Edited version of private advice

Authorisation Number: 1051648891499

Date of advice: 19 March 2020

Ruling

Subject: Goods and services tax (GST)

Question

Are you required to be registered for GST pursuant to section 23-5 of the GST Act.

Answer

No. You are not required to be registered for GST pursuant to section 23-5 of the GST Act as you are not carrying on an enterprise.

Question

Are your supplies taxable supplies pursuant to section 9-5 of the GST Act.

Answer

No. As you are not required to be registered for GST, your supplies are not taxable supplies pursuant to section 9-5 of the GST Act.

This ruling applies for the following periods:

From March 2020.

Relevant facts and circumstances

You are an individual.

You are not currently registered for GST.

You are a software development consultant working in Australia. You currently work solely for a non-resident company.

You work from home.

The non-resident does not have any offices or other presence in Australia.

You have provided your own monitor to perform your work for the non-resident. The non-resident did not reimburse you for this purchase.

The non-resident has provided you with a laptop, online platforms and software to perform your work for the non-resident.

You have entered into a written agreement with the non-resident documenting your arrangement, which provides the following:

·        The non-resident pays you more than the GST registration turnover threshold per annum for the work performed under the contract.

·        You raise an invoice to the non-resident every 15 days. The non-resident pays the invoiced amount into your Australian bank account.

·        The basis of your remuneration is based off a pre-agreed amount. While you are required to work 8 hours a day for the non-resident, your remuneration is not calculated based on hours worked, or linked to any specific milestones or tasks. Rather, the pre-agreed amount is agreed for a 12 month period, which has been broken down into fortnightly payments.

·        You are not permitted to delegate any of your work under the contract pursuant to a non-disclosure agreement that you have entered into with the non-resident.

·        The non-resident reimburses you for any work related travel.

·        You are bound by a non-compete and cannot work in the same industry or some domain as the non-resident.

Relevant legislative provisions

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

Section 9-5

Section 9-20

Section 23-5

Section 195-1

Reasons for decision

In this reasoning,

·        unless otherwise stated, all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)

·        all legislative terms of the GST Act marked with an asterisk are defined in section 195-1 of the GST Act.

Detailed reasoning

GST is payable on any taxable supply that you make.

You make a taxable supply where you satisfy all of the requirements of the GST Act. Section 9-5 provides the following:

You make a taxable supply if:

(a)   you make the 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; 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.

All of the requirements of section 9-5 must be satisfied in order for your supply (IT consulting services) to be a taxable supply.

Relevant to your circumstances is to consider whether you are required to be registered for GST (requirement (d)).

Required to be registered for GST

You are required to be registered for GST if the requirements of section 23-5 are met. Section 23-5 provides the following:

You are required to be registered under this Act if:

(a)   you are *carrying on an *enterprise; and

(b)   your *GST turnover meets the *registration turnover threshold.

"Carrying on" an enterprise is defined in section 195-1:

carrying on an *enterprise includes doing anything in the course of the commencement or termination of the enterprise.

"Enterprise" is defined in section 9-20 to include an activity, or a series of activities, done in the form of a business (paragraph 9-20(1)(a)).

However "enterprise" does not include activities conducted by an employee (subsection 9-20(2)):

(2)     However, enterprise does not include an activity, or series of activities, done:

(a)   by a person as an employee or in connection with earning *withholding payments covered by subsection (4) (unless the activity or series is done in supplying services as the holder of an office that the person has accepted in the course of or in connection with an activity or series of activities of a kind mentioned in subsection (1);

...

Definition of employee

The term "employee" is not defined in the GST Act. Therefore "employee" means employee at common law. Each individual contract must be examined in order to determine whether the person is engaged as an employee or as an independent contractor.

Whether a person is an employee of another is a question of fact to be determined by examining the terms and circumstances of the contract between them having regard to the key indicators expressed in the relevant case law. Defining the contractual relationship is often a process of examining a number of factors and evaluating those factors within the context of the relationship between the parties. No one indicator of itself is determinative of that relationship. The totality of the relationship between the parties must be considered.

The courts have identified various features as indicators of whether a relationship is that of an employee or independent contractor. Taxation Ruling TR 2005/16: Pay As You Go - withholding from payments to employees sets out the key indicators:

·        whether control is exercised over the manner in which the work was performed;

·        whether the worker operates on their own account or in the business of the payer;

·        whether the substance of the contract is to achieve a specified result;

·        whether the work can be delegated or subcontracted;

·        whether the worker bears little or no risk of the costs arising out of injury or defect in carrying out their work; and

·        whether the worker provides their own tools and equipment and pays business expenses.

How the parties characterise their relationship is not decisive. The whole of the circumstances including any written agreement between the parties are examined to determine whether an individual is an employee within the common law meaning of that term. No one factor is decisive. A consideration of all the relevant circumstances can lead to a conclusion that an individual is an employee notwithstanding a description in a contract characterising the individual as an independent contractor.

You have advised that you are a software development consultant working remotely for a non-resident. You provide services to the non-resident on a full time basis. While you have provided your own computer monitor, the non-resident has provided you with a laptop, online platforms and software to perform your work.

You have a written agreement in place, which provides amongst other things:

·        You cannot delegate your work to anyone;

·        You invoice the non-resident on a fortnightly basis;

·        Your remuneration is an annual amount and not related to milestones or hours worked;

·        Any work-related travel is reimbursed.

·        You are expected to work for the non-resident only;

·        You cannot work in the same industry or domain as the non-resident;

From the information that you have provided, we find that you are an employee of the non-resident.

As your activities are done as an employee, you are not carrying on an enterprise for GST purposes pursuant to section 9-20(2). As you are not carrying on an enterprise for GST purposes, you are not required to be registered for GST pursuant to section 23-5.

As you are not required to be registered for GST, you supplies are not taxable supplies as all of the requirements of section 9-5 are not met.