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Edited version of your written advice
Authorisation Number: 1051327949221
Date of advice: 17 January 2018
Ruling
Subject: GST, agency and supply of caravans by hirer
Question 1
Does the Trust need to charge GST to customers on the hire fees when acting as an agent and the principal is not GST registered when hiring out a caravan?
Answer
The Trust may have to where an owner is required to be registered for GST but has not registered for GST. This can occur where an owner meets the turnover threshold of $75,000.
Relevant facts and circumstances
The Trust operates the business. The Trust has a website where customers can go to hire a caravan. The caravans are owned by third parties who are generally not registered for GST.
The Trust has an agent/principal agreement with each caravan owner to advertise their caravans and enter into rental agreement with customers.
If a customer would like to hire a caravan, the Trust will send them an invoice in the name of the business and a rental agreement for them to sign prior to hiring the caravan.
All payments are made to the Trust. The Trust then keeps 15% commission and transfers the balance to each caravan owner.
Total income from customers is $xxx and the Trust is registered for GST.
When a caravan is hired, it is collected by the customer and taken to their desired campaign ground. They are not fixed/permanent structures.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 9-5.
Reasons for decision
Agency
An Agent facilitates sales in return for an agreed amount paid through a commission or similar arrangement.
If an entity makes taxable sales through an agent, the entity is responsible for the GST where the supply is taxable. Either the entity that makes the taxable supply or the agent can issue a tax invoice to a customer, but you can't both issue tax invoices for the same sale.
Taxable supply
An entity makes a taxable supply where they satisfy section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). For a supply to be taxable every paragraph of 9-5 needs to be satisfied. This section provides that:
You make a taxable supply if:
(a) you make a supply for consideration; and
(b) the supply is made in the course or furtherance of an enterprise that you carry on; and
(c) the supply is connected with the indirect tax zone (Australia); and
(d) you are registered or required to be registered.
However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.
Supply of caravan by the owner
In this situation, where the Trust acts as an agent and supplies a caravan on behalf of an owner to a customer and receives consideration paragraph 9-5(a) will be satisfied. The supply will be in the course of an enterprise that the owner of the caravan carries on and the supply of the caravan will be in the indirect tax zone as it is done in Australia, as such paragraphs 9-5(b) and (c) will be satisfied. Where a caravan owner is registered for GST it will mean that paragraph 9-5(d) is also satisfied and the supply will be taxable. Likewise where a caravan owner is required to be registered for GST the supply will also be taxable. Conversely, where the caravan owner is neither registered for GST nor required to be registered for GST the supply of the caravan will not be a taxable supply as paragraph 9-5(d) would not be satisfied.
Furthermore, where a supply of a caravan is taxable there are no provisions that would result in the supply being GST-free or input taxed. This is because road vehicles, including motor homes, caravans and campervans, are not residential premises as they are not land or a building. This is the case regardless of whether they are used as a residence or for residential accommodation.
Where a caravan owner is registered for required to be registered for GST and their caravan is hired out they will be liable for 1/11th of the price charged to the customer and will be required to report this on their relevant BAS. That is to say that it is the amount prior to the agent commission being accounted for that the GST liability is worked out on for a caravan owner’s supply.
Supply by agent
The supply from the Trust acting as an agent to a customer will also be a taxable supply. As there is a supply of hiring service for consideration the 15% commission, the supply is made in the course of an enterprise that the Trust carries on, the supply is in the indirect tax zone as it is done in Australia, and the Trustee is registered for GST. There is no provision that would result in the supply being GST-free or input taxed. Hence, The Trust will be liable for 1/11th of the 15% commission received.
The link below is for the ATO website and provides information on when an entity is required to be registered for GST.
https://www.ato.gov.au/Business/GST/Registering-for-GST/#Doyouneedtoregister1