Edited version of private ruling

Authorisation Number: 1011809145672

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Ruling

Subject: GST and the Commission's discretion to treat a document as a tax invoice

Question 1

Will the Commissioner treat a tax invoice addressed to the principal and the Subdivision 153-B agreement between you and the principal together, as a tax invoice for goods and services tax (GST) purposes?

Advice/Answers

Yes, for a limited period of time.

Reasons For Decision

Relevant facts

You are registered for GST.

You provide freight services to customers where the customers' goods are imported and delivered to customers located in Australia. In such cases, the customer is noted on Customs related import documentation as the importer.

In order to arrange for collection and release of the goods, certain port related services are supplied to customers. You are required to pay for the cost of those services (port charges) on behalf of the customers. The port charges must be paid in order for the goods to be released to you. Unless these charges are paid promptly and the goods cleared the dock rapidly, substantial penalties will apply which you cannot recover from your customers.

In order to simplify its GST administration, you recently entered into a subdivision 153-B agreement(s) with its customers with respect to those above charges.

Entities issuing port charge invoices have been requested to address the invoices to you but have refused to do so.

Reasons for decision

Summary

The Commissioner will exercise discretion to treat a Subdivision 153-B agreement in conjunction with a tax invoice issued to your customer as a valid tax invoice for the purposes of section 29-70 of the GST Act for a limited time period.

Detailed reasoning

Under subsection 29-10 (4) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) if an entity does not hold a tax invoice for a creditable acquisition when they give the Commissioner a GST return for the tax period, the input tax credit associated with the creditable acquisition is not attributable to that tax period. This ruling does not address whether other requirements for attribution have been met.

Section 29-70 of the GST Act provides that a tax invoice is a document that contains enough information to be treated as a tax invoice as provided under paragraph 29-70(1)(c) of the GST Act. In your circumstances, the tax invoices from various suppliers contain most of the requirements in subsection 29-70(1) of the GST Act other than the requirement under sub-paragraph 29-70(1)(c)(ii). This paragraph states:

if the total *price of the supply or supplies is at least $1,000 or such higher amount as the regulations specify, or if the document was issued by the recipient - the recipient's identity or the recipient's ABN.

An asterisk denotes a defined term in the GST Act.

The relevant tax invoice you received was addressed to another entity, not You. It is not a tax invoice for the purposes of attribution by you under section 29-10 of the GST Act. You have requested the Commissioner to treat a particular document that would not, apart from subsection
29-70(1B) of the GST Act, be a tax invoice. This includes the Commissioner exercising discretion to treat a tax invoice addressed to another party (a principal under a 153-B agreement) a tax invoice to You (the agent under the Subdivision 153-B agreement).

Law Administration Practice Statement PS LA 2004/11 provides guidance to the Tax Office staff in the exercise of the statutory discretions contained in subsection 29-70(1B) and 29-75(1) of the GST Act.

In exercising his discretion, the Commissioner must be satisfied that the following conditions are satisfied:

· Whether the recipient has made a reasonable attempt to obtain a valid tax invoice. This includes attempt to change the name of the recipient on the tax invoice.

· Whether a creditable acquisition has been made.

Furthermore, the Commissioner also needs to consider whether the exercise of the discretion is to be made for past transactions or into the future where the supply has not been occurred.

Reasonable attempt

You have advised that it has requested various entities receiving payments of port charges to address the tax invoice to you instead of the principals, but they have refused to do so.

It is accepted that you have made reasonable attempts to obtain the valid tax invoices with its name as the recipient.

Creditable acquisition

You have entered into agreement with a number of your customers under Sub-division

153-B of the GST Act to be a separate acquirer/supplier in relation to the fee and charges mentioned earlier.

It is considered that the agreement between you and a customer meets the requirements under Subdivision 153-B of the GST Act and the acquisitions by you in relation to the port charges listed in the agreement are acquisitions that are referred to in section 153-50 of the GST Act.

The effect of entering into this arrangement is that the principal and you treat creditable acquisitions that the principal makes through you as two separate acquisitions and they are treated as acting between themselves as principal to principal for GST purposes. When you make a creditable acquisition (acquisitions specified in the agreement) from a third party on behalf of the principal, it is taken to make a creditable acquisition in its own right.

You are taken to make a taxable supply to the principal of the same thing that you are taken to acquire.

It is not disputed that a principal would make a creditable acquisition in relation to the port charges itself. It follows that under section 153-50 of the GST Act, you are also making creditable acquisition when it makes payments of the port charges that are included in the Subdivision 153-B agreement.

The Commissioner's discretion

Past acquisitions

As there is sufficient evidence to establish that you have made creditable acquisitions in relation to the port charges, the Commissioner will exercise the discretion to treat the Subdivision 153-B agreement in conjunction with the tax invoices issued to a principal, not to you, as valid tax invoices for acquisitions made by you. That is, for the acquisitions that you have already received tax invoices (a tax invoice that addressed to a principal, not to you). It should be noted that the past acquisitions only included the port charges payments made on or after the date of the first Subdivision 153-B agreement.

You can claim the input tax credit for the payment of port charges in the next or a subsequent activity statement provided that other requirements for attribution have been met.

Future acquisitions

For acquisitions that have not occurred, paragraphs 12 and 13 of Attachment A to the PS LA 2004/11 states that:

12. Occasionally we may be asked by a recipient to exercise the discretion before the supply has even occurred or before a document is sought or obtained from the supplier. This could occur when the recipient knows that it is likely that the tax invoice it is going to receive will be defective…

13. As a general rule, the exercise of the discretions for a particular recipient for an indefinite period would be rare and exceptional…

It is considered that in You circumstances there are alternatives to the exercise of the discretion for an indefinite period. As paying agent for a principal:

· You will receive reimbursement of the same amount from a principal and the reimbursement is not consideration for any supply made by you. There will be no GST consequence following the reimbursement made by a principal.

· Alternatively, you can choose to recover the port charges and add your own charge for the service you make to the principal. The port charges will not be consideration for any supply made by you and therefore no GST will be included in the recovery amount. However, any service charges imposed on the principal in addition to the recovery amount will be consideration for the service and will be subject to GST.

The Commissioner will allow you to continue to accept and use incorrectly addressed tax invoices for a period of three calendar months from the date of this letter. It is expected that in this period you will modify its processing system to prevent the administrative problems associated with the receipt of the reimbursement.

That is, the period of exercising the discretion to you would commence from the time the first Subdivision 153-B agreement was entered into to the close of business on XXXX and applies to port charges specified in the Subdivision 153-B agreement(s). You cannot attribute any input tax credits arising from tax invoices not issued/addressed to you after that date.