Edited version of your written advice

Authorisation Number: 1013137065861

Date of advice: 7 December 2016

Ruling

Subject: GST, importations, resident agent and agent services to a non-resident

Question 1

Does the agency arrangement between Entity A and the owners meet the requirements of Division 57 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) where the owner of the good is registered for GST or where the owner is not registered, but is required to be registered for GST in the indirect tax zone (Australia)?

Answer

Yes, provided the non-resident is registered or required to be registered for GST in Australia and an agreement is entered into where the arrangement is to exceed one year.

Question 2

Does the non-resident owner of the good make a taxable importation when the good first enters Australia? If so, who is liable for the GST payable?

Answer

Yes, where an entity imports a good as the owner or an agent they will be liable for any GST on a taxable importation.

Question 3

Can Entity A, as agent for the owner of the good, defer the GST payable on the taxable importation?

Answer

Yes, provided Entity A acts as a resident agent and has registered in the approved form to defer GST on taxable importations.

Question 4

Is Entity A, as agent, entitled to claim input tax credits in relation to the taxable importation of a good?

Answer

Yes, provided Entity A acts as a resident agent for the non-resident and the non-resident makes a creditable importation. Where the intention is that the importation is for a private or domestic purpose it will not be for a creditable purpose.

Question 5

Will the departure and re-entering of a good be a re-importation?

Answer

Yes, however it may not be a taxable importation if it is a non-taxable importation that satisfies section 42-10 of the GST Act.

Question 6

Can Entity A, as agent, claim input tax credits in relation to acquisitions it makes on behalf of non-residents?

Answer

Yes, provided Entity A acts as a resident agent for the non-resident and the non-resident makes a creditable acquisition.

Question 7

Can Entity A claim input tax credits relating to the acquisition of goods used in the repair, renovation, modification or treatment of a non-resident's good?

Answer

Yes, provided Entity A acts as a resident agent for the non-resident and the non-resident makes a creditable acquisition.

Question 8

Can Entity A claim input tax credits relating to the acquisition of services used in the repair, renovation, modification or treatment of a non-resident's good?

Answer

Yes, provided Entity A acts as a resident agent for the non-resident and the non-resident makes a creditable acquisition.

Question 9

Can Entity A claim input tax credits in relation to acquisition it makes in its own capacity in providing its good management service?

Answer

Yes.

Relevant facts and circumstances

Entity A is registered for GST.

Entity A acts as a resident agent for clients importing goods into Australia and/or utilising them for short term leasing on behalf of the owner.

Many of the owners that use Entity A's services are non-residents.

The owners voluntarily bring their good to Australia and intend for them to remain here for the purposes of being leased out for a short term. In certain circumstances, the owners may wish to use their own good in Australia.

The good is not intended to remain in Australia indefinitely.

Entity A will act as agent for the owners for general law purposes and for the purpose of Division 57 of the GST Act. The agency relationship will be evidenced by a written agreement.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 subsection 9-25(6),

A New Tax System (Goods and Services Tax) Act 1999 division 9-27,

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

A New Tax System (Goods and Services Tax) Act 1999 section 11-15,

A New Tax System (Goods and Services Tax) Act 1999 subsection 13-5(1),

A New Tax System (Goods and Services Tax) Act 1999 section 15-10,

A New Tax System (Goods and Services Tax) Act 1999 section 15-20,

A New Tax System (Goods and Services Tax) Act 1999 section 15-25,

A New Tax System (Goods and Services Tax) Act 1999 subsection 33-15(1),

A New Tax System (Goods and Services Tax) Act 1999 paragraph 33-15(1)(b),

A New Tax System (Goods and Services Tax) Act 1999 item 6 in the table in subsection 38-185(1),

A New Tax System (Goods and Services Tax) Act 1999 subsection 38-185(2),

A New Tax System (Goods and Services Tax) Act 1999 item 5 in the table in subsection 38-190(1),

A New Tax System (Goods and Services Tax) Act 1999 subsection 42-5(1)

A New Tax System (Goods and Services Tax) Act 1999 section 42-10,

A New Tax System (Goods and Services Tax) Act 1999 division 57, and

A New Tax System (Goods and Services Tax) Act 1999 section 57-7.

Reasons for decision

Issue 1

Question 1

An entity may be authorised by another entity to do something on that entity's behalf. 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 entity.

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 entity can claim to be a principal's agent unless both entities consent to the creation of the agency.

Where a principal makes a taxable supply or a creditable acquisition through an agent, the GST payable by the principal or the input tax credit to which the principal is entitled would be attributable according to the basic attribution rules. However, a non-resident entity may make taxable supplies, taxable importations or creditable importations through a resident agent.

The provisions of Division 57 of the GST Act treat any GST liability or entitlements of the non-resident as those of the resident agent.

The non-resident entity may need to review any existing arrangements it has with resident agents (as the GST liability on a supply through a GST enterprise presence must be imposed on the non-resident principal instead of the resident agent).

However, an owner should consider where as an agent you provide services in Australia on behalf of a non-resident that amounts to an enterprise being carried on in the indirect tax zone by the non-resident.

Prior to 1 October 2016 the relevant provision is subsection 9-25(6) of the GST Act that provides:

An enterprise is carried on in the indirect tax zone if the enterprise is carried on through:

(a) a permanent establishment (as defined in subsection 6(1) of the Income Tax Assessment Act 1936) in the indirect tax zone; or

(b) a place that would be such a permanent establishment if paragraph (e), (f) or (g) of that definition did not apply.

Please refer to GSTR 2000/31 for further information on the ATO view on this issue.

From 1 October 2016 the relevant provision is Division 9-27 of the GST Act that provides:

(1) the enterprise is carried on in the indirect tax zone (Australia) if:

(a) the enterprise is carried on by one or more individuals covered by subsection (3) who are in Australia; and

(b) any of the following applies:

(i) the enterprise is carried on through a fixed place in Australia;

(ii) the enterprise has been carried on through one or more

places in Australia for more than 183 days in a 12 month period;

(iii) the entity intends to carry on the enterprise through one or

more places in Australia for more than 183 days in a 12 month period.

(2) It does not matter whether:

(a) the entity has exclusive use of a place; or

(b) the entity owns, leases or has any other claim or interest in relation to a place.

(3) This subsection covers the following individuals:

(a) if the entity is an individual - that individual;

(b) an employee or officer of the entity;

(c) an individual who is, or is employed by, an agent of the entity that:

(i) has, habitually exercise, authority to conclude contracts on behalf of the entity; and

(ii) is not a broker, general commission agent or other agent of

independent status that is acting in the ordinary course of the

agent's business as such an agent.

Please refer to Law Companion Guide GCG 2016/1 GST and carrying on an enterprise in Australia for further information.

However, where the requirements of section 57-7 of the GST Act are met, the resident agent will remain liable for GST and entitle to claim input tax credits on supplies and acquisitions made through the resident agent on behalf of the non-resident.

Please note: an entity cannot make a supply to itself therefore where a principal uses their own good in Australia they cannot supply the good to themselves through you as their agent (refer to paragraph 95 of GSTR 2006/9). Furthermore, this would be viewed as being of a private and domestic nature.

Question 2

You make a taxable importation under subsection 13-5(1) of the GST Act if:

(a) goods are imported; and

(b) you enter the goods for home consumption.

However, the importation is not a taxable importation to the extent that it is a non-taxable importation.

Subsection 33-15(1) of the GST Act explains how and when the liability for GST on taxable importations is payable.

GST on taxable importations is payable by the 'importer' to Customs at the same time and place, and in the same manner, as the customs duty on the goods is payable (or would be payable if the goods were subject to customs duty).

'Importer' in this context does not mean the entity that actually brings the goods, or causes them to be brought, into Australia. The liability for GST falls on the entity that makes the taxable importation. Importer, in this context, therefore, simply means the entity that makes the taxable importation and is therefore liable to pay the GST on the taxable importation. That entity is typically, but need not be, the same entity that brings the goods, or causes the goods to be brought, into Australia.

An importer with a GST liability may pay the amount personally or arrange for another party, such as a customs broker or an agent, to pay the amount on its behalf. Alternatively, some importers can defer GST on taxable importations and account for it directly to the Taxation Office. For approval to defer GST, the importer must satisfy the eligibility requirements for the deferral scheme as set out in the regulations.

While the entity that actually imports the goods usually enters them for home consumption and pays any GST, in some cases, goods that one party imports may be entered for home consumption by another party. The fact that an entity enters goods for home consumption does not necessarily mean that it is that entity that imports the goods into Australia. Completing the customs formalities is just one part of the importation process. Identifying the entity that imports goods determines which entity may have an entitlement to input tax credits.

Question 3

Paragraph 33-15(1)(b) of the GST Act provides that amounts of assessable GST on taxable importations are to be paid by the importer to the Commonwealth in the circumstances specified in the regulations, within such further time and in the manner specified in the regulations.

Pursuant to regulation 33-15.02 of the GST Regulations an entity may apply to the Commissioner for approval to make deferred payments of assessed GST on taxable importations and the application must be made in a manner approved by the Commissioner and contain the information required by the Commissioner.

The application is below to apply for deferred GST on taxable importations in the approved form.

https://www.ato.gov.au/Forms/Approval-to-defer-GST-on-imported-goods/Application-to-defer-GST-on-imported-goods/

Question 4

You make a creditable importation if you satisfy section 15-10 of the GST Act. This section provides that you make a creditable importation if:

(a) you import goods solely or partly for a creditable purpose; and

(b) the importation is a taxable importation; and

(c) you are registered, or required to be registered.

Section 15-10 of the GST Act provides for the meaning of creditable purpose as being:

(1) You import goods for a creditable purpose to the extent that you import the goods in carrying on your enterprise.

(2) However, you do not import the goods for a creditable purpose to the extent that:

(a) The importation relates to making supplies that would be input taxed; or

(b) The importation is of a private or domestic nature.

…

Section 15-20 of the GST Act provides for how much are the input tax credits for a creditable importation as being:

The amount of input tax credit for a creditable importation is an amount equal to the GST payable on the importation. However, the amount of the input tax credit is reduced if the importation is only partly creditable.

Section 15-25 of the GST Act provides for importations that are partly creditable as;

(1) An importation that you make is partly creditable if it is a creditable importation that you make only partly for a creditable purpose.

(2) Repealed

(3) The amount of the input tax credit on an importation that you make that is partly creditable is as follows:

Full input tax credit x Extend of creditable purpose

Where:

extent of creditable purpose is the extent to which the importation is for a creditable purpose, expressed as a percentage of the total purpose of the importation.

full input tax credit is what would have been the amount of the input tax credit for the importation if it had been made solely for a creditable purpose.

…

Where Entity A acts as a resident agent they will be entitled to claim an input tax credit to the extent that the principal makes a creditable importation. Therefore, Entity A will be required to take into account where the principal imports the goods for a creditable purpose. Hence for carrying on their enterprise or if the importation is of a private or domestic nature.

Where the good has been imported for a private or domestic nature it will not be for a creditable purpose. Also where the importation is both for a creditable purpose and not for a creditable purpose the input tax credit will need to be apportioned on a reasonable basis for the extent of it being for a creditable purpose.

Question 5

Division 42 sets out classes of importations that are non-taxable importations. The operation of this Division complements several of the existing concessional items in Schedule 4 to the Customs Tariff Act 1995, which reduce the customs duty on importations to zero in particular circumstances.

Subsection 42-5(1) of the GST Act lists the Schedule 4 items in respect of which no GST is payable on an importation if the goods are covered by one of the items.

Where goods cannot be covered by a Schedule 4 item due to the operation of subsection 18(1) of the Customs Tariff Act 1995, subsection 42-5(2) treats importations of the goods as non-taxable importations if Schedule 4 would otherwise apply.

Paragraphs 247, 248 and 249 of Goods and Services Tax Ruling GSTR 2003/15 Goods and services tax: importation of goods into Australia (GSTR 2003/15) provides the ATO view on the exporting and re-importing of goods as follows:

247. Under subsection 42-10(1), where goods are exported and later re-imported into Australia, the re-importation is a non-taxable importation provided:

• the exported and re-imported goods have not been subjected to any treatment, industrial processing, repair, renovation, alteration or any other process since their export;

• the importer was not entitled to, and did not claim, a refund of GST under the tourist refund scheme when the goods were exported; and

• the importer is the manufacturer of the goods, or had previously acquired the goods by way of a taxable supply or taxable importation in respect of which GST was paid.

248. Under subsection 42-10(2), a re-importation of goods is a non-taxable importation provided:

• the importer manufactured, acquired or imported the goods prior to 1 July 2000; and

• the goods have been exported before, on or after 1 July 2000, then re-imported on or after 1 July 2000 without being subject to any treatment, industrial processing, repair, renovation, alteration or any other process since their export from Australia; and

• the importer was not entitled to, and did not claim, a refund under the tourist refund scheme when the goods were exported; and

• the ownership of the goods upon their return to Australia is the same as their ownership on 1 July 2000.

249. There is no intention test in subsections 42-10(1) or (2). That is, it is not necessary for the goods to have been exported with the intention of being re-imported. Provided the requirements of the relevant subsection are satisfied, the re-importation is a non-taxable importation, even though the goods may not have been exported with the intention of being re-imported.

Therefore, where the requirements are met the exporting and re-importing of a good will be a non-taxable importation and no GST will be charged.

Question 6

Section 11-5 of the GST Act provides for what is a creditable acquisition.

The section provides 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 registered or required to be registered.

Section 11-15 of the GST Act provides the meaning of creditable purpose. The section states:

(1) You acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise.

(2) However, you do not acquire the thing for a creditable purpose tot eh extent that:

(a) the acquisition relates to making supplies that would be input taxed; or

(b) the acquisition is of a private or domestic nature.

(3) …

Where Entity A acts as a resident agent they will be entitled to claim an input tax credit to the extent that the principal makes a creditable acquisition. Therefore, Entity A will be required to take into account where the principal acquires an acquisition and whether it is for a creditable purpose. Hence the extent it is for carrying on the non-resident principal's enterprise or if the acquisition is of a private or domestic nature.

Where the thing acquired is for a private or domestic nature it will not be for a creditable purpose. Also where the acquisition relates to both a creditable purpose and not for a creditable purpose made by the non-resident the acquisition will need to be apportioned on a reasonable basis.

Question 7

Item 6 in the table in subsection 38-185(1) of the GST Act (Item 6) provides that a supply of goods in the course of repairing, renovating, modifying or treating other goods from outside Australia whose destination is outside of Australia, but only if:

(a) the goods are attached to, or become part of, the other goods; or

(b) the goods become unusable or worthless as a direct result of being used to repair, renovate, modify or treat the other goods.

Furthermore, subsection 38-185(2) of the GST Act provides a supply covered by items 1 to 6 in the table in subsection (1) is not GST-free if the supplier reimports the goods into Australia.

Under paragraph 55 of GSTR 2005/2 the use of the phrase 'whose destination is outside of Australia', when directly following the initial phrase that identifies the goods as 'goods from outside Australia', implies that the duration of the stay of the goods in Australia is temporary or transitory. There is a temporal link or nexus between the goods arriving in Australia and the goods departing Australia if on arrival in Australia, the goods have a destination outside of Australia.

In the circumstances you have outlined where a good is imported to Australian for a non-resident to carry on an enterprise in Australia and/or for a private and domestic purpose it will not satisfy the requirement of there being a temporal link or nexus being the good arriving in Australian and the good departing Australia.

Example 6 in paragraph 61 of GSTR 2005/2 provides an example of goods from outside of Australia whose destination is outside of Australia.

An aircraft arrives in Australia. On arrival it is discovered that the aircraft has a mechanical problem. The problem is repaired and the aircraft continues on its international route. The aircraft's stay in Australia is transitory. At the time of the repair, the aircraft has the character of goods from outside of Australia whose destination is outside of Australia. The use of the aircraft in flying in Australia forms part of that journey. The supply of the repair is GST-free.

Therefore, Item 6 will not apply in this situation you have described however, section

11-5 of the GST Act provides for what is a creditable acquisition.

The section provides 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 registered or required to be registered.

Section 11-15 of the GST act provides the meaning of creditable purpose. The section states:

(1) You acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise.

(2) However, you do not acquire the thing for a creditable purpose tot eh extent that:

(a) the acquisition relates to making supplies that would be input taxed; or

(b) the acquisition is of a private or domestic nature.

(3) …

Where Entity A acts as a resident agent they will be entitled to claim an input tax credit to the extent that the principal makes a creditable acquisition. Therefore, Entity A will be required to take into account where the principal acquires an acquisition and whether it is for a creditable purpose. Hence the extent it is for carrying on the non-resident principal's enterprise or if the acquisition is of a private or domestic nature.

Where the thing acquired is for a private or domestic nature it will not be for a creditable purpose. Also where the acquisition relates to both a creditable purpose and not for a creditable purpose made by the non-resident principal the acquisition will need to be apportioned on a reasonable basis.

Question 8

Item 5 in the table in subsection 38-190(1) of the GST Act (Item 5) provides that a supply that is constituted by the repair, renovation, modification or treatment of goods from outside of Australia whose destination is outside of Australia.

In the circumstances you have outlined where a good is imported to Australian for a non-resident to carry on an enterprise in Australia and/or for a private and domestic purpose it will not satisfy the requirement of there being a temporal link or nexus being the good arriving in Australian and the good departing Australia.

Therefore, Item 5 will not apply in the situation you have described, however, section 11-5 of the GST Act provides for what is a creditable acquisition.

The section provides 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 registered or required to be registered.

Section 11-15 of the GST act provides the meaning of creditable purpose. The section states:

(1) You acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise.

(2) However, you do not acquire the thing for a creditable purpose tot eh extent that:

(a) the acquisition relates to making supplies that would be input taxed; or

(b) the acquisition is of a private or domestic nature.

(3) …

Where Entity A acts as a resident agent they will be entitled to claim an input tax credit to the extent that the principal makes a creditable acquisition. Therefore, Entity A will be required to take into account where the principal acquires an acquisition and whether it is for a creditable purpose hence the extent it is for carrying on the non-resident principal's enterprise or if the acquisition is of a private or domestic nature.

Where the thing acquired is for a private or domestic nature what is acquired will not be for a creditable purpose. Also where the acquisition relates to both a creditable purpose and not for a creditable purpose made by the non-resident principal the acquisition will need to be apportioned on a reasonable basis.

Question 9

The acquisitions Entity A acquire in their own right to supply services to the non-resident is a creditable acquisition when section 11-5 of the GST Act is satisfied.

The section provides 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 registered or required to be registered.

Therefore, where Entity A acquires anything solely or partly for a creditable purpose, the supply of the thing to Entity A is a taxable supply, Entity A provides consideration for the supply and they are registered for GST, they will be entitled to claim input tax credits on their acquisitions for their supply of services as it is a separate supply from what Entity A undertakes as a resident agent acting on behalf of a non-resident.