Edited version of your private ruling

Authorisation Number: 1012542963386

Ruling

Subject: GST and search information fees

Question

Is the fee payable by a client to the entity for search information provided, consideration for a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) 1999 (GST Act)?

Answer

Yes, the fee payable by a client to the entity for search information provided is consideration for a taxable supply under section 9-5 of the GST Act unless there is an agency relationship between the entity and the relevant government department.

Relevant facts and circumstances

The entity is registered for goods and services tax (GST).

The entity has entered into licensing agreements with various government departments to enable it access information from the departments.

The entity's clients incur a fee for the service and information that it supplies to them. The entity issues invoices to its clients for the fee which is comprised of the following two components:

· an 'information fee' which is levied by the government department (the cost of obtaining information from their database), and

· a 'delivery fee' which is levied by the entity to cover its administrative costs.

The entity remits the information fee to the relevant government department on a monthly basis.

The entity is of the view that it does not make supplies on behalf of the government departments to its clients. It is also of the view that all the licensing agreements that it has entered into stipulate that they do not create or imply an 'agency relationship' or that it acts as an agent for the department.

The entity provided copies of some of the licensing agreements it has entered into.

Relevant legislative provisions

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

A New Tax System (Goods and Services Tax) 1999 section 9-70

A New Tax System (Goods and Services Tax) 1999 Division 81

A New Tax System (Goods and Services Tax) Act 1999 section 81-5

A New Tax System (Goods and Services Tax) Act 1999 section 81-10

A New Tax System (Goods and Services Tax) Act 1999 subsection 81-10(5)

A New Tax System (Goods and Services Tax) Act 1999 section 81-15

A New Tax System (Goods and Services Tax) Act 1999 section 195-1

Income Tax Assessment Act 1997 section 995-1

Reasons for decision

Under section 9-5 of the GST Act, an entity makes a taxable supply if:

· it makes the supply for consideration

· the supply is made in the course or furtherance of an enterprise that the entity carries on

· the supply is connected with Australia, and

· the entity is 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.

Where an entity makes a taxable supply, section 9-70 of the GST Act provides that the amount of GST payable is 10% of the value of the taxable supply. Generally, the value of the supply is the total GST exclusive consideration received for that supply.

The entity's supply to its clients satisfies the requirements of section 9-5 of the GST Act and as such, is making a taxable supply to its clients.

The entity has entered into licensing agreements with government departments (licensors) which enables it to access search information from the relevant departments under the terms and conditions set out in those agreements.

The fee that the clients pay to the entity comprises of two components:

· an 'information fee' levied by the government department for the cost of obtaining information from their database which the entity remits to the relevant government department on a monthly basis, and

· a 'delivery fee' which is levied by the entity to cover its administrative costs.

It is necessary to establish whether the entire fee charged by the client is consideration for its supply of search information. This would depend on whether the supply by the licensors is to the entity or to the entity's clients. The question that arises is whether the entity is making a supply in its own right or as agent of the licensors when it supplies the search information to its clients.

The term 'agent' is considered in Goods and Services Tax Ruling GSTR 2000/37 on agency relationships and the application of the law which states at paragraph 11:

For commercial law purposes, an agent is a person who is authorised, either expressly or impliedly, by a principal to act for that principal so as to create or affect legal relations between the principal and third parties.

Paragraph 28 of GSTR 2000/37 states factors that indicate an agency relationship and states:

In most cases, any relevant documentation about the business relationship, the description used by the parties and the conduct of the parties establish the existence of an agency relationship. Therefore, the following factors may show that you are an agent under an agency relationship, although no single factor (by itself) is determinative:

· any description of you as an agent, having authority to act for another party, in an agreement (expressed or implied) between you and the other party;

· any exercise of the authority that you are given to enter into legal relations with a third party;

· whether you bear any significant commercial risk;

· whether you act in your own name;

· whether you are remunerated for your services by way of commissions and whether you are entitled to keep any part of your remuneration secret from another party; and

· whether you decide the price of things that you might sell to third parties.

To determine whether the entity is an agent of the licensors, we have examined the licensing agreements that were provided.

It is clear that the purpose of some of the agreements is to appoint the agent as a reseller of the search information rather than as an agent of the licensors. The licensors under these agreements have no intention to be contractually bound to the entity's clients/end users through the actions of the entity. The licence to access or purchase the search information is given expressly to the entity as principal in order for it to carry on its business of resupplying the information to its clients.

As the supply of the search information is made by the entity to its clients and not by the licensors to the entity's clients, the 'information fee' component that is paid to the entity by its clients form part of the total consideration that is paid by them. Therefore, the entire fee collected by the entity is for the taxable supply that it makes to its clients under section 9-5 of the GST Act. This would be the case even if the supply of the information by the licensors to the entity is a supply to which Division 81 of the GST Act applies and no GST is payable on that supply. This is because the payment for the search information loses its character as an Australian tax, fee or charge when the information is on-supplied by the entity to its clients. The supply of the search information by the entity to its clients, as principal, is a separate supply from that of the licensors to the entity. (See below for information on Division 81 of the GST Act).

Some of the agreements stipulate that the entity is appointed as an agent of the licensors and is paid a commission for its services.

Paragraph 28 of GSTR 2000/37 explains that in most cases, any relevant documentation about the business relationship, the description used by the parties and the conduct of the parties establish the existence of an agency relationship. It lists several factors and explains that no single factor is determinative. Any description of an entity as an agent, having authority to act for another party, in an agreement (expressed or implied) between the entity and the other party may indicate the existence of an agency relationship.

Where the entity is an agent of the licensor and merely collects the payment from its clients and performs other administrative functions as a conduit in the supply of the search information, then the 'information fee' payable by the clients will not form part of the consideration for the taxable supply that the entity makes to its clients. This fee may be covered under Division 81 of the GST Act as an Australian fee or charge.

Additional information - operation of Division 81 of the GST Act

Division 81 of the GST Act was amended with effect from 1 July 2011 to allow entities to self assess the GST treatment of a payment of an Australian tax or an Australian fee or charge in accordance with certain principles.

Under the transitional arrangements, those Australian taxes, fees and charges that were not subject to GST under the A New Tax System (Goods and Service Tax)

(Exempt Taxes, Fees and Charges) Determination 2011 (No. 1 ) (Treasurer's Determination) remained not subject to GST until 30 June 2013 and thereafter are assessed under Division 81 as amended.

The GST treatment of all Australian taxes or Australian fees or charges that were not listed in the Treasurer's Determination are self assessed under the changes made to Division 81 of the GST Act with effect from 1 July 2011.

Section 81-5 of the GST Act considers the effect of the payment of a tax. This section is not relevant to the issue in this case and is, therefore, not discussed.

Of relevance to this case are sections 81-10 and 81-15 of the GST Act which consider the effect of certain fees and charges. In particular, subsection 81-10(5) of the GST Act considers fees and charges that relate to information and record-keeping. It states:

81-10 Effect of payment of certain fees and charges

(1) …

(2) …

(3) …

(4) …

Fees or charges relating to information and record-keeping etc.

(5) This subsection covers a fee or charge paid to an *Australian government agency if the fee or charge relates to the agency doing any of the following:

(a) recording information;

(b) copying information;

(c) modifying information;

(d) allowing access to information;

(e) receiving information;

(f) processing information;

(g) searching for information.

81-15 Other fees and charges that do not constitute consideration

The regulations may provide that the payment of a prescribed *Australian fee or charge, or of an Australian fee or charge of a prescribed kind, or the discharging of a liability to make such a payment, is not the provision of *consideration.

The term 'Australian fee or charge' is defined in section 195-1 of the GST Act as:

Australian fee or charge means a fee or charge (however described), other than an Australian tax, imposed under an *Australian law and payable to an *Australian government agency.

Australian Law

The term 'Australian law' is defined in section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) and relevantly includes a State law. It includes acts and law making powers which are delegated by parliaments, such as regulations, by-laws, proclamations and orders made under Acts.

Australian Government Agency

The term 'Australian government agency' is defined by section 995-1 of the ITAA 1997. 'Australian government agency' means:

· the Commonwealth, a State or Territory; or

· an authority of the Commonwealth or of a State or a Territory.

For the purposes of this Ruling, it is accepted that the government departments that the entity enters into agreements with for the information would come within the definition of an Australian government agency.

In circumstances where there is an agency relationship between the entity and the relevant government agency, the 'information fee' paid for the search information may be covered subsection 81-10(5) of the GST Act and no GST is payable.

Where there is no agency relationship between the entity and the relevant government department, the entire fee that is paid to the entity by its clients is for a supply by the entity to its clients. This is a separate supply from that of the government departments/licensors to the entity. As explained above, the payment for the search information loses its character as an Australian tax, fee or charge when the information is on-supplied by the entity to its clients.