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Ruling

Subject: GST and public transport

GST and the supply of public transport services

Issue 1

Question 1

What is the appropriate method of accounting for GST in relation to the supply of public transport tickets by the transport ticket sellers?

Advice/Answers

The entity that sells the tickets is the entity that is responsible for accounting for the GST payable on those ticket sales. However, where the tickets are sold by an agent on behalf of a transport provider and the transport provider must account for the GST payable at the time it receives the consideration from the agents.

Issue 2

Question 1

Are the public transport tickets valid tax invoices for the purposes of subsection 29-70(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Advice/Answers

Yes, the tickets are valid tax invoices.

Relevant facts

The entity (you) is registered for GST.

The Public Transport entity, is a government entity responsible for establishing and managing an electronic ticketing system for public transport users and operators.

Public transport tickets are sold in different ways

Currently each of the entities that sell the tickets account for the GST on the tickets sold even though the transport service may be supplied by a different entity.

There are different entities involved in the provision of transport services and the sale of the tickets to passengers.

Passengers using tickets are entitled to travel between two points. Passengers using multi transport tickets use their tickets for unlimited travel within their "zone"

Tickets are sold through a large number of outlets.

Tickets are sold by public transport ticket outlets and at retail outlets (e.g. newsagents, convenience stores)

Ticket sellers either pay cash on delivery or after month end. The consideration paid by the ticket sellers is net of their commission.

The transport provider receives and accounts for the GST in the period the tickets were sold to customers and in the relevant tax period.

The payment by the ticket sellers is net of the GST inclusive commission the ticket sellers receive

The tickets that are provided to the transport users have all the necessary information for a valid tax invoice.

The primary purpose of issuing the tickets is to allow customers to use the transportation services.

Some customers require a tax invoice so tickets are issued as tax invoices even for low value supplies.

Passengers must have a valid ticket to travel on the transport service provided.

The following information is displayed on the ticket:

· Name and ABN of the Supplier

· The words "tax invoice"

· The date the ticket/invoice was issued

· The supply includes GST and the amount of GST

· Total value of the supply

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 subsection 7-1(1)

A New Tax System (Goods and Services Tax) Act 1999 section 9-5

A New Tax System (Goods and Services Tax) Act 1999 section 9-10

A New Tax System (Goods and Services Tax) Act 1999 section 29-70

Explanatory Memorandum to the A New Tax System (Goods and Services Tax) Bill 1998

Reasons for decision

Issue 1

Question 1

Summary

When the entity that sells the ticket is a transport provider, that entity is the entity that is responsible for accounting for the GST payable on those ticket sales.

Tickets are also sold through agents. Where the tickets are sold by the agents, the principal must account for the GST payable at the time it receives the consideration from the agents.

Detailed reasoning

Tickets

Subsection 7-1(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that GST is payable on taxable supplies and taxable importations.

Section 9-5 of the GST Act provides that you make a taxable supply if (a) you make a supply for consideration; (b) the supply is made in the course or furtherance of an enterprise that you carry on; (c) the supply is connected with Australia and (d) you are 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.

From the facts given, the requirements of paragraphs 9-5(b), (c) and (d) of the GST Act are satisfied because the sales of the transport tickets are made in the course of a business carried on; the supply is made through an enterprise carried on in Australia; and the transport providers that sell the tickets are registered for GST.

There are no provisions under the GST Act to make the sales of the transport GST-free or input taxed.

What remains to be determined is whether the transport providers are making a supply for consideration at the time when the tickets are sold to the prospective passengers.

Transport Tickets for use on all transport services

These tickets are different to the tickets referred to above in that this type of ticket entitles the ticket holder to travel on any of the modes of transport.

From the facts given, upon the sale of a ticket consideration is provided and the requirements of paragraphs 9-5(b), (c) and (d) of the GST Act are satisfied because, the sales of the tickets are made in the course of a business carried on in Australia; and each of the entities that sell the tickets are registered for GST.

There are no provisions under the GST Act to make the sales of the transport GST-free or input taxed.

What remains to be determined is whether the ticket sellers are making a supply for consideration at the time when the tickets are sold to the prospective passengers.

Supply

In Commissioner of Taxation v Reliance Carpet Co Pty Ltd [2008] ATC 20-028 involving a forfeited deposit in a real estate transaction, the High Court stated that a vendor makes a supply when it enters into a contract consisting of the obligations it undertakes. At paragraph 36 the Court states:

36. In the present case, and as remarked earlier in these reasons, whatever other characteristics were attributable to the deposit, it was held as security for the obligation of the purchaser duly to complete the Contract.

In Reliance, the High Court found that there was a supply notwithstanding the property settlement did not occur. Similarly, on the sale of a transport ticket there is a supply of the obligation to provide the transport services. This has the effect of requiring attribution of the GST even if the ticket purchaser does not subsequently make use of the transport service to which they are entitled.

In a recent Administrative Appeals Tribunal (AAT) decision, Qantas Airways v Federal Commissioner of Taxation 2010 ATC 10-164, the tribunal states:

There is accordingly an argument that at the time of the creation of the rights and the entering into of the obligations, which will generally be at the time, or shortly after, a reservation is made, there is a supply. Certainly it will be no later than the time of payment. The mutual; promises or the payment will provide consideration.

The AAT found that at the time a reservation was made and no later than the payment of the fare there is a supply even where the passenger does not undertake the travel. We consider that the sale of a transport ticket gives rise to a supply even if the ticket purchaser does not make use of the transport service. It therefore follows that the appropriate entity to pay the GST is the entity that sells the ticket.

We also note that in the context of Division 100, the Explanatory Memorandum notes that tickets that are not vouchers are subject to GST at the time of supply of the ticket (not at the time the ticket is used).

1.98 Division 100 will not cover things which are for a specified good or service but which may also state a price or value of the good or service, such as a bus ticket, a movie ticket or an airline ticket. These types of supplies entitle the holder to a specified service such as a set number of trips on a bus or travel on a particular date over a particular period (for example a bus pass). These types of supplies are subject to the normal rules and subject to GST at the time of the supply of the ticket etc.

Ticket sales by agents

Agents sell transport tickets as agents for the transport provider. The tickets are provided to the agents and an invoice issued to the agents at the time the tickets are delivered. The agents either pay on delivery of the tickets or at month end. The agents pay for the tickets net of their commission and account for GST on their agency service.

The transport provider accounts for GST on the sales made by the agents and claims input tax credits for its acquisition of the commission agency services. The transport provider will attribute agency ticket sales to the period in which it receives payments from ticket resellers.

Issue 2

Question 1

Summary

Yes, the tickets are valid tax invoices when they meet the requirements of Subsection 29-70 of the GST Act.

Detailed reasoning

Subsection 29-70 of the GST Act sets out the requirements of a tax invoice and states:

29-70 Tax Invoices

(1) A tax Invoice is a document that complies with the following requirements:

(a) it issued by the supplier of the supply or supplies to which the document relates, unless it is a recipient created tax invoice (in which case it is issued by the recipient);

(b) it is in the approved form;

(c) it contains enough information to enable the following to be clearly ascertained:

(i) the supplier's identity and the supplier's *ABN;

(ii) 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;

(iii) what is supplied, including the quantity (if applicable) and the price of what is supplied;

(iv) the extent to which the document relates is a *taxable supply;

(v) the date the document is issued;

(vi) the amount of GST (if any) payable in relation to each supply to which the document relates;

(vii) if the document was issued by the recipient and GST is payable in relation to any supply---that the GST is payable by the supplier;

(viii) such other matters as the regulations specify;

(d) it can be clearly ascertained from the document that the document was intended to be a tax invoice or, if it was issued by the recipient, a recipient created tax invoice.

*To find definitions of asterisked term, see Dictionary, starting at section 195-1.

The train ticket displays the following information:

· Name and ABN of the supplier;

· The words "tax Invoice";

· The date the ticket/invoice was issued;

· The supply includes GST and the amount of the GST; and

· Total value of the supply.

The tickets are valid tax invoices as they have sufficient information to clearly ascertain that the document was intended to be a tax invoice.

The remainder of the tickets issued for the other modes of transport will also meet the requirements of a valid tax invoice where they have the same information that is displayed on the tickets.

As stated in issue one above, there is a supply at the time a ticket is sold. Accordingly, the ticket is a valid tax invoice provided that it includes the required details of the transport service provider that sells (either directly or through an agent) the ticket.