supplies are:

1. supplies of agricultural products made to registered recipients who determine the value of the agricultural products (and any by-products) subsequent to, and dependent upon, quantitative or qualitative analysis of the supply being undertaken

2. supplies made to registered government related entities that satisfy the requirements for issuing RCTIs, and

3. supplies made to registered recipients who have a GST turnover (including input taxed supplies) of at least $20 million annually.

Goods and Services Tax Ruling GSTR 2000/10: recipient created tax invoices (GSTR 2000/10) explains Determination No1 and outlines how to seek a further determination under subsection
29-70(3) of the GST Act for other classes of invoices.

Determination No1 at clause 3(b) authorises RCTIs for taxable supplies made to a government related entity provided the requirements set out in clause 4 of the determination are satisfied.

Both you and Entity are Australian government agencies as defined (refer to Question 2 above), as such, the supplies you make to Entity are included in Determination No1.

Paragraphs 37 to 47 of GSTR 2000/10 provide guidance in relation to the requirements set out in clause 4 of Determination No1 that must be fully satisfied.

Provided the requirements set out in clause 4 of Determination No1 are satisfied, Entity is authorised to issue RCTIs for the taxable supplies of services you make.

Clause 4 of Determination No1 also places obligations on suppliers which include entering into a written agreement with the recipient, agreeing not to issue tax invoices in respect of the supplies and notifying the recipient if you cease to be registered.

There are no conditions under clause 4 of Determination No1 that you or Entity, as appropriate, are unable to fully satisfy.

Provided the requirements set out in clause 4 of the determination are satisfied, Entity is authorised to issue RCTIs for the supplies of services for which you receive an amount.