Edited version of your written advice

Authorisation Number: 1013026103156

Date of advice: 1 June 2016

Ruling

Subject: GST and agency

Question 1

Is Entity A acting as agent of Entity B when collecting and banking fees for Entity B?

Answer

Yes. Entity A is acting as agent of Entity B when collecting and banking fees for Entity B.

The ATO's view on agency relationships is provided in Goods and Services Tax Ruling GSTR 2000/37 Goods and Services Tax: agency relationships and the application of the law (GSTR 2000/37). Paragraph 11 of GSTR 2000/37 provides that an agency relationship can exist either expressly or impliedly and paragraph 28 of GSTR 2000/37 list various factors that would indicate an agency relationship. Under the agreement, Entity A is authorised to collect and bank client fees for Entity B before remitting the proceeds net of administration services fees to Entity B. This will accord with an agency relationship.

It is to be noted however, the supply of the administration services by Entity A to Entity B is a separate supply from the services provided by Entity B to its clients. This supply by Entity A to Entity B is made for consideration, in the course of furtherance of its enterprise, and is connected with the indirect tax zone. As Entity A is registered for GST, all the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) are met and therefore the supply of the administration services by Entity A to Entity B is a taxable supply and subject to GST.

Question 2

Is Entity A required to issue a recipient created tax invoice (RCTI) to Entity B?

Answer

No.

Subsection 29-70(3) of the GST Act provides that a RCTI is a class of invoice that the Commissioner has determined in writing may be issued by the recipient of the tax supply. Recipient in relation to a supply is defined in section 195-1 of the GST Act as meaning the entity to which the supply is made.

In this case, Entity B does not provide any services to Entity A and therefore Entity A is not a recipient of any supply from Entity B. Thus Entity A cannot issue a RCTI to Entity B. In addition there is no provision within the GST Act, which would allow the Commissioner of Taxation to make a special determination to allow Entity A to use an RCTI.

However, as Entity A makes a taxable supply of administration services to Entity B for which it receives the administration services fees, Entity A will need to issue Entity B with a tax invoice, at least within 28 days of Entity B requesting one.

Relevant facts and circumstances

Entity A is registered for GST and provides administration services to Entity B.

Entity B operates its business from the facility provided by Entity A and enters into an agreement with Entity A in relation to the facility and administration services provided by Entity A to Entity B.

Entity B is not an employee of Entity A and is registered for GST in its own right.

Entity B is appropriately qualified to be accepted as a recognised professional in its field.

Under the agreement, Entity A is responsible for the provision of rooms, equipment, supplies, office administration systems and procedures, collection of fees from clients and other matters in relation to the operation of the facility.

As consideration for the provision of these services Entity A receives an administration services fee calculated as a percentage of client fees received by Entity B.

Entity A collects all the client fees for the whole business and banks it into an account in Entity A's name.

On a fortnightly basis, after establishing the correct figures, Entity A remit the client fees net of administration services fees to Entity B.

Entity A does not provide any services to Entity B's clients.

Entity B does not provide any services to Entity A.

Relevant legislative provisions

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

Section 9-5

Subdivision 153-A