Edited version of your written advice

Authorisation Number: 1012752984624

Ruling

Subject: GST and agency agreement

Question 1

Will Subdivision 153-A of the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act) apply to the proposed agency arrangement to treat your season membership fees invoiced and collected by the clubs on your behalf as your revenue and not revenue of the clubs and thereby exclude this amount from the club's goods and services tax (GST) turnover?

Answer

Yes

Question 2

If the answer to Question 1 is yes can all clubs that enter into this proposed agency arrangement rely on this ruling?

Answer

Yes

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

• You are a not for profit sporting association and is registered for GST.

• You conduct sport competitions at stadiums in Australia.

• A number of sport clubs, most of which are not registered for GST, enter teams into these competitions.

• A player who wishes to play in the competition must register with the club.

• When a player registers with the club the following is paid:

• a club fee to join a team for that season. This is payable to the club at the start of the season. The amount is set by the club and may vary from club to club:

• a season membership fee to you (game fee) to play at the venue.

New Arrangement

Previous to the current arrangement the season membership fee was paid by the player each week at the venue prior to commencement of the game however this became extremely inefficient as it required manual reconciliations and significant amounts of cash to be handled by you.

The Proposal

It is proposed to amend the arrangements to those outlined below effective for the new season commencing in early 2015 and will continue indefinitely i.e. be effective for all future seasons.

• Your objective is to collect the game fees in advance at the start of the season and it now proposes to appoint clubs as its agent to collect the game fee from the player when the player registers with the club to play for that season. The proposed fee is $xxx per season but is subject to review by you each season

• You appoint the clubs as its agent to collect the game fees for that season (a clause of your constitution allows you to appoint agents to transact any business on your behalf).

• You and the clubs will enter into the agency agreement. The agreement states that the club must collect a certain number of the game fees on your behalf depending on the number of teams the club enters into that season's competitions. The schedule of required number of fee collections is contained at the back of the draft agreement

• Once a club has collected the required number of the fees, on your behalf as per the schedule, it does not have to collect any further season membership fees from players.

• Players will register to play for the club either through the club on-line payment system or manually by paying the required amount in cash or cheque to a representative of the club (usually the Treasurer).

• Via either method of registration the club will collect

• its club season fees- this amount is set by the club and may vary from club to club

• your game fees) of $xxx, on your behalf, as per the agency agreement, until the maximum required number of the fees as per the schedule is collected

• The club will issue an invoice to the player for the club's season fees and it will also issue a tax invoice, on your behalf, for your fee for the season.

• Where the player's registration is via the club's on-line system the invoice will be automatically generated. If the players register manually then a manual invoice will be issued in the same format from a pre-printed invoice book.

• The club will remit to you, at the midpoint of each season, your game fees it has collected on your behalf.

The Agency agreement

Most of the clubs will enter into the agency agreement with you:

You have provided a copy of the agency agreement with a club, the name of the club has been replaced by a general nomination 'the club'. The key points of the proposed agency agreement are as follows:

• A clause of your constitution allows you to appoint agents to transact any business on your behalf

• You appoint the club as your agent to collect your game fees from players who register with the club who accepts the appointment

• The club will issue a tax invoice, on your behalf, for your fee in the format in listed in the agreement. Where the player's registration is via the club's on-line system the invoice will be automatically generated.

• If the players register in-person then a manual invoice will be issued in the same format from a pre-printed invoice book.

• The club will remit to you, at the midpoint of each season, your fees it has collected on your behalf.

• This agreement will continue until terminated by either party. 30 days' notice of termination must be given in writing

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999

Section 9-5

Sub-division 153A

Reasons for decision

Question 1

Summary

Under the proposed arrangement, the Clubs act as an agent in collecting the fee. You are liable for the GST payable on the fee. The Clubs will not include any of your fee in their GST turnover calculation and are not liable for any GST component in the fee.

Detailed reasoning

Goods and Services Tax Ruling GSTR 2000/37 describes what is meant by principal/agent relationship and explains the operation of the GST Act for transactions involving these relationships.

General law and agency relationship

Paragraphs 10 and 11, 12 and 15 of GSTR 2000/37 provide that:

10. An entity may be authorised by another party to do something on that party's behalf. Generally, the authorised entity is called an agent. The party who authorises the agent to act on their behalf is called the principal. ..

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.

12. The principal is bound by the acts of an agent as a result of the authority given to the agent.

In cases of actual authority, the relationship between a principal and an agent is a consensual one so that no party can claim to be a principal's agent unless both parties consent to the creation of the agency…

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

Under the proposed agency agreement, you appoint the clubs (who enters into the agency agreement) as you agents to collect your game fees from players who register with the clubs and the clubs accept the appointment.

It is considered that the proposed agency agreement will create a general law agency relation between you (principal) and the clubs (agents). It follows that your game fee of $xxx that the clubs collect on your behalf deems to be received by and becomes your revenue.

GST and agency relationship

Section 188-10 of the GST Act explains the meaning of 'GST turnover'. Sections 188-15 and 188-20 explain further the two key components of the calculation of GST turnover: the current GST turnover and the projected turnover.

Both sections provide that only the values of all supplies that a club has made be included in the GST turnover calculation.

As the clubs only collect your fee, they are not entitled to any part of your fee and do not make any supply in relation to your fee, the receipt of your fee currently at $xxx will not be included in the GST turnover of the clubs.

Paragraph 23 of GSTR 2000/37 explains the requirement in section 153-15 of the GST Act:

Documentary requirements

Under the basic rules about tax invoices and adjustment notes, a tax invoice for a taxable supply or an adjustment note must be issued by a principal who makes supplies through an agent However, Subdivision 153-A provides that the principal's obligations are complied with if the agent issues tax invoices and adjustment notes on behalf of the principal for those supplies made by the principal through the agent.

Attribution

You are liable to remit the GST component of your game fee to the Tax Office. The clubs are not liable for any GST payable on your fee that they collect on your behalf. The Clubs are not required to report any collection made on your behalf under the agency agreement with WBA for tax purposes.

Question 2

Summary

You and the clubs that entered into the proposed agency agreement can rely on this private ruling.

Detailed reasoning

Section 359 of the Taxation Administration Act 1953 (TAA) explains the operation of a private ruling for tax purposes.

The Commissioner may, on application, make a written ruling on the way in which the Commissioner considers a relevant provision applies or would apply to you in relation to a specified *scheme. Such a ruling is called a private ruling.

A *private ruling may cover any matter involved in the application of the provision.

A *private ruling must state that it is a private ruling.

A *private ruling must identify the entity to whom it applies and specify the relevant *scheme and the relevant provision to which it relates.

Following section 359 of the TAA, a private ruling only applies to the rulee (the client section of the Private Ruling Application NAT 13043-07.2014).

Law and Practice Statement PSLA 2008/3 explains the forms of advice and guidance the Australian Taxation Office (ATO) provides about the application of laws administered by the Commissioner.

The following key points are reproduced as follows:

Private ruling

A private ruling is provided in writing and applies to a particular taxpayer in relation to their specific circumstances. It is based on the facts relevant to the scheme defined in the taxpayer's ruling application, and on any assumptions that are made. In effect, it allows a taxpayer to be notionally assessed on an existing or proposed transaction.

A taxpayer can choose not to rely on the ruling, and can have the ruling reviewed if they disagree with it.

Paragraph 87 of the PSLA 2008/3 provides that usually the ruling applies only to the entity in respect of whom the application was made.

You have requested to add the names of the clubs that will enter into the proposed arrangement with you to the Private ruling application. You and those clubs are the entities to which this private ruling applies.

You and those clubs can rely on this private ruling as explained above. Please note that the private ruling only applies in the circumstances set out in the 'Relevant facts and circumstances' section of the ruling.