Edited version of private advice

Authorisation Number: 1051749340215

Date of advice: 4 September 2020

Ruling

Subject: Goods and services tax and resident agent

Question

Will you be required to collect and remit GST under section 57-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) on supplies of insurance made by the non-resident insurer through you under the Binding Authority Agreement?

Answer

Yes. You are required collect and remit GST under subsection 57-5(1) of the GST Act for the supplies of insurance made by the non-resident insurer through you under the Binding Authority Agreement.

The non-resident insurer is a non-resident entity.

You are an Australian resident as you are a company in incorporated in Australia.

You are the non-resident insurer's resident agent as you are expressly authorised by the non-resident insurer, under the Binding Authority Agreement, to act as the non-resident insurer's agent with respect to binding insurance in Australia. Further, the non-resident insurer makes these supplies through you as you bind the non-resident insurer to the insurance arrangements. We consider that the non-resident insurer does not make these supplies through an enterprise that the non-resident insurer carries on in the indirect tax zone (Australia).

Consequently, where the non-resident insurer is registered or is required to be registered, and the non-resident insurer does not make the supplies to Australian-based business recipients, the non-resident insurer makes taxable supplies of insurance through a resident agent, satisfying section 57-5 of the GST Act. As the non-resident insurer's resident agent, you are required collect and remit GST under subsection 57-5(1) for the taxable supplies of insurance made by the non-resident insurer through you under the Binding Authority Agreement.

This ruling applies for the following periods:

1 July 20XX - 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You are registered for GST.

You are a company incorporated in Australia.

You carry on an enterprise of insurance brokerage. You are a firm of general insurance brokers and underwriting agents with other binding authority agreements with other insurers.

You have an Australian financial services (AFS) licence.

Your place of business was not originally acquired for the purposes of enabling you to carry on the business of the non-resident insurer.

You have provided a copy of a draft Binding Authority Agreement. You are referred to as the 'Coverholder' in the Binding Authority Agreement. The non-resident insurer in the Binding Authority Agreement is referred to as the 'Underwriter'. The non-resident insurer is not incorporated in Australia and is not registered for GST.

The non-resident insurer does not exercise any degree of control over the running of your business. However, they require that you are compliant in your actions and you anticipate that the non-resident insurer will audit you to ensure that you will follow the agreed process, as outlined in the Binding Authority Agreement.

The non-resident insurer does not carry on a business in Australia and does not have its central management and control in Australia or its voting power controlled by shareholders who are residents of Australia.

As far as you are aware, the non-resident insurer does not have an office in Australia and the non-resident insurer does not have any employees, officers or agents in Australia

The non-resident insurer does not directly reimburse you for the cost of accommodation or staff at your fixed business address. The non-resident insurer also does not make other contributions to the financing of your business.

You are not a subsidiary or branch of the non-resident insurer.

You have allocated staff to handle the binder administration under the Binding Authority Agreement.

Insurance arrangements

You work with car dealers who represent various manufacturing brands. The non-resident insurer arranges cover worldwide for these brands.

You are the coverholder under a binder authority with the non-resident insurer to issue policies of insurance to Australian recipients. Under this binder authority, you work as agent of the non-resident insurer, not the insured, in providing insurance quotes to the insured. If the insured request cover, and certain conditions are met, you issue the policy documentation and collect the premium from the insured. Where the criteria is not met, the case is referred to the non-resident insurer for consideration. You do not have authority to bind the non-resident insurer for insurance outside of the specified circumstances.

The insured are primarily individuals who are not registered for GST. Some insured may be businesses; however you do not know whether these entities are registered for GST, nor whether they are acquiring the insurance in the carrying on of their enterprise.

Where automatic or tacit renewal has been specifically authorised by the non-resident insurer or is mandatory under the local law, you are required to review each insurance bound prior to its individual renewal date in order to offer renewal terms or to decline the renewal. You are responsible for and shall issue in a timely fashion the necessary and proper notice of non-renewal for individual insurances bound to prevent their automatic or tacit renewal,

You have advised that you are remunerated for your services to the non-resident insurer by reference to transactions, being the sale of a warranty policy at a fixed fee basis per warranty sold.

You will deduct your fee from the premium amount and then pay the remaining funds to the non-resident insurer. You shall bear and pay all charges and expenses incurred by you in the operation of the Binding Authority Agreement.

You have also stated that the non-resident insurer does not directly reimburse you for the cost of accommodation or staff at your fixed business address. The non-resident insurer also does not make other contributions to the financing of your business.

You do your wok on the understanding that GST, withholding tax and Stamp Duty will apply and you will settle these taxes on behalf of the non-resident insurer.

You advised that it is under the binding authority provided by the non-resident insurer that you conclude the contract of insurance and the insured with communicate with you as specified in the contract of insurance. You handle all queries from the insureds and are noted in the contract of insurance to be the contact for any dispute resolution.

All contract documentation (and any endorsements issued) shall comply with all applicable laws and regulations, contain all the agreed terms of the contract (or the endorsement) between the insured and the non-resident insurer and shall contain your full name and address

The non-resident insurer deals with the claims via the dealers. Once a claim is accepted the dealer completes the warranty repair. The dealer raises an invoice for agreement by the non-resident insurer. The non-resident insurer provides you with a claim pool to settle the repair invoices on their behalf. You have no authority to accept or decline claims.

You establish and maintain complete records relating to all insurances bound, claims handled, and recoveries pursued under the Binder Authority Agreement. Such records shall be and shall remain the property of the non-resident insurer.

Relevant legislative provisions

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

Section 9-5

Section 9-25

Section 9-26

Section 9-40

Division 57

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.

Summary

You are required collect and remit GST under subsection 57-5(1) of the GST Act for the taxable supplies of insurance made by the non-resident insurer through you under the Binding Authority Agreement.

The non-resident insurer is a non-resident entity.

You are an Australian resident as you are a company in incorporated in Australia.

You are the non-resident insurer's resident agent as you are expressly authorised by the non-resident insurer, under the Binding Authority Agreement, to act as the non-resident insurer's agent with respect to binding insurance in Australia. Further, the non-resident insurer makes these supplies through you as you bind the non-resident insurer to the insurance arrangements. We consider that the non-resident insurer does not make these supplies through an enterprise that the non-resident insurer carries on in the indirect tax zone (Australia).

Consequently, where the non-resident insurer is registered or is required to be registered, and the non-resident insurer does not make the supplies to Australian-based business recipients, the non-resident insurer makes taxable supplies of insurance through a resident agent, satisfying section 57-5 of the GST Act. As the non-resident insurer's resident agent, you are required collect and remit GST under subsection 57-5(1) for the taxable supplies of insurance made by the non-resident insurer through you under the Binding Authority Agreement.

Detailed reasoning

Resident agents acting for non-residents

The general rule in section 9-40 is that an entity must pay the GST on taxable supplies which that entity makes. However, subsection 57-5(1) provides that GST payable on a taxable supply made by a non-resident through a resident agent is payable by the agent and not payable by the non-resident. Subsection 57-5(2) provides that section 57-5 has effect despite section 9-40.

The following factors must be satisfied in order for subsection 57-5(1) to apply (subject to the exceptions contained in subsection 57-5(3), discussed below):

1. a taxable supply;
2. is made by a non-resident;
3. through a resident agent.

We have considered each factor below.

1.    Taxably supply

A supply is a taxable supply where the requirements of section 9-5 are met.

Section 9-5 states:

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.

The supply of insurance to recipients will satisfy paragraphs (a) and (b) of section 9-5 as the supply is made for consideration (being the premium paid by the insured) and the supply is made in the course or furtherance of an enterprise carried on by the non-resident insurer.

What remains to be determined is whether the supply is connected with Australia and whether the non-resident insurer is required to be registered for GST. Where all of the requirements of section 9-5 are met, the non-resident insurer's supply of insurance will be a taxable supply. Such supplies are not GST-free or input taxed under Division 38 or Division 40 respectively, or under a provision of another Act.

Is the supply of insurance policy connected with Australia (paragraph 9-5(c))?

The connection with Australia requirement is one of the elements of a taxable supply. Relevant to the supply of insurance policy is subsection 9-25(5) of the GST Act:

Supplies of anything else

(5)  A supply of anything other than goods or *real property is connected with the indirect tax zone if:

(a)  the thing is done in the indirect tax zone; or

(b)  the supplier makes the supplier through an *enterprise that the supplier *carries on in the indirect tax zone; or

(c)   all of the following apply:

(i)neither paragraph (a) nor (b) applies in respect of the thing;

(ii)the thing is a right or option to acquire another thing;

(iii)the supply of the other thing would be connected with the indirect tax zone; or

(d)  the *recipient of the supply is an *Australian consumer.

Only one paragraph in subsection 9-25(5) needs to be satisfied for the supply to be connected with Australia.

Characterisation of the supply

Whether a supply is connected with Australia depends on the type of supply being made. Therefore, it is necessary to characterise the supply being made by the non-resident insurer.

Regarding supplies of insurance policy, our view is that these supplies are supplies of rights.

Paragraph 9-25(5)(a): the 'thing' is 'done' in Australia

A supply will be connected with Australia under paragraph 9-25(5)(a) if the 'thing' being supplied is 'done' in Australia.

Goods and Services Tax Ruling GSTR 2019/1 supply of anything other than goods or real property connected with the indirect tax zone (Australia) provides guidance on when a supply of anything other than goods or real property is connected with Australia.

Paragraph 49 of GSTR 2019/1 provides that a supply of rights will be 'done' where the right is created in that other person, granted, transferred or assigned to that other person or surrendered respectively. Paragraphs 51-52 of GSTR 2019/1 further provide that if the rights are supplied under an agreement, the granting of the right is done where the agreement is made. Therefore, if the agreement is made in Australia, the supply of that right is connected with Australia and satisfies paragraph 9-25(5)(a).

You have advised that you, as agent of the non-resident insurer, conclude the contracts of insurance with the insured in Australia. Therefore, the non-resident insurer's supplies of insurance policy are connected with Australia under paragraph 9-25(5)(a).

Exceptions to the 'connected with Australia' rules

Section 9-26 outlines exceptions to the 'connected with Australia' rules for supplies of anything other than goods or real property that are done in Australia and made by non-resident suppliers.

If a supply satisfies the requirements of section 9-26 it is not connected with Australia under paragraph 9-25(5)(a). These supplies are referred to as 'disconnected supplies'. Disconnected supplies are not taxable supplies as paragraph 9-5(c) is not met.

However, there is one instance where supplies that would ordinarily be 'disconnected' under section 9-26 remain connected with Australia. This applies in certain circumstances where the non-resident supplier has a resident agent and enters into a written agreement with the agent stating that subsection 9-26(1) does not apply to the specified supplies.

You have not advised whether you and the non-resident insurer have entered into such an agreement for the supply of insurance policy to Australian recipients. As such, we have considered below whether the non-resident insurer's supplies are disconnected supplies.

'Disconnected supplies' - supplies made to an Australian-based business recipient

A supply of anything other than goods or real property that is 'done' in Australia is disconnected under item 1 in the table in subsection 9-26(1) if all of the following requirements are met:

·         the supplier is a non-resident (paragraph 9-26(1)(a));

·         the supplier does not make the supply through an enterprise that the supplier carries on in Australia (paragraph 9-26(1)(b)); and

·         the recipient is an Australian-based business recipient of the supply (item 1 of the table contained in paragraph 9-26(1)(c)).

Supplier is a non-resident

'Non-resident' is defined in section 195-1 to mean 'an entity that is not an *Australian resident'.

'Australian resident' is defined in section 195-1 to mean 'a person who is a resident of Australia for the purposes of the ITAA 1936'.

Relevantly, a company is a resident of Australia pursuant to section 6 of the Income Tax Assessment Act 1936 (ITAA 1936) if the company is incorporated in Australia, or, if not incorporated in Australia, carries on business in Australia, and has either its central management and control in Australia, or its voting power controlled by shareholders who are residents of Australia.

You have advised that the non-resident insurer is not incorporated in Australia and does not carry on a business in Australia and does not have either its central management and control in Australia or its voting power controlled by shareholders who are residents of Australia.

Consequently, the non-resident insurer, the supplier, is a non-resident for GST purposes satisfying paragraph 9-26(1)(a).

Supplier does not make the supply through an enterprise that the supplier carries on in the indirect tax zone

The non-resident insurer makes the supply of insurance policies through you, its resident agent (see below discussion for definition of 'resident agent'), to customers in Australia. In these circumstances it is relevant to consider whether you create an Australian presence for the non-resident insurer.

Section 9-27 determines when an entity carries on an enterprise in the indirect tax zone:

(1)  An *enterprise of an entity is carried on in the indirect tax zone if:

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

(b)  any of the following applies:

(i) the enterprise is carried on through a fixed place in the indirect tax zone;

(ii) the enterprise has been carried on through one or more places in the indirect tax zone 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 the indirect tax zone 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 claims 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, and habitually exercises, 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.

You have advised that the non-resident insurer does not have an office in Australia and the non-resident insurer does not have any employees, officers or agents in Australia. You have also advised that you are not a subsidiary or branch of the non-resident insurer.

If a non-resident company has no fixed and definite place of its own in Australia, it may still carry on business in Australia through an agent from some fixed and definite place. As you act as agent of the non-resident insurer it is necessary to consider whether the non-resident insurer is carrying an enterprise in Australia through you as agent.

Section 9-27 applies only to agents that are dependent agents who have, and habitually exercise, authority to conclude contracts on behalf of their principal. It also applies to employees of those dependent agents. The terms 'agent' and 'other agent of independent status' (i.e. an independent agent) are not defined in the GST Act and take on their ordinary meaning, subject to context and applicable rules of statutory interpretation.

Paragraphs 2.32 - 2.33 of the Explanatory Memorandum to the Tax and Superannuation Laws Amendment (2016 Measures No. 1) Act 2016 provides:

2.32 The scope of agents considered in the revised test [contained in subsection 9-27(3)] is limited to those agents that have, and habitually exercise authority to conclude contracts on behalf of the entity, but are not a broker, general commission or independent agent. [Schedule 2, item 3, paragraph 9-27(3)(c)]

2.33 This approach is consistent with the type of agents that are relevant in determining whether an entity has a permanent establishment under the current law, and in the permanent establishment articles in Australia's tax treaties. However, for GST purposes the phrase 'substantially negotiates' (which is used in recent Australian tax treaties about the role of agents) has not been used. As such, the analysis of whether an agent causes a non-resident to carry on an enterprise in the ITZ focusses on the authority of an agent, and their exercise of that authority, to conclude contracts on the non-resident's behalf.

You have stated that you make contracts with the insured in the name of the non-resident insurer so as to bind the non-resident insurer. Therefore, you habitually exercise authority to conclude contracts on behalf of the non-resident insurer. The non-resident insurer will be carrying on an enterprise in Australia through you as agent unless you are a broker, general commission or independent agent.

As outlined in the Explanatory Memorandum, the type of agents that are relevant in determining whether an entity has a permanent establishment under the current law is consistent with the type of agent in the permanent establishment articles in Australia's tax treaties. Consequently, we have referred to the Commentary on the OECD Model Tax Convention on Income and on Capital (OECD Commentary) as a supplementary means of interpretation of the term 'independent agent' and when an entity acts in the ordinary course of their business when acting on behalf of their principal (consistent with our approach outlined in paragraphs 101 to 105 of Taxation Ruling TR 2001/13 Income Tax: Interpreting Australia's Double Tax Agreements).

Independent agent

The OECD Commentary, as it read on 21 November 2017, provides at paragraph 102, in discussing Article 5(6) of the Model Tax Convention on Income and Capital, that an enterprise will come within the scope of the independent agents article, i.e. the enterprise will not constitute a permanent establishment (PE) of the enterprise on whose behalf they act, if the agent is an independent agent and the agent acts in the ordinary course of their business when acting on behalf of the enterprise.

Whether an enterprise is independent of the enterprise represented depends on the extent of the obligations which this enterprise has vis-à-vis the represented enterprise.

The OECD Commentary notes the following characteristics of 'independence':

·         Independence is determined by consideration of the extent to which the agent exercises freedom in the conduct of business on behalf of the principal within the scope of the authority conferred by the agreement

·         An independent agent will typically be responsible to his principal for the results of his work but not subject to significant control with respect to the manner in which that work is carried out. He will not be subject to detailed instructions from the principal or comprehensive control by the principal as to the conduct of the work.

·         Although not determinative by itself, independent status is less likely if the activities of the agent are performed wholly or almost wholly on behalf of only one enterprise over the lifetime of the business or a long period of time.

·         The provision of substantial information is not in itself a sufficient criterion for determination that the agent is dependent unless the information is provided in the course of seeking approval from the principal for the manner in which the business is to be conducted.

Are you effectively independent from the non-resident insurer both legally and economically?

From the facts given you are legally independent from the non-resident insurer as:

·         You are a company incorporated in Australia and you have an AFS licence.

·         You are not a subsidiary or branch of the non-resident insurer.

·         You are a firm of general insurance brokers and you carry on an enterprise of insurance brokerage.

·         The non-resident insurer does not exercise control of the running of the business conducted by you.

·         You do not display the name of the non-resident insurer at your premises or on stationary. The non-resident insurer details appear on the policy documents (wording, certificate and promotional brochures for dealer display) only.

While the scope of your authority to bind insurance is specifically defined in the Binding Authority Agreement (that is, you can only bind insurance under certain conditions), including the restrictions on automatic or tactic renewals, these limitations are not relevant to dependency. This view is supported by paragraph 107 of the OECD Commentary:

107. Limitations on the scale of business which may be conducted by the agent clearly affect the scope of the agent's authority. However such limitations are not relevant to dependency which is determined by consideration of the extent to which the agent exercises freedom in the conduct of business on behalf of the principal within the scope of the authority conferred by the agreement.

Further, while you are required to prepare for the non-resident insurer statistical information and maintain records of insurance bound, this information is not provided in the course of seeking approval from the principal for the manner in which the business is to be conducted. This view is supported by paragraph 108 of the OECD Commentary:

108. It may be a feature of the operation of an agreement that an agent will provide substantial information to a principal in connection with the business conducted under the agreement. This is not in itself a sufficient criterion for determination that the agent is dependent unless the information is provided in the course of seeking approval from the principal for the manner in which the business is to be conducted. The provision of information which is simply intended to ensure the smooth running of the agreement and continued good relations with the principal is not a sign of dependence.

We consider that the following factors point towards dependency:

·         the content and form of contract documentation issued by you is specified in the Binding Authority Agreement;

·         you must agree with the non-resident insurer any specific marketing or promotional material to be used in relation to the insurances to be bound under the Binding Authority Agreement.

However, when taking into account the remaining factors above, we consider that on a balance, you are legally independent from the non-resident insurer as you are not subject to detailed instructions from the non-resident insurer or comprehensive control by the non-resident insurer as to the conduct of your work. The above facts lead to the conclusion that you represent yourself as an independent entrepreneur, in a business of your own, carried under your own trade name,

From the facts given, you are also economically independent from the non-resident insurer as:

·         You are remunerated for your services provided to the non-resident insurer under the Binding Authority Agreement on a fixed fee basis per insurance sold;

·         You shall bear and pay all charges and expenses incurred by you in the operation of the Binding Authority Agreement.

·         The non-resident insurer does not directly reimburse you for the cost of accommodation or staff at your fixed business address.

·         The non-resident insurer does not make other contributions to the financing of the business carried on by you;

·         You earn income outside of your arrangements with the non-resident insurer by representing other insurers and underwriting agents under other binding authority agreements.

The above facts lead to the conclusion that you undertake comprehensive economic activities of your own other than the services provided to the non-resident insurer under the Binding Authority Agreement. Consequently, you are economically independent from the non-resident insurer.

Do you provide your services to the non-resident insurer in the ordinary course of your business?

Now that it has been established that you are legally and economically independent of the non-resident insurer, it is necessary to consider whether you are providing services to the non-resident insurer in the ordinary course of your business. Paragraph 110 of the OECD Commentary provides the following guidance in this regard:

110. An independent agent cannot be said to act in the ordinary course of its business as agent when it performs activities that are unrelated to that agency business. Where, for example, a company that acts on its own account as a distributor for a number of companies also acts as an agent for another enterprise, the activities that the company undertakes as a distributor will not be considered to be part of the activities that the company carries on in the ordinary course of its business as an agent for the purposes of the application of paragraph 6. Activities that are part of the ordinary course of a business that an enterprise carries on as agent will, however, include intermediation activities which, in line with the common practice in a particular business sector, are performed sometimes as agent and sometimes on the enterprise's own account, provided that these intermediation activities are, in substance, indistinguishable from each other. Where, for example, a broker-dealer in the financial sector performs a variety of market intermediation activities in the same way but, informed by the needs of the clients, does it sometimes as an agent for another enterprise and sometimes on its own account, the broker-dealer will be considered to be acting in the ordinary course of its business as an agent when it performs these various market intermediation activities.

From the facts given, you are a firm of general insurance brokers and you carry on an enterprise of insurance brokerage. We consider that it would be in the ordinary course of your business to enter into binding authority agreements with insurers. Consequently, you are providing your services to the non-resident insurer in the ordinary course of your business.

Based on the information provided, we consider that while you conclude contracts on behalf of the non-resident insurer, you are not carrying on their enterprise as a dependent agent as you are acting as an independent agent in the ordinary course of your business in Australia.

This is to be contrasted with the Example 10 provided in Law Companion Ruling LCR 2016/1 GST and carrying on an enterprise in the indirect tax zone (Australia), where the resident agent creates a GST enterprise presence for the non-resident entity:

Example 10 - GST liabilities and supplies through resident agents

92. Flora Ltd, a non-resident entity which supplies training services, had a GST enterprise presence under the former test which operated prior to section 9-27.

93. Gerber Ltd acts as Flora Ltd's agent and habitually concludes contracts on Flora Ltd's behalf, doing so exclusively for Flora Ltd. As a result, Flora Ltd makes its supplies of training services through Gerber Ltd and therefore under the test in section 9-27, Flora still has a GST enterprise presence in Australia.

94. Until now, Gerber Ltd has been liable for the GST liabilities on the supplies Flora Ltd makes through it, under Division 57.

95. However, from the date from which the Bill applies, Flora Ltd will be responsible for its own GST liabilities.

In Example 10, the resident agent acts exclusively for the non-resident entity, which is a strong indicator that the resident agent is economically dependent on the non-resident entity. In contrast, you are an independent agent of the non-resident insurer (both legally and economically), and it is within the ordinary course of your business to act on the behalf of insurers under binding authority agreements.

Consequently, paragraph 9-26(1)(b) is satisfied as the non-resident insurer does not make the supply through an enterprise that it carries on in Australia.

The recipient is an Australian-based business recipient of the supply

Subsection 9-26(2) defines 'Australian-based business recipient':

(2)  An entity is an Australian-based business recipient of a supply made to the entity if:

(a)  the entity is *registered; and

(b)  an *enterprise of the entity is *carried on in the indirect tax zone; and

(c)   the entity's acquisition of the thing supplied is not solely of a private or domestic nature.

You have stated that a majority of the insured are individuals and that these insured are not registered for GST. As paragraph 9-26(2)(a) of the definition of 'Australian-based business recipient' is not satisfied, these insured are not Australian-based business recipients and the non-resident insurer's supplies to these recipients are not 'disconnected' with Australia under section 9-26. Consequently, supplies provided to these recipients are taxable supplies if the non-resident insurer is registered or required to be registered.

Insured that are registered, for example the proportion of the insured that are businesses, carry on an enterprise in Australia and the insured's acquisition of the thing supplied is not solely of a private or domestic nature are Australian-based business recipients pursuant to subsection 9-26(2), satisfying item 1 of the table contained in paragraph 9-26(1)(c). As all of the remaining requirements of subsection 9-26(1) are met, supplies to these entities would be 'disconnected' with Australia under section 9-26 and would not be taxable supplies as all of the requirements of section 9-5 would not be met.

2.    Taxable supply made by non-resident

As established above, the non-resident insurer is a non-resident for GST purposes.

3.    Taxable supply made by a non-resident through a resident agent

'Resident agent' is defined in section 195-1 as an agent that is an 'Australian resident'.

As stated above, 'Australian resident' is defined in section 195-1 to mean 'a person who is a resident of Australia for the purposes of the ITAA 1936'. Pursuant to section 6 of the ITAA 1936, a company is a resident of Australia if the company is incorporated in Australia. Accordingly, you are an 'Australian resident' for GST purposes as you are a company incorporated in Australia.

As also previously stated, 'agent' is not a defined term in the GST Act, and therefore the term takes on its ordinary meaning. Paragraph 11 of Goods and Services Tax Ruling GSTR 2000/37: agency relationships and the application of the law provides the following:

11. 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 parties.

You are expressly authorised by the non-resident insurer to act for the principal so as to create or affect legal relations between the non-resident insurer and the insured (for example, by concluding contracts with the insured, binding the non-resident insurer). On this basis, we consider that you are the non-resident insurer's agent. As you are an Australian resident and the non-resident insurer is a non-resident, you are the non-resident insurer's resident agent for Division 57 purposes.

Paragraph 45 of GSTR 2000/37 considers whether a transaction is made through an agent:

45. ...The word 'make' and its derivatives, such as 'made', are used in the GST Act, inter alia, to connect the thing being transacted in the course of an entity's enterprise with the paying or receiving of consideration. When an agent is authorised to undertake a transaction on behalf of the principal, thereby binding the principal to the legal effects of the transaction, then the transaction is made by the principal through the agent.

You are authorised by the non-resident insurer to conclude specified insurance contracts with the insured on the non-resident insurer's behalf, thereby binding the non-resident insurer to the legal effects of the transaction. Such transactions are made by the non-resident insurer through you as agent. Consequently, subsection 57-5(1) is satisfied. Any GST liabilities or entitlements of the non-resident insurer are yours, unless the non-resident insurer makes taxable supplies through an enterprise that they carry on in Australia pursuant to paragraph 57-5(3)(b); or where the supply is done in Australia and is only a taxable supply because of the reverse charge rules under section 84-5 pursuant to paragraph 57-5(3)(a).

For completeness, we note that when determining whether the supply of insurance by the non-resident insurer was being made through an enterprise carried on in Australia pursuant to section 9-27, we concluded that the non-resident insurer does not carry an enterprise in Australia through an agent (being you) as you are not a dependant agent of the non-resident insurer.

Conversely, the test prescribed in paragraph 45 of GSTR 2000/37 for Division 57 is whether an agent is:

...authorised to undertake a transaction on behalf of the principal, thereby binding the principal.

Consequently, while we consider that you are acting as the non-resident insurer's resident agent, the non-resident insurer is not carrying on an enterprise in Australia for the purposes of section 9-27.

Accordingly, where the non-resident insurer is registered or is required to be registered, and the non-resident insurer does not make the supplies of insurance policy to Australian-based business recipients, the non-resident insurer makes taxable supplies of insurance policy through a resident agent, satisfying section 57-5 of the GST Act. As the non-resident insurer's resident agent, you are required collect and remit GST under subsection 57-5(1) for the taxable supplies of insurance made by the non-resident insurer through you under the Binding Authority Agreement.