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Edited version of private advice
Authorisation Number: 1051885255824
Date of advice: 13 August 2021
Ruling
Subject: GST and solicitors and barristers services to a non-resident
Questions
1. Is GST payable on the Solicitors services to the non-resident clients?
2. Who is the recipient of the Barrister's services, as defined in section 195-1 of the A New Tax System (Goods and Services Tax) Act 1999?
3. Is GST payable on the Barristers services?
Answers
1. No, GST is not payable on the Solicitor services supplied to the non-resident clients.
2. The recipient of the Barrister's services, as defined in section 195-1 of theGST Act are the non-resident.
3. No, GST is not payable on the Barrister's services.
Relevant facts and circumstances
The Solicitor entered into a contract with non-resident individuals (clients) to assist them resolve a family property dispute.
The property is located in Australia.
The Solicitor secured the services of a Barrister on-behalf of the clients to conduct work in relation to resolving the property dispute. The clients have ratified the services of the Barrister.
Under this ratification, the Barrister's contract is with the clients and it is the clients that are liable to pay the Barrister.
The contract between the Solicitor and the clients indicate the Barrister's services as a Disbursement that has been incurred by the Solicitor on-behalf of the clients.
No services were "physically performed on goods or real property situated in Australia" either by the Barrister or the Solicitor.
The clients were not in Australia when services were supplied by the Solicitor or the Barrister.
The Barrister's services are both supplied and provided to the non-resident clients.
Relevant legislative provisions
Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999
Subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999
Subsection 38-190(3) of the A New Tax System (Goods and Services Tax) Act 1999
Reasons for decision
GST is payable on taxable supplies.
A taxable supply is defined in section 9-5 of the GST Act as follows:
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.
(terms marked with asterisks (*) are defined in section 195-1 of the GST Act)
Solicitors' services
The services supplied by the Solicitor to the clients meet the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act for the following reasons:
9-5(a) - the Solicitor supplies their services for consideration (i.e. the solicitors fees)
9-5(b) - the Solicitor makes the supplies in the course of their business
9-5 (c) - the services were performed in Australia and therefore are connected with the Indirect Tax Zone
9-5(d) - the Solicitor is registered for GST
The supply of services by a Solicitor is not an input taxed supply as defined in Division 40 of the GST Act.
What needs to be determined here is whether the Solicitors services are GST-free.
GST-free supply
The relevant GST-free provision to consider is item 2 and 3 in the table in subsection 38-190(1) of the GST Act which state:
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Supplies of things, other than goods or real property, for consumption outside the indirect tax zone |
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Item |
Topic |
These supplies are GST-free (except to the extent that they are supplies of goods or *real property)... |
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.......... |
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2 |
Supply to *non-resident outside the indirect tax zone |
a supply that is made to a *non-resident who is not in the indirect tax zone when the thing supplied is done, and: (a) the supply is neither a supply of work physically performed on goods situated in the indirect tax zone when the work is done nor a supply directly connected with *real property situated in the indirect tax zone; or (b) the *non-resident acquires the thing in *carrying on the non-resident ' s *enterprise, but is not *registered or *required to be registered. |
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.......... |
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3 |
Supplies used or enjoyed outside the indirect tax zone |
a supply: (a) that is made to a *recipient who is not in the indirect tax zone when the thing supplied is done; and (b) the effective use or enjoyment of which takes place outside the indirect tax zone; |
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other than a supply of work physically performed on goods situated in the indirect tax zone when the thing supplied is done, or a supply directly connected with *real property situated in the indirect tax zone. |
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The Solicitors services come within item 2(a) in the table in subsection 38-190(1) of the GST Act because:
• the recipient of the supply are not in Australia at the time the services were performed,
• the services of the Solicitor were neither a supply of work physically performed on goods situated in the indirect tax zone when the work is done nor a supply directly connected with real property situated in the indirect tax zone.
Therefore, unless otherwise subsection 38-190(3) of the GST Act applies, the Solicitor's services are GST-free.
Subsection 38-190(3) of the GST Act has no application in this instance as the Solicitor services are both 'supplied' and 'provided' to the non-resident.
Note: Further information on subsection 38-190(3) is provided below under 'Barrister's services'.
Solicitors services are not a taxable supply and as such no GST is required to be paid on the supply of the Solicitors services.
Barrister's services
• Who is the recipient of the Barristers' services?
Section 195-1 of the GST Act defines a recipient as follows:
recipient, in relation to a supply, means the entity to which the supply was made.
Pursuant to the Commissioners' views presented in Goods and Services Tax Ruling GSTR 2000/37 Goods and services tax: agency relationships and the application of the law where an agent engages a service provider on-behalf of a principal, the recipient of the services of the service provider is the principal and not the agent.
Whether a solicitor retains a barrister as principal or as agent of a client depends on the particular circumstances.
In this case, where the Solicitor engaged the Barrister on-behalf of the clients, the Solicitor acted as an agent of the clients. This is further confirmed in the contract between the solicitor and the client where Barristers fees are considered as a 'Disbursement'.
Therefore, as per the Commissioners' view in GSTR 2000/37, the recipient of the Barristers' services are the non-resident clients and not the Solicitor.
• GST-free services
For the same reasons provided above under 'Solicitors services' the supply of the Barristers services to the non-resident clients come within item 2 (a) in the table in subsection 38-190(1) of the GST Act. Therefore, unless otherwise subsection 38-190(3) of the GST Act applies, the Barrister's services are also GST-free.
Goods and Services Tax Ruling, GSTR 2005/6 - Goods and services tax: the scope of subsection 38-190(3) and its application to supplies of things (other than goods or real property) made to non-residents that are GST-free under item2 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 provides the Commissioner's views of the application in relation to Barrister's services as follows:
Example 19 - Australian barrister engaged by an Australian solicitor who is acting as agent of a non-resident individual
472. An Australian solicitor acting as agent for a non-resident individual engages an Australian barrister to supply legal services to the non-resident individual on an immigration matter. The individual is not in Australia when the legal services are performed and the supply is not directly connected with real property situated in Australia.
Item 2
473. The supply of legal services by the barrister is made to the non-resident individual (principal) through the solicitor, as agent for the non-resident. The presence in Australia of the solicitor does not mean that the non-resident individual is in Australia for the purposes of item 2.[1] The supply by the barrister to the non-resident individual meets the requirements of item 2.
Subsection 38-190(3)
474. The supply of legal services by the barrister to the non-resident individual is a supply under an agreement entered into indirectly with a non-resident (that is, through the resident agent). Paragraph 38-190(3)(a) is therefore satisfied.
Provided to another entity
475. What is being supplied is advice on immigration matters concerning the non-resident individual. The barrister has been engaged by the Australian solicitor to provide advice to the non-resident individual. The legal services are provided to the non-resident, not the agent. The supply by the barrister to the non-resident individual is both made and provided to the non-resident, through the solicitor as agent. The supply by the barrister is neither made nor provided to the solicitor.
476. Subsection 38-190(3) does not apply to the supply of the legal services provided by the barrister.
Given that the Barrister's services in this case are both supplied and provided to the non-resident clients the Barrister's services do not come within subsection 38-190(3) of the GST Act.
Additional information:
Paragraph 50 of GSTR 2000/37states the following:
50. The following are examples of common fees and charges, for which a client is liable, that may be paid for by a solicitor as a paying agent of the client. If the solicitor makes the payment, GST is not payable on the subsequent reimbursement by the client to the solicitor for:
• application fees;
• registration fees;
• court fees;
• barrister's fees when the barrister is engaged by the client;
• incorporation fees;
• most fees in connection with registering and maintaining the status of particular legal relationships such as companies, partnerships, societies or associations;
• fines, penalties, stamp duty and taxes; and
• probate fees.
Accordingly, there are no GST implications where the Solicitor is 'reimbursed' by the clients for the Barrister's fees paid by the Solicitor on behalf of the clients.
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[1] Refer to Goods and Services Tax Ruling GSTR 2004/7, at paragraphs 204 to 213.