Edited version of your private ruling

Authorisation Number: 1012437189892

Ruling

Subject: GST and taxable supplies of services

Question 1

Are the supplies of agent services made by you to a government department taxable supplies on which goods and services tax (GST) is payable?

Answer

Yes, the supplies of agent services made by you to a government department are taxable supplies on which GST is payable.

Relevant facts and circumstances

You are a not for profit charitable institution and are registered for GST. You account for GST on a cash basis in quarterly tax periods. You carry on an enterprise which involves making supplies of agent services to a government department.

You entered into an agreement with a government department (department) to provide them with agent services.

You treated the supplies of these agent services as input taxed supplies. Consequently, no GST was remitted to the ATO in relation to those supplies of services and no input tax credits were claimed.

You provided copies of two documents which indicate that payments made to you by the department in relation to the agent services for an earlier year did not include a GST component whilst the payments made to you from a subsequent year did include a GST component.

You provided a copy of a third document indicating that each of the twelve payments made by the department in relation to agent services for the current financial year included a GST component.

You also provided the following documents:

o A letter from the department accepting your offer to provide agent services for the current financial year.

o An extract setting out the terms of a contract for an earlier year.

o A document inviting you to be a provider of agent services for the current financial year.

o A document in which you offer the department agent services for the current financial year in accordance with the terms and conditions of the contract. That document provides that a contract is formed upon acceptance of the offer, by the department issuing a letter of acceptance to the contractor (you). You will be paid for the services in the manner specified in the tax invoice/invoice.

o A document entitled 'Remittance Advice'.

o A letter concerning agent services to the department for an earlier financial year.

o A document that contains the agent services general terms and conditions for the current financial year (T&Cs) with a schedule document.

The extract from an earlier financial year's T&Cs provides that:

o The department will pay the contractor the contract price as specified in the schedule.

o The contract price has been calculated, and is quoted and provided for, on a GST inclusive basis and the contractor is not entitled to recover any additional amount on account of GST from the department.

The T&Cs define the terms 'contract price to mean the fees and charges payable to the Contractor by the department under the Contract, as set out in the Offer and any Special Conditions; and 'GST' to mean GST payable under the GST Act and associated taxation legislation.

The T&Cs also provides that the department must pay the contractor the contract price, in the manner specified in the contract, for the provision of the services by the contractor and that the receipt of a tax invoice/invoice in the form contained in the offer is sufficient for the department to initiate payment.

Additionally, the T&Cs provide that:

o The contract price is the GST inclusive amount as specified in the contract where the agent is registered for GST.

o If the contractor is not registered for GST, the contract price will be the GST exclusive amount as specified in the contract.

o The contractor warrants that it has complied with GST requirements including GST registration if applicable and it will advise the department immediately in writing in the event that its GST registration status changes.

Your representative signed the offer and at that date you warranted that you were registered for GST.

You advised that you are paid an hourly rate to cover wages of staff and overheads. You registered for GST some years after you first contracted with the department to provide agent services.

You confirmed that the payments made to you in relation to the agent services are greater than 50% of the GST inclusive market value of the supply and greater than 75% of the cost of 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 9-40,

A New Tax System (Goods and Services Tax) Act 1999 Section 11-5,

A New Tax System (Goods and Services Tax) Act 1999 Division 38,

A New Tax System (Goods and Services Tax) Act 1999 Section 38-250,

A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-250(1),

A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-250(2),

A New Tax System (Goods and Services Tax) Act 1999 Division 40,

A New Tax System (Goods and Services Tax) Act 1999 Subdivision 40-F,

Reasons for decision

Subsection 7-1(1) of the GST Act provides that GST is payable on taxable supplies.

Under section 9-5 of the GST Act, a taxable supply is made if:

· you make a supply for consideration,

· the supply is made in the course or furtherance of an enterprise that you carry on,

· the supply is connected with Australian, and

· 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.

On the facts provided, you contracted to make supplies of agent services to the department for consideration (contract payments). The supplies of services are made in the course or furtherance of an enterprise that you carry on. Furthermore, the supply is connected with Australia and you are registered for GST.

The issue that arises in relation to section 9-5 of the GST Act is whether and to what the supplies of agent services you made since registering for GST and continue to make to the department are GST-free or input taxed.

You advise that you have been making supplies of your agent services since registering for GST and treated those supplies of services as input taxed supplies.

Input taxed supply

Division 40 of the GST Act provides for supplies that are input taxed. If a supply is input taxed no GST is payable on the supply and there is no entitlement to an input tax credit for anything acquired or imported to make the supply (see section 11-5 of the GST Act in relation to creditable acquisitions).

Subdivision 40-F of the GST Act provides that fund-raising events conducted by charities are input taxed. However, this subdivision has no application to the supply by you of agent services to the department as your supplies do not meet the definition of fund-raising events.

Based on the facts you have provided, the supplies of agent services are not input taxed under any other provisions of Division 40 of the GST Act.

GST-free supply

Division 38 of the GST Act provides for supplies that are GST-free. If a supply is GST-free no GST is payable on the supply and an entitlement to an input tax credit for anything acquired or imported to make the supply is not affected.

In particular, section 38-250 of the GST Act provides that a supply is GST-free if:

· the supplier is an endorsed charity; and

· the supply is for consideration that:

· if the supply is not a supply of accommodation - is less than 50% of the GST inclusive market value of the supply (subsection 38-250(1) of the GST Act); or

· if the supply is not a supply of accommodation - is less than 75% of the cost of supply (subsection 38-250(2) of the GST Act).

Since you have advised that your supplies of agent services to the department are greater than 50% of the GST inclusive market value or greater than 75% of the cost of supply, section 38-250 of the GST Act has no application to those supplies.

Based on the facts you have provided, the supply of agent services are not GST-free under any other provision of Division 38 of the GST Act. Information on not for profit and charity organisations can be found at the ATO website (http://www.ato.gov.au/nonprofit/).

It follows that as all the supplies of agent services you make to the department satisfy the requirements of a taxable supply under section 9-5 of the GST Act, those supplies are taxable supplies on which GST is payable. As provided by section 9-40 of the GST Act you are liable for GST on any taxable supply you make.