Edited version of private ruling

Authorisation Number: 1011820166059

This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.

Ruling

Subject: GST and supply to an Australian legal firm in respect of non-resident companies

Question

Is the supply of legal services by an Australian barrister ('you') to an Australian legal firm ('solicitor') and/or the non-resident companies GST-free?

Answer

Yes, the supply of your legal services to the solicitor but provided to a non-resident company who is not considered to be in Australia in relation to your supply is GST-free.

Where the non-resident company has an Australian presence (such as a branch or subsidiary, if any), and your legal services are for the purposes of that Australian presence, or the involvement of the Australian presence is not minor, the supply of your legal services will be taxable.

Relevant facts and circumstances

An Australian barrister ('you') is registered for goods and services tax (GST). You were engaged by an Australian legal firm ('solicitor') to provide legal services in respect of non-resident companies.

The solicitor is representing the non-resident companies.

You entered into costs agreements with the solicitor in relation to matters involving several non-resident companies.

The advice prepared by you was provided to the solicitor for the benefit of the non-resident companies. You have also represented the non-resident companies in court. No officers of the non-resident companies were in Australia when the services were performed/provided.

The legal services and advice did not involve any real property in Australia.

The legal services involved written and oral legal advice that has been provided to the solicitor for the benefit of the non-resident companies, in relation to certain taxation matters. Furthermore, you have represented the non-resident companies in court. During this period, no officers of the non-resident companies were present in Australia. The nature of the court proceedings include defending against certain orders and appeals, together with applications for a stay of summary judgement, and defending against summary judgment in the proceedings. You have also attended informal negotiation meetings with the other party.

You provided advice to the solicitor for the benefit of the non-resident companies which are covered in the costs agreements/retainer(s). The advice is for the non-resident companies' benefit but in practical terms, you give the oral or written advice to the solicitor and/or to an individual who is the non-resident companies' tax agent ('tax agent'). The tax agent is an Australian resident who also gives advice (accounting and commercial) to the non-resident companies.

You do not have any direct interactions with the non-resident companies, other than that you may be paid by direct debit from the non-resident companies.

No representatives of the non-resident companies were in Australia at any time that the legal advice was prepared or when the non-resident companies were represented in court. However, the tax agent was in Australia during this time.

In evidence of the engagement of your supply of legal services to the solicitor, copies of costs agreements were provided, and provides (amongst other things):

· Each costs agreement is between you and the solicitor in relation to matter(s) of:

- {Name of each non-resident company is stated for each separate cost agreement}

· The brief is to advise and appear.

· You shall charge fees to the solicitor for time spent on advices, conference attendances, preparation, appearances and all necessary reading and research, at a specified rate (to which GST will be added at 10% or such other rate as maybe prescribed).

· Certain fares for travel, accommodation, and meals for time spent outside of the metropolitan area are paid for or reimbursed by the solicitor.

· You shall render accounts to the solicitor when nothing more remains to be done for the time being or in a continuing matter at monthly intervals.

· You are entitled to charge the solicitor a cancellation fee under certain circumstances.

· Written assurance is to be provided by the solicitor to you that monies sufficient to cover the fee for your brief on hearing are held in trust.

· The solicitor acknowledges that the solicitor is retaining you as a principal and not as an agent for the solicitor's client.

· You shall take it that the solicitor agrees to retain you (on the basis set in the costs agreement) if the solicitor advises so, or if the solicitor continues to instruct you in the matter.

Reasons for decision

GST is payable on a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). From the facts provided, you satisfy the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act as:

(a) You make the supply of legal services in return for consideration (by way of payments); and

(b) The supply is made in the course or furtherance of an enterprise (business) that you carry on; and

(c) The supply is made through a business that you carry on in Australia and/or is performed in Australia (and therefore the supply is connected with Australia); and

(d) You are registered for GST.

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

We first need to determine who you are supplying your legal services to, before determining the GST status of the supply.

Who is the recipient of the supply?

Under section 195-1 of the GST Act, the recipient in relation to a supply is defined as the entity to which the supply is made.

You advise that the solicitor engages you for your legal services in respect of the non-resident companies.

Goods and Services Tax Ruling GSTR 2000/37 discusses the principal and agency relationship and explains the application of the GST law to transactions involving these relationships.

A distinction is made between an entity incurring expenses on a client matter as an agent for a client and as a principal in the ordinary course of providing their services to the client. Paragraphs 48 to 54 of GSTR 2000/37 describe the effects of an agency relationship on disbursements by lawyers, and state at paragraphs 48 and 49:

48. Agents may incur expenses on a client matter both as an agent of the client and as a principal in the ordinary course of providing their services to the client. For example, in most cases, even though agreements between solicitors and clients may not use the term agent or agency, it is clear that the clients have authorised the solicitors to act on their behalf in the particular matter. When the solicitor acts as an agent for the client, the general law of agency applies so that the solicitor is 'standing in the shoes' of the client.

49. If a disbursement is made by a solicitor and incurred in the solicitor's capacity as a paying agent for a particular client, then no GST is payable by the solicitor on the subsequent reimbursement by the client. This is because the goods or services to which the disbursement relates are supplied to the client, not to the solicitor, by a third party. Also, the reimbursement forms no part of the consideration payable by the client for the supply of services by the solicitor. However, if goods or services are supplied to the solicitor to enable the solicitor to perform services supplied to the client, GST is payable by the solicitor on any reimbursement by the client of expenses incurred on those goods or services, whether the reimbursement is separately itemised or included as part of the solicitor's overall fee. This is because the reimbursement is part of the consideration payable by the client for services supplied by the solicitor.

To make this distinction clearer paragraphs 50 to 53 of GSTR 2000/37 list fees that a solicitor commonly pays on behalf of a client and distinguishes those fees paid as an agent from fees paid as a principal.

Examples of common fees and charges, for which a client is liable, that may be paid for by a solicitor as a paying agent of the client, and for which if the solicitor makes the payment, GST is not payable on the subsequent reimbursement by the client to the solicitor include barrister's fees when the barrister is engaged by the client (paragraph 50 of GSTR 2000/37). In this circumstance, the barrister's services are made to the client (as principal).

Examples of common disbursements that, depending upon the contractual arrangements between the client and the solicitor, can be incurred by a solicitor and then reimbursed by a client as part of the consideration payable for legal services provided to the client by the solicitor, for which if the disbursements are incurred by a solicitor, GST is payable on the subsequent reimbursement by the client to the solicitor, include barrister's fees when the barrister is engaged by the solicitor (paragraph 51). In this circumstance, the barrister's services are made to the solicitor (as principal).

Where the solicitor is acting as principal in relation to the transaction(s):

The facts indicate that you are engaged by the solicitor to provide legal services in respect of matters of the non-resident companies. The costs agreement(s) provides that the solicitor acknowledges that the solicitor is retaining you as a principal and not as an agent for the solicitor's client (being the non-resident companies). We note that the cost agreement(s) is/may be different from the retainer(s), and that the retainer(s) may outline clearer the relationship between the parties. However, in the absence of any other documentation provided, in the circumstance when the solicitor is acting as the principal in relation to a transaction with you and retains you to supply the legal services to them, the legal effects of the transaction is binding on the solicitor and the supply is made to the solicitor. The solicitor is the recipient of the supply of your legal services.

Where the solicitor is acting as an agent for the non-resident companies in relation to the transaction(s):

Alternatively, the solicitor may engage you for your legal services as agent/representative on behalf of the non-resident companies.

As stated under paragraph 15 of GSTR 2000/37:

15. When an agent uses his or her authority to act for a principal, then any act done on behalf of that principal is an act of the principal...

In addition, paragraphs 234 and 236 of Goods and Services Tax Ruling GSTR 2005/6 state:

234. A non-resident principal may make an acquisition of a service or other thing through an agent. The agent is authorised to undertake the acquisition on behalf of the principal, thereby binding the principal to the legal effects of the transaction.

236. In these circumstances, the supply of the service is made to the non-resident. (In the case of a non-resident entity, other than an individual, the presence of an agent in Australia can sometimes result in the non-resident entity failing the requirement in item 2 that the non-resident is not in Australia.)

Accordingly, when a principal makes a relevant transaction (that is, taxable supply or creditable acquisition) through an agent, the word 'make' and its derivatives, such as 'made', are used in the GST Act, inter alia, to connect the thing being transacted in the course of an entity's enterprise with the paying or receiving of consideration. When an agent is authorised to undertake a transaction on behalf of the principal, thereby binding the principal to the legal effects of the transaction, then the transaction is made by the principal through the agent.

In this circumstance, if the solicitor is acting as an agent/representative of the non-resident companies in relation to transactions with you, the supplies are made to the non-resident companies (as the principal) through the solicitor (as their agent). The non-resident companies are the recipients of the supplies of your legal services.

In your application for a private ruling, you made references to paragraphs 472 to 476 (Example 19) of GSTR 2005/6. We note that in Example 19, the facts are that an Australian solicitor is acting as agent for a non-resident and engages an Australian barrister to supply legal services to the non-resident. In this example, the supply of legal services by the barrister is made to the non-resident (principal) through the solicitor, as agent for the non-resident. This example is similar to the circumstance when the solicitor is acting as an agent for a non-resident company in relation to the transaction(s) with you, and can be distinguished from when the solicitor is acting as principal in relation to the transaction(s).

We now consider the GST status of the supply of your legal (barrister's) services. The supply of your legal (barristers) services is not input taxed. The GST-free provisions are taken into consideration.

GST-free

Section 38-190 of the GST Act specifies the circumstances where the supply of things other than goods or real property for consumption outside Australia is GST-free. Of relevance to the supply of your legal services to the solicitor and/or the non-resident companies are items 2 and 3 in the table in subsection 38-190(1) of the GST Act.

Under item 2 in the table in subsection 38-190(1) of the GST Act (Item 2), a supply is GST-free where it is:

a supply that is made to a *non-resident who is not in Australia when the thing supplied is done; and

(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-residents *enterprise, but is not *registered or *required to be registered.

Under item 3 in the table in subsection 38-190(1) of the GST Act (Item 3), a supply is GST-free where it is:

a supply:

(a) that is made to a *recipient who is not in Australia when the thing supplied is done; and

(b) the effective use or enjoyment of which takes place outside Australia;

other than a supply of work physically performed on goods situated in Australia when the thing supplied is done, or a supply directly connected with *real property situated in Australia.

(* denotes a defined term under section 195-1 of the GST Act)

Item 2 is applicable to supplies made to non-resident recipients. Item 3 is applicable irrespective of the residency of the recipient.

(A) Where the solicitor is acting as principal in relation to the transaction(s):

The solicitor is an Australian law firm and is not a non-resident entity. Accordingly, when the supply is made to the solicitor, and they are the recipient of the supply of your legal services, Item 2 is not applicable. We will consider the application of Item 3.

Goods and Services Tax Ruling GSTR 2004/7 and Goods and Services Tax Ruling GSTR 2007/2 provide guidance on the application of Item 3.

For the supply to be GST-free under Item 3, the supply must satisfy both paragraphs (a) and (b) of Item 3, and be neither a supply of work physically performed on goods, nor directly connected with real property, in Australia.

Paragraph (a) - Recipient who is not in Australia in relation to the supply

Paragraph (a) of Item 3 requires that the supply is made to a recipient who is not in Australia when the thing supplied is done. The requirement in this paragraph refers to the recipient of the supply. The recipient in relation to a supply is the entity to which the supply is made as defined in section 195-1 of the GST Act. For a supply of services, the thing is done when the services are performed.

The requirement that the recipient must not be in Australia in relation to the supply when it is done, is not satisfied as the solicitor carries on its business in Australia and is in Australia when your legal services are performed. Accordingly, the requirement in paragraph (a) of Item 3 is not satisfied.

Where a supply is made to a recipient who fails the not in Australia requirement in paragraph (a) of Item 3, it is necessary to consider whether subsection 38-190(4) of the GST Act applies.

Subsection 38-190(4) of the GST Act extends the scope of Item 3. This subsection provides that a supply to a recipient who is in Australia in relation to the supply is taken for the purposes of Item 3, to be a supply made to a recipient who is not in Australia if:

(a) the supply is made under an agreement entered into, whether directly or indirectly, with an Australian resident; and

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

GSTR 2004/7, GSTR 2005/6 and GSTR 2007/2 provide guidance on the application of subsection 38-190(4) of the GST Act.

The term 'provided' is used to contrast with the term 'made'. Paragraphs 52 to 54 of GSTR 2007/2 state:

52. A supply may be made and provided to the same entity, or may be made to one entity but be provided to another entity (or entities). Such circumstances are provided for in the legislation by subsections 38-190(3) and (4)…

53. The entity to which the supply is made is the recipient. The supplier may provide the supply to that recipient entity (in which case the recipient is also the providee) or may provide the supply to another entity (in which case the other entity is the providee).

54. A supply is provided to another entity if, in the performance of a service (or in the doing of some thing), the actual flow of that supply is to an entity that is not the recipient. The contractual flow is to the recipient and the actual flow of the supply is to another entity and thus the other entity is the providee.

Paragraphs 60 and 61 of GSTR 2007/2 provide that the focus point in working out whether a supply is provided to another entity is the facts and circumstances of the doing of the thing supplied. By the supplier examining what it is required to do and in what circumstances, the supplier is able to objectively determine to whom the supply is provided. In some instances, it is inherent in the nature of the supply that the supply is provided to a particular entity.

Paragraph 76 of GSTR 2005/6 provides that in cases of supplies that involve the supply of legal services, the question of whether the supply is provided to another entity depends on the facts and circumstances in any given case.

In this circumstance, the facts indicate that you are engaged by the solicitor to provide legal services in respect to matters of the non-resident companies. The advice is for the benefit of the non-resident companies, but in practical terms, the written and oral legal advice is given to the solicitor (and/or to the non-resident companies' tax agent). The legal services and advice are in relation to certain taxation matters of those non-resident companies. You also represented the non-resident companies in court. The nature of the court proceedings include defending against certain orders and appeals, together with applications for a stay of summary judgement, and defending against summary judgment in the proceedings. You have also attended informal negotiation meetings with the other party. No officers of the non-resident companies were present in Australia when you provided the legal services and advice.

Applying subsection 38-190(4) of the GST Act to these facts in respect of your arrangements with the solicitor, it is considered that there is an agreement with the solicitor for the supply of your legal services to be provided to the non-resident companies. On the condition that the non-resident companies are not considered to be in Australia (that is, not carrying on business through another Australian entity (such as a branch or subsidiary), and the legal services are not for the purposes of that Australian presence) in relation to your legal services, paragraph (a) of Item 3 would be satisfied.

We also need to take into consideration the place of effective use or enjoyment of the supply.

Paragraph (b) of Item 3

Paragraph (b) of Item 3 requires the place of effective use or enjoyment of a supply to be determined (that is, whether the place is outside Australia). We take a two step approach to work out whether effective use or enjoyment of a supply takes place outside Australia. First, we determine the entity to which the supply is provided (the providee entity). We then determine whether provision of the supply to the providee entity is outside Australia.

A supply that is made to a recipient entity may be provided to another entity. If a supply is made to a recipient and provided to another entity, the entity that actually uses or enjoys the supply is that other entity. According to paragraph 41 of GSTR 2007/2, a supply is made to a recipient and provided to another entity if in the performance of the service (or in the doing of some thing) the actual flow of that supply is to an entity that is not the recipient entity with which the supplier made the agreement for the supply. That is while the contractual flow of the supply is to the recipient entity, the actual flow of the supply is to another entity.

Thus, to determine the effective use or enjoyment of the supply, it is necessary to inquire as to the entity that has the actual use or enjoyment of the supply.

As outlined above and on the basis of the facts available in respect of your arrangements with the solicitor, you are engaged by the solicitor to provide legal services on matters of the non-resident companies. The non-resident companies appear to have the actual use or enjoyment of your legal (barrister's) services, and are considered to be the providee entity in relation to each supply of your legal services.

The next step is to determine whether the effective use or enjoyment of the supply takes place outside Australia.

Effective use or enjoyment of a supply only takes place outside Australia if there is provision of the supply to the providee entity outside Australia.

In this circumstance, the facts available indicate that the non-resident companies (as the providee entities) are entities based outside Australia, and you advise that no representatives of the non-resident companies were in Australia at any time when you performed/provided your legal services. There are no facts to indicate that these non-resident companies are in Australia (that is, of its own, or through another Australian entity and that the legal services are for the purposes of that Australian presence). The use or enjoyment of the supply of your legal services takes place outside Australia as the non-resident companies are located outside Australia at the time of your supplies.

Accordingly, the supplies of your legal services that are made to the solicitor and provided to the non-resident companies (who are outside Australia) satisfy the requirement of paragraph (b) of Item 3.

Another entity benefits from the supply

If a supply is provided to an entity outside Australia and another entity in Australia benefits from that supply this does not alter the outcome that the supply is provided to an entity outside Australia. Thus effective use or enjoyment of the supply does take place outside Australia.

Later use of the advice

For the later use of a supply, that is, a supply is provided to another entity outside Australia, and that supply is later used in Australia, that later use does not alter the fact that the supply is provided to that entity outside Australia for the purposes of applying subsections 38-190(3) and

38-190(4) of the GST Act.

Work physically performed on goods, nor directly connected with real property, in Australia

In relation to whether the supply is of work physically performed on goods, or directly connected with real property, in Australia, the facts provided do not indicate that the supply of your legal services involves work physically performed on goods, or is directly connected with real property, in Australia.

Summary - Item 3

The supplies of your legal services under your arrangements with the solicitor in respect of matters of the non-resident companies (as outlined in this private ruling) that are made to the solicitor (who is acting as principal in relation to a supply), but are provided to the non-resident companies (who are outside Australia) are GST-free under Item 3, and therefore are not taxable supplies.

(B) Where the solicitor is acting as an agent for the non-resident companies in relation to the transaction(s):

The following applies where the solicitor is acting as an agent for the non-resident companies in relation to a transaction(s) with you.

In this circumstance, the supplies are made to the non-resident companies through the solicitor (as their agent). The non-resident companies are the recipients of your supplies of legal services. As the recipient(s) for each supply of your legal services is a non-resident company, Item 2 would need to be considered.

Precondition - Recipient who is not in Australia in relation to the supply

For the supply to be GST-free under Item 2 there is a precondition that the recipient must not be in Australia in relation to the supply when it is done.

Goods and Services Tax Ruling GSTR 2004/7 discusses when an entity is not in Australia when the thing supplied is done. Paragraph 37 of GSTR 2004/7 provides that a non-resident company is in Australia if that company carries on business (or in the case of company that does not carry on business, carries on its activities) in Australia through:

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

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

Paragraph 250 of GSTR 2004/7 states:

We consider that if a non-resident company carries on business at or through a fixed and definite place of its own in Australia and it had carried on, or intends to carry on, its business from such premises by its servants or agents for a sufficiently substantial period of time, that company is in Australia.

Further, paragraphs 277 and 278 of GSTR 2004/7 provide that if a non-resident company has no fixed and definite place of its own in Australia, it may still carry on business in Australia through an agent from some fixed and definite place. The key issue in this kind of situation is whether the non-resident company is itself carrying on business in Australia through a duly appointed agent, or whether the business being conducted is the agent's own business, the non-resident company merely being one of its customers.

You will need to obtain information from each of the non-resident companies to determine if they are carrying on a business (or carries on its activities) in Australia on its own, or through an agent, in Australia at a fixed and definite place for a sufficiently substantial period of time. Various factors to assist in determining whether a non-resident company can properly be regarded as carrying on business in Australia through an agent are outlined in paragraph 281 of GSTR 2004/7 (which is available from the Australian Taxation Office (ATO) website at www.ato.gov.au).

It is necessary to weigh up these various factors, but is not necessarily limited to the factors listed in paragraphs 281 of GSTR 2004/7.

Paragraph 283 of GSTR 2004/7 provides that if an agent has the power to make contracts on behalf of the non-resident company without seeking the company's approval before binding the non-resident to contractual obligations, this is a factor of great importance in establishing that the agent is carrying on the non-resident company's business. Further, paragraph 311 of GSTR 2004/7 provides that if the business of the non-resident company does not involve making contracts for sales, leases or similar, we consider that a non-resident company is in Australia if the agent carries on a material part of the non-resident's business.

In relation to the supply

In addition, if a non-resident company is determined to be in Australia on the basis of the above test, it is necessary to determine if the company is in Australia in relation to the supply, when the supply is done (that is, provided/performed).

Paragraphs 41 and 65 of GSTR 2004/7 provide that a (non-resident) company is in Australia in relation to the supply if the supply is solely or partly for the purposes of the Australian presence, for example, its Australian branch, representative office or agent if it is a non-resident company or the Australian head office if it is an Australian incorporated company. If the supply is not for the purposes of the Australian presence but that Australian presence is involved in the supply, the company is in Australia in relation to the supply, except where the only involvement is minor.

On the basis of the facts available, we consider that if the non-resident companies are merely one of the solicitor's (or the tax agent's) clients, and the solicitor (or the tax agent) is not carrying on a substantial or material part of the non-residents' businesses, that the non-resident companies are not carrying on their businesses in Australia through them (as agents) in relation to your legal services.

Accordingly, where the non-resident companies do not have any other Australian presence (that is, of its own, or through another Australian presence who is involved with the supplies of your legal services), the precondition of Item 2 that the recipient must not be in Australia in relation to the supply when it is done is satisfied.

Paragraph (a) of Item 2

Under paragraph (a) of Item 2, a supply of a thing that is made to a non-resident who is not in Australia when the thing supplied is done is GST-free if the supply is neither a supply of work physically performed on goods situated in Australia, nor directly connected with real property situated in Australia, when the work is done.

The facts provided do not indicate that the supplies of your legal services involve work physically performed on goods, or directly connected with real property, in Australia. Accordingly, the requirements in paragraph (a) of Item 2 are satisfied.

Paragraph (b) of Item 2

Under paragraph (b) of the Item 2, a supply is GST-free if the non-resident acquires your services in carrying on its business, and is neither registered nor required to be registered for GST.

The supplier must be satisfied, on reasonable grounds that the non-resident is not required to be registered for GST before they can treat their supply as GST-free under paragraph (b) of Item 2. Where the supplier is not in a position to be aware of these circumstances, enquiries should be made of the non-resident. The Commissioner accepts that the supplier has reasonable grounds to be satisfied, if the non-resident has provide a signed written statement, declaring that they are not required to be registered. This is only accepted where the supplier has no reasons to believe the statement is not accurate.

Accordingly, where the non-resident companies acquire your legal services for a creditable purpose and are not registered or required to be registered for GST in Australia, the requirements in paragraph (a) of Item 2 are satisfied.

Limitation - Subsection 38-190(3) of the GST Act

Where it has been determined that the precondition and the requirements of either paragraph (a) or (b) of Item 2 is satisfied, it is necessary to consider subsection 38-190(3) of the GST Act which states:

Without limiting subsection (2), a supply covered by item 2 in that table 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.

GSTR 2005/6 provides guidance on the application of subsection 38-190(3) of the GST Act. The term 'provided' is used in subsection 38-190(3) of the GST Act to contrast with the term 'made' in Item 2.

A supply is made to a recipient and provided to another entity if in the performance of the service (or in the doing of some thing) the actual flow of that supply is to an entity that is not the recipient entity with which the supplier made the agreement for the supply. That is, while the contractual flow of the supply is to the recipient entity, the actual flow of the supply is to another entity.

In relation to paragraph 38-190(3)(a) of the GST Act, in the circumstance where the solicitor engages you as an agent on behalf of a non-resident company, the transactions are made to the non-resident company, who is the principal, and the non-resident company is the recipient of your supply of these services. It is taken that the non-resident company has entered into an agreement(s) indirectly with you (as their agent), and that the supply is made to them. Accordingly, paragraph 38-190(3)(a) of the GST Act is satisfied because the supply is made under an agreement entered into indirectly with a non-resident (being the non-resident companies).

We now consider paragraph 38-190(3)(b) of the GST Act. In this circumstance, the facts indicate that you are engaged by the solicitor to provide legal services in respect to matters of the non-resident companies. The legal services and advice are for the benefit of the non-resident companies. The legal services and advice are in relation to certain taxation matters. You also represented the non-resident companies in court. The nature of the court proceedings include defending against certain orders and appeals, together with applications for a stay of summary judgement, and defending against summary judgment in the proceedings. You have also attended informal negotiation meetings with the other party. No officers of the non-resident companies were present in Australia when you provided the legal services and advice.

On the basis of these facts, we consider that the supplies of legal services are provided to the non-resident companies (who have actual use and enjoyment of your legal services), and that there is no agreement(s) with the non-resident companies to provide your legal services to the solicitor and/or the tax agent. On the condition that your legal services are not provided to another Australian presence of the non-resident companies, subsection 38-190(3) of the GST Act will not exclude the supplies of your legal services from being GST-free under Item 2.

Summary - Item 2

Accordingly, where you are engaged by the solicitor, as an agent for the non-resident companies who are not in Australia when you perform/provide your legal (barrister's) services, the supply is provided to the non-resident companies (who are outside Australia), and therefore the supply of your legal services is GST-free under Item 2.

Additional information

In your application for a private ruling you referred to the court case Levy v Bergseng [2008] NSWSC 294 (Levy's case). The decision in Levy's case primarily considered a dispute between a barrister and a solicitor regarding costs pursuant to a costs agreement(s) between the parties. GST was a secondary matter and therefore we consider that the decision has limited scope. The court found that when the legal services were supplied, GST was payable on the supply by an Australian barrister to that Australian solicitor pursuant to a costs agreement(s) made between them. On the basis of the facts of that case, the court determined that the supply, while for the benefit of the non-resident client, was supplied (and provided) to the solicitor and not to the client. As the court did not broadly consider the relationship between a barrister, solicitor and the client, we consider this decision to be too narrow to adopt generally. Further, the Commissioner was not a party to the litigation and therefore is also not bound by this decision. We consider that this decision that the supply of the legal services was taxable is not applicable in your circumstances.

We consider that a costs agreement is merely an agreement about the payment of legal costs and therefore is not conclusive in determining whether a barrister is engaged by a client, a solicitor, or a solicitor as agent for the client. Given that it is the retainer that establishes the relationship of professional engagement and authority, it is this document (if it exists), which should be considered when determining to whom the barristers services are made and provided to. Further (and without the retainer) it is necessary to consider all the other information provided in relation to arrangements between the barrister, solicitor and client. A barrister would usually be engaged by a solicitor as agent for the client. It is not enough that the costs agreement specifically states that the solicitor is the principal, rather than the agent of the client to draw an overall inference of the relationship between the barrister and the client. All information regarding the arrangements between the relevant parties must be assessed.