Edited version of private ruling

Authorisation Number: 1011763866081

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Ruling

Subject: GST and auctioneering services

Question 1

Are you making a taxable supply of auctioneering services to Australian bidders under section 9-5 of the GST Act where an administrative fee is charged?

Answer

Yes, your supply of auction services made to Australian bidders is a taxable supply under section 9-5 of the GST Act. GST is therefore applicable on the administrative fee.

Question 2

Are you making a GST-free supply of auctioneering services under item 2 in the table in subsection 38-190(1) of the GST Act where your services are provided to non-resident bidders that do not carry on a business in Australia and are not registered for GST?

Answer

Yes, your supply of auctioneering services to non-resident bidders is GST-free under item 2 in the table in subsection 38-190(1) of the GST-Act.

Relevant facts

You are carrying on an enterprise of selling goods through reserved public auctions.

You are registered for goods and services tax (GST).

You hold auctions throughout the year at locations in Australia.

The owner of the goods consigns the goods to you for the auction process while retaining the title to the goods.

You act as a selling agent for the consignor and acquire a power of attorney for the limited purpose of executing all documents required for a title transfer and registration, without any further action of the consignor.

The consignor pays you a commission for your service.

In addition to selling the goods that is owned by the consignor, you also purchase goods in your own name to sell in the auction.

All the sales made at the auction are final and sold "as is". You do not deliver or arrange for delivery of any purchases. All buyers must remove the goods from the location of the auction.

Potential buyers may bid on items at the auction in person, bid over the internet or bid by submitting a proxy. Buyers could be resident of Australia or non-resident.

You are implementing a new fee structure where all buyers will be charged an administrative fee. The administrative fee will be separately stated on the buyers invoice.

The only exception to this fee will be on-site buyers purchasing equipment from an auction conducted on a farm. These buyers will not be charged the administrative fee.

You will not be acting as an agent for any non-resident buyers.

Reasons for decision

Question 1

Goods and Services Tax (GST) is a broad based tax on the consumption of goods and services in Australia. A supplier has an obligation to pay GST where they make a taxable supply.

Section 9-5 of the GST Act provides that 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.

When you supply your auctioneering services to entities in Australia paragraphs (a) to (d) of section 9-5 of the GST Act are satisfied as:

(a) You are receiving consideration, being the administrative fees; and

(b) The supply is made in the course of your enterprise; and

(c) The supply is connected with Australia as the services are done in Australia; and

(d) You are registered for GST.

Hence, your supply of auctioneering services to entities in Australia is taxable to the extent that it is not GST-free under Division 38 of the GST Act or input taxed under Division 40 of the GST Act.

In this case, there are not any provisions in Division 38 and 40 of the GST Act to allow either GST-free status or input taxed status in respect of auctioneering services provided to entities in Australia.

Therefore, your supply of auctioneering services made to entities in Australia is a taxable supply under section 9-5 of the GST Act. GST is therefore applicable on the supply.

Question 2

As discussed in Question 1 above, a supply will not be a taxable supply to the extent that it is GST-free or input taxed. Whilst your supply of auctioneering services to non-resident entities is not input taxed under any of the provisions of the GST Act, it may be GST-free under division 38 of the GST Act.

Section 38-190 of the GST Act provides that in certain circumstances, the supply of things other than goods or real property, for consumption outside of Australia, is GST-free. The supply of auctioneering services is not a supply of goods or real property, thus it is appropriately considered under section 38-190 of the GST Act.

In particular, item 2 in the table in subsection 38-190(1) of the GST Act (Item 2) provides that a supply that is made to a non-resident who is not in Australia when the thing supplied is done will be GST-free where:

(a) the supply is neither a supply of work physically performed on goods situated in Australia when the work is done nor a supply directly connected with real property situated in Australia, or

(b) the non-resident acquires the thing in carrying on the non-resident's enterprise, but is not registered or required to be registered for GST.

Accordingly, where the provisions of either (a) or (b) above are met, the supply will be GST-free if the non-resident is not in Australia when the thing supplied is done.

For a supply of services to be GST-free under Item 2, there is a precondition that the non-resident must not be in Australia in relation to the supply when the thing supplied is done.

Not in Australia

We consider that the precondition in Item 2 requiring that the non-resident is not in Australia is a requirement that the non-resident is not in Australia in relation to the supply.

As expressed in paragraph 37 of Goods and Services Tax Ruling GSTR 2004/7 a non-resident company is in Australia if the company carries on business in Australia:

(a) at or through a fixed and definite place of its own for a sufficiently substantial period of time; or

(b) through an agent at a fixed and definite place for a sufficiently substantial period of time.

In your situation you are supplying auctioneering services to the non-resident entities. The services provided are not services physically performed on goods situated in Australia nor are they directly connected with real property in Australia, thus paragraph (a) is satisfied. Where the non-resident entity acquires your services in carrying on its enterprise but is not registered or required to be registered for GST in Australia, then paragraph (b) would also be satisfied.

However in order for the supply to be GST-free under Item 2, there is a requirement that the non-resident must not be in Australia when your auctioneering services are supplied.

The question of whether an entity is 'in Australia' has been addressed in GSTR 2000/31 'Supplies connected with Australia'.

At paragraph 68 it states:

For the purposes of items 2 and 3 in subsection 38-190(1), the precondition that the recipient is not in Australia at the relevant time requires that neither the recipient, nor a representative acting on behalf of the recipient if the recipient is a company, is in Australia in relation to the supply.

In this case, you have advised that the non-resident is outside Australia when you make your supply. The non-resident does not have a business presence in Australia, nor do they have a representative in Australia. Thus the non-resident is outside of Australia for the purposes of Item 2.

Accordingly your supply of auctioneering services to non-resident entities that are not in Australia is a GST-free supply under Item 2.

However, the scope of Item 2 is limited by subsection 38-190(3) of the GST Act. Subsection 38-190(3) provides that a supply covered under Item 2 is not GST-free if:

(a) it is a supply under an agreement entered into, whether directly or indirectly, with a non-resident; and

(b) the supply is provided, or the agreement requires it to be provided, to another entity in Australia;

In your situation, you provide your services to the non-resident entities and you do not have an agreement with the non-resident requiring you to provide your services to another entity in Australia. Therefore, subsection 38-190(3) of the GST Act does not exclude the supply of your services to the non-resident entity from being a GST-free supply under Item 2.

In conclusion, the auctioneering service you supply to non-resident entities is GST-free under item 2 in the table in subsection 38-190(1) of the GST Act.