Edited version of private advice

Authorisation Number: 1051614507424

Date of advice: 19 December 2019

Ruling

Subject: Mixed supplies

Question 1

Is the supply of the service a fully taxable supply?

Answer

No. The supply of the service is a mixed supply (taxable and GST-free) with the GST status of each individual component of the service being assessed individually.

The taxable portion of a mixed supply is calculated in accordance with the formula contained in section 9-80 of the GST Act.

Question 2

Is the service fee a fully taxable supply?

Answer

No. The supply of the regular service is a mixed supply (taxable and GST-free) with the GST status of each individual component of the service needing to be assessed individually.

The taxable portion of a mixed supply is calculated in accordance with the formula contained in section 9-80 of the GST Act.

Relevant facts and circumstances

·   You have an active Australian Business Number (ABN) however are not currently registered for goods and services tax (GST).

·   You are in the start-up phase of an enterprise.

·   Your proposed business involves the provision of a mixed supply (taxable and GST products)

Relevant legislative provisions

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

A New Tax System (Goods and Services Tax) Act 1999 Section 9-40

A New Tax System (Goods and Services Tax) Act 1999 Section 9-80

A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-47(1)

Reasons for decision

Under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), an entity makes a 'taxable supply' where the supply:

1. Is made for consideration;

2. Is made in the course or furtherance of an enterprise that you carry on;

3. Is connected with the indirect tax zone; and

4. Is made by a supplier who is registered, or required to be registered, for GST.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

Under section 9-40 of the GST Act an entity is liable for GST on all taxable supplies that it makes. However, where an entity is making a mixed supply that is a combination of separately identifiable taxable and non-taxable parts the GST liability is only calculated on the taxable portion of the supply.

In respect to a mixed supply, the consideration received for the supply must be apportioned, and GST levied only on the consideration relating to the taxable part of the supply.

The taxable portion of a mixed supply is calculated in accordance with the formula contained in section 9-80 of the GST Act.

Goods and Services Tax Ruling GSTR 2001/8, Goods and Services tax: apportioning the consideration for a supply that includes taxable and non-taxable parts provides the ATO view on to identify whether a supply in includes taxable and non-taxable parts.

It may be necessary to characterise what is supplied to determine whether it wholly or partly meets the requirements of section 9-5 or a provision that makes it non-taxable.

Paragraphs 11, 12 and 16 of GSTR 2001/8 states:

11. Where you make a supply that is identifiable as having more than one part and each part is taxable, you do not need to apportion the whole supply. This is because GST is payable on the whole supply. Similarly, if all the parts of a supply are identifiable as being non-taxable, GST is not payable on any part of the supply.

12. However where you make a supply that is a combination of separately identifiable taxable and non-taxable parts, you need to identify the taxable part of the supply.

16.... the term 'mixed supply' is used to determine a supply that has to be separated or unbundled as it contains separately identifiable taxable and non-taxable parts that need to be individually recognised.

Paragraphs 40 to 41, 43 and 45 of GSTR 2001/8 provide:

40. Where a transaction comprises a bundle of features and acts, it may be necessary to characterise what is supplied to determine whether a particular provision applies in whole or in part.

40A. An identification of the essential character of what is supplied may inform whether a particular transaction falls within terms of a specific statutory provision, and whether it does so wholly or only to some extent. You must consider all of the circumstances of the transaction to ascertain its essential character.

41. By having regard to the essential character or features of the transaction it can be ascertained whether a supply contains separately identifiable taxable and non-taxable parts or is a composite supply of one thing. It is a composite supply of one thing if one part of the supply should be regarded as being the dominant part, with the other parts being integral, ancillary or incidental to that dominant part.

43. A mixed supply is a single supply made up of separately identifiable parts, where one or more of the parts is taxable and one or more of the parts is non-taxable, and these are not integral, ancillary or incidental in relation to a dominant part of the supply. On the other hand, a composite supply is a single supply made up of one dominant part and other parts that are not treated as having a separate identity as they are integral, ancillary or incidental to the dominant part of the supply.

45. In many circumstances, it will be a matter of fact and degree whether the parts of a supply are separately identifiable, and retain their own identity.

How this applies in your case

The supplies/services that you will make have clearly identifiable parts, one of which is GST-free.

One part of the supplies you will be making is GST-free under the GST Act.

What we have to determine is whether the supplies you will be making are mixed supplies that can be clearly identifiable as separate parts to one supply or composite supplies which is a single supply made up of a dominant part and other parts that are not treated as having a separate identity as they are integral, ancillary or incidental to the dominant part of the supply.

The cost of the supplies you would be providing can be broken down into identifiable parts.

Apportionment

Section 9-40 of the GST Act provides that an entity is liable for GST on all taxable supplies that it makes. However, where an entity is making a mixed supply that is a combination of separately identifiable taxable and non-taxable parts the GST liability is only on the taxable part of the supply.

In respect to a mixed supply, the consideration received for the supply must be apportioned, and GST levied only on the consideration relating to the taxable part of the supply.

You have indicated that the components that make up your supplies are clearly identifiable and as a result,it would be possible to separate on any tax invoice issued by you to your business's the applicable GST.

The basis for apportionment needs to be calculated on a reasonable basis and records must be kept to explain the method of apportionment used.

In conclusion

The supplies are mixed supplies with the GST status of each individual component of the supply required to be assessed individually.

The taxable portion of a mixed supply is calculated in accordance with the formula contained in section 9-80 of the GST Act.