Edited version of private advice

Authorisation Number: 1051900720024

Date of advice: 21 September 2021

Ruling

Subject: GST and supply of facilities to an Australian business

Question 1

Will you be acting as an agent for the Contractor when you collect and deposit the fees received from the Chiropractor's clients into your bank account?

Answer

Yes, you will be actingas an agent for the Contractor when you collect and deposit the fees received from the Chiropractor's clients into your bank account.

Question 2

Can you issue a recipient created tax invoice (RCTI) for the fees that you remit to the Contractor?

Answer

No, you cannot issue an RCTI to the Contractor as the fees are not for any supply made to you by the Contractor.

Relevant facts

You will operate a new chiropractic facility for chiropractors.

You will enter into agreements with the Contractor and Chiropractor which provides that you will supply the facilities listed in Annexure A to a Contractor and the Contractor's chiropractor to enable them to conduct a chiropractor's practice at your chiropractic facility.

The Chiropractor will be a qualified professional registered with the Chiropractic Board of Australia and will maintain their registration throughout the term of the agreement. The Contractor must be registered for GST and will remain registered throughout the term of the agreement.

Your relationship with the Contractor will be that of principal and independent contractor. There will be no employment relationship between you and the Contractor (or its officers, employees, servants and agents). The Contractor is solely responsible for controlling the way the chiropractor provides the chiropractic services to their clients.

You will not provide any chiropractic services to the clients nor will the Contractor or the Contractor's chiropractor make any supplies to you.

Your fees for supplying the facilities (Facilities Fee) will be a percentageof the professional fees collected by you on behalf of the Contractor weekly or fortnightly .The agreed percentage will be reassessed annually at your sole discretion.

Including in your supply of facilities is you will be responsible to collect fees generated from the Contractor's business, that is the fees collected from the clients upon receipt of chiropractic services from the Contractor's chiropractor. You will deposit the money that you collected in your bank account. On a weekly or fortnightly basis you will take the Facilities Fee from the money collected and remit the rest to the Contractor.

Unless otherwise specified in the draft agreement or agreed to by the parties the Contractor is responsible for all expenses incurred by the Contractor (or its officers, employees, servants and agents), outside of the Facilities, in performing the Services

There will be a file transfer fee to be paid on the termination of the Agreement and this file transfer fee will be paid to you as consideration for your goodwill and your legitimate business interests in the client and the client's file.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 subsection 29-70(3)

Reasons for decision

Note: Where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in section 195-1 of the GST Act.

Question 1

Summary

From the information given, you will be actingas an agent for the Contractor when you collect and deposit the fees received from the chiropractor's clients into your bank account.

Detailed reasoning

An entity may be authorised by another party to do something on that party's behalf. Generally, the authorised entity is called an agent

Under the agreement you will be responsible to provide facilities to the Contractor and the Contractor's Chiropractor which will enable them to carry on their chiropractic practice in the health facility that you operate. In return you will receive a percentageof the professional fees that you collected on behalf of the Contractor each week or fortnight. In this instance we consider when you supply the facilities to the Contractor and the Chiropractor, you are making the supply in your own right to the Contractor. The Contractor will pay you the Facilities Fee for the supply.

However, in supplying the facilities you will be responsible to collect the fees that are charged to the clients for the chiropractic services made by the Chiropractor. You will deposit the money that you collected in your bank account. On a weekly or fortnightly basis you will take the Facilities Fee from the money collected and remit the rest to the Contractor.

Schedule 1 to the agreement indicates that you will collect the fees from the clients on behalf of the Contractor; thus, we consider that you are acting as an agent for the Contractor when you do so

Accordingly, the Contractor will account for all the fees collected from the clients and you will account for the Facilities Fee you receive for your supplies of facilities to the Contractor.

You should ensure you hold an appropriate record keeping system and other procedures so that the incomes and expenses of your business are properly recorded and, records of fees collected on behalf of the Contractor are kept separately from your business records.

Question 2

Summary

You cannot issue an RCTI to the Contractor as you are not the recipient of any supply made by the Contractor.

Detailed reasoning

Goods and Services Tax Ruling GSTR 2000/10 provides guidance when an RCTI can be issued.

An RCTI is a tax invoice that belongs to a class of tax invoices that the Commissioner has determined in writing may be issued by the recipient of a taxable supply.

In order to provide an RCTI you must be the recipient of the supply. 'Recipient in relation to a supply' is defined in section 195-1 of the GST Act as the entity to which the supply was made.

The Contractor will not make any supplies to you and therefore you will not be the recipient of any supply made by the Contractor. As such you cannot issue an RCTI for the fees that you remit to the Contractor.

Further there is no provision under the GST law that allows the Commissioner to make a special determination to allow you to issue an RCTI under the arrangement in your draft agreement.

Where you are registered for GST or required to be registered for GST, you will need to issue a tax invoice to the Contractor for your supply of facilities since the supply will be a taxable supply under section 9-5 of the GST Act.