Edited version of your written advice

Authorisation Number: 1012764864008

Ruling

Subject: GST and creditable acquisitions

Question

Do you make an acquisition of a taxable supply when a customer (Owner) assigns the right to create Small-scale Technology Certificates (STCs) to you?

Answer

No, as the Owner is not registered or required to be registered for GST, you do not make an acquisition of a taxable supply when the Owner assigns the right to create the STCs to you.

Relevant facts and circumstances

You are registered for GST and carry on an enterprise as an authorised distributor (as wholesaler and retailer) of specific products.

In general a customer (Owner) who acquires certain eligible installations of specific products (Eligible Products) has the ability to assign rights to create STCs. The transaction that is the subject of this private ruling is your acquisition of the rights to create STCs from the Owner.

The Owner is not registered or required to be registered for GST.

An Owner will acquire the Eligible Product from a retailer (Retailer). The Retailer will install the Eligible Product in the Owners home either by itself or engage a certified third party (Installer) to install the Eligible Product. For the purposes of this response the Retailer is the installer.

The Retailer, acting as an agent for you, provides the Assignment Form to an Owner for the Owner to assign the right to create STCs to you.

As part of this ruling request you have provided a copy of the Assignment Form which sets out the following:

• 'Owner Details'. This section includes the name, postal address, contact details and installation address of the customer (Owner) who is having the specific product installed.

• 'System Details'. This section specifies the brand, model details and other information pertaining to the eligibility of 'Specific Credits' in respect of the specific product installed.

• 'CEC Installer Section'. This section outlines the name, phone number, address and accreditation number of the installer, designer and electrician in respect of the specific product installed.

• 'Mandatory written statement by the CEC Installer and Designer'

• 'Mandatory Declaration' which is signed by the 'Owner' and 'Agent/Installer'. This declaration provides:

• I am the legal owner of the above mentioned small generation unit (SGU) and assign the right to create STC's to you for the period stated above, commencing at the date of installation.

• I further declare that the accredited CEC installer named on this form physically attended the installation of the unit.

• 'Customer GST Declaration' - which requires the Owner of the SGU to disclose if they are registered for GST and (if relevant) their business name and ABN.

Upon signing of the Assignment Form the Owner will receive a point of sale discount (equivalent to the installation amount) from the Retailer. This discount amount is the consideration received by the Owner for the supply of the right to create the STCs.

Under this arrangement the Retailer:

• invoices the Owner for their supply of the Eligible Product; and

• provides the payment to the Owner (represented as the discount) for the right to create the STCs; and

• upon invoicing will offset the payment due for the Eligible Product against the payment for the right to create the STCs. This effectively reduces the balance payment due to the Retailer.

As a result of the Retailer (as agent for you) providing the payment (represented as the discount amount) for the supply by the Owner, the Retailer will recover this amount by receiving a credit note or cash amount from you.

For the purposes of this ruling request you have provided a representative copy of a completed Assignment Form and invoice issued by a Retailer.

The completed Assignment Form shows that the Owner is not registered for GST.

For the purposes of this ruling request the Retailer and/or Installer are registered for GST.

Relevant legislative provisions

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

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

Reasons for decision

Section 11-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states:

You make a creditable acquisition if:

(a) you acquire anything solely or partly for a *creditable purpose; and

(b) the supply of the thing to you is a *taxable supply; and

(c) you provide, or are liable to provide, *consideration for the supply; and

(d) you are *registered, or *required to be registered.

(*Asterisked items are defined terms in section 195-1 of the GST Act)

In this case you are acquiring the right to create STCs, however for the purposes of making a creditable acquisition paragraph 11-5(b) of the GST Act requires that 'the supply of thing to you is a taxable supply'.

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

• it makes a supply for consideration,

• the supply is in the course or furtherance of an enterprise;

• the supply is connected with Australia; and

• the entity is registered or required to be registered for GST; and

• the supply is not a supply that is GST-free or input taxed.

Therefore it is important to identify who is making the supply to you to determine whether the requirements of section 9-5 of the GST Act would be met.

In this case the transaction involves more than two parties (sometimes referred to as a tripartite arrangement) consisting of:

• you as a registered agent trading in STCs

• the Owner as owner of the Eligible Product who is entitled to assign the right to create the STCs at the time that the Eligible Product is installed, and

• the Retailer/Installer that installs the Eligible Product.

The Commissioner has considered the concept of 'supply' and 'acquisition' in the context of tripartite arrangements in Goods and Services Tax Ruling GSTR 2006/9, Goods and services tax: supplies (GSTR 2006/9). Relevantly at paragraph 116 GSTR 2006/9 explains that the GST consequences of tripartite arrangements turn on identifying:

• one or more supplies

• the consideration (a payment, act or forbearance)

• a nexus between the supply and the consideration, and

• the entity to whom the supply is made.

GSTR 2006/9 at paragraph 119 explains that the starting point in analysing any transaction in order to determine who is making a supply of what to whom is to examine the agreements.

In this case there are at least two supplies that can be identified which are described below.

The first supply is the supply by the Retailer to the Owner of the Eligible Product. The information provided indicates that the arrangement is such that the Retailer offers what is referred to as a 'point of sale discount' to the Owner in respect of the Eligible Product on the condition that the Owner assigns the right to create the STCs to you. Under the arrangement the 'point of sale discount' amount is recovered by the Retailer at a later stage by way of receiving a credit note or cash payment from you.

The second supply is the supply of the right to create the STCs by the Owner to you, as evidenced by the Assignment Form.

It may be argued that there is a third supply, which is the provision of the Assignment Form by the Retailer to you and/or the Owner. However it is considered that the payment you make (by way of providing a credit note or cash amount to the Retailer) has no nexus with that supply.

This is supported by the fact that if the Owner did not assign the right to you (which is a supply) to create the STCs as evidenced by the Assignment Form, the Retailer would not present the document to you and the arrangement has no effect.

Therefore, the actual supply that makes the arrangement between the Owner, Retailer and you work is the fact that the Owner assigns the right to create the STC's to you. If this was not the case, the Retailer would not offer the discount and the Owner would be liable to pay the full amount for the Eligible Product. The act of the assignment of rights by the Owner ensures that the Owner receives the 'discount' on the Eligible Product and the Retailer will recover this amount at a later stage, for the supply of the right made by the Owner to you.

Accordingly it is considered that the payment made by you (by way of providing the credit note or cash), is not for an acquisition from the Retailer but instead is consideration for the supply of the rights to create the STCs made by the Owner to you.

On this basis if the Owner is not registered or required to be registered for GST, the right to create the STCs will not be a taxable supply to you. Accordingly, you are not making an acquisition of a taxable supply for the purposes of section 11-5(b) of the GST Act. Consequently the acquisition you make will also not satisfy the requirements for a creditable acquisition.

Additional information

If the Owner is registered or required to be registered for GST, and they supply you with the rights to create the STC's in the course or furtherance of an enterprise that they carry on, you would make an acquisition of a taxable supply. Therefore you would also make a creditable acquisition of the right to create STCs where the requirements of section 11-5 of the GST Act are met.