Edited version of private advice

Authorisation Number: 1051915784089

Date of advice: 8 November 2021

Ruling

Subject: GST and income from a social media platform

Question 1

Are you required to be registered for GST?

Answer

Yes, you are required to be registered for GST. We have included below some important information regarding your other GST obligations. Please read 'Reasons for decision' for further information.

Question 2

If so, when were you required to be registered for GST?

Answer

You were required to be registered for GST when your GST turnover reached the Registration turnover threshold. Please read below our 'Reasons for decision' for further details.

Question 3

Are the payments received from a social media platform subject to GST?

Answer

No, the payments received from a social media platform are not subject to GST.

Relevant facts and circumstances

You, are a sole trader, carrying on enterprise A.

You also carry on an enterprise (enterprises B) under a contract with a social media platform under which you get paid by the social media platform.

The social media platform operator is a non-resident and is not in Australia.

You are currently not registered for GST.

You realised that your GST turnover reached the GST registration turnover threshold sometime in the 20XX/20XX financial year.

Relevant legislative provisions

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

Section 23-5 of the A New Tax System (Goods and Services Tax) 1999

Subsection 38-190(1) of the A New Tax System (Goods and Services Tax)1999

Reasons for decision

1.    Are you required to be registered for GST?

Section 23-5 of the A New Tax System (Goods and Services Tax) Act 1999 states:

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.

Note: It is the entity that carries on the enterprise that is required to be registered (and not the enterprise).

(terms marked with asterisks (*) are defined in section 195-1 of the GST Act)

Enterprise

You carry out two enterprises (A and B) according to section 9-20 of the GST Act.

Registration turnover threshold

Section 188-10 of the GST Act is relevant for working out whether your GST turnover meets, or does not exceed, a particular turnover threshold.

You have a GST turnover that meets a particular turnover threshold under subsection 188-10(1) when:

•         your current GST turnover is at or above the turnover threshold, and the Commissioner is not satisfied that your projected GST turnover is below the turnover threshold; or

•         your projected GST turnover is at or above the turnover threshold.

The registration turnover threshold is $75,000.

Section 188-15 defines 'current GST turnover'. Subject to certain exclusions, 'current GST turnover' at any time during a particular month is the sum of the values of all the supplies that you made, or are likely to make, during the current month and the preceding 11 months.

Section 188-20 defines 'projected GST turnover'. Subject to certain exclusions, 'projected GST turnover' at a time during a particular month is the sum of the values of all the supplies that you made, or are likely to make, during that month and the next 11 months.

You have advised us that based on your actual earning figures, you met the GST registration turnover threshold in a particular month in 2021.

This means that you have satisfied the requirements of section 23-5 of the GST Act and as such is required to be registered for GST.

2.    When were you required to be registered for GST?

You are required to be registered for GST when your GST turnover met the registration turnover threshold.

The Commissioner's views in relation to GST turnover are provided in goods and services tax ruling GSTR 2001/7 Goods and services tax: meaning of GST turnover, including the effect of section 188-25 on projected GST turnover. GSTR 2001/7 states as follows:

Whether your GST turnover meets, or does not exceed, a turnover threshold

16.  Whether you have a GST turnover that meets or does not exceed a particular turnover threshold depends on an objective assessment of your projected GST turnover and current GST turnover. An 'objective assessment' is one that a reasonable person could be expected to arrive at having regard to the facts and circumstances which apply to your enterprise at the relevant time. The Commissioner will accept your assessment of these turnovers unless he has reason to believe that your assessment was not reasonable.

17.  Under subsection 188-10(1), you meet a particular turnover threshold if your projected GST turnover is at or above the threshold. You also meet a turnover threshold if your current GST turnover is at or above the turnover threshold and it is not possible to conclude that your projected GST turnover is below the threshold. This will occur if your projected GST turnover is also above the relevant threshold, or if your circumstances are such that it is not possible to calculate a projected GST turnover. In either of these situations, the Commissioner cannot be satisfied that your projected GST turnover is below the turnover threshold.

......

19.  Although your current GST turnover and your projected GST turnover may be capable of being determined on every day during a month, there is no requirement for continuous recalculation. However, under the GST Act there are obligations if you meet or exceed a particular threshold and there is an opportunity for you to make certain elections if you do not exceed a particular threshold. Therefore, you should be aware of the relevant thresholds likely to affect you and consider whether your turnover may be sufficiently close to the relevant thresholds to make a review prudent. For example, Entity A conducts an enterprise with a GST turnover of $70,000 and is not registered for GST. Because Entity A is aware that a $5,000 increase in its GST turnover will result in the $75,000 registration turnover threshold being met, it should monitor changes in its turnover. Entity B by contrast, is registered for GST, conducts an enterprise with a GST turnover of $600,000 and accounts on a cash basis. The nearest relevant threshold is the cash accounting turnover threshold ($2,000,000). Entity B may decide to review its current GST turnover and projected GST turnover on an annual basis whilst being aware that a significant change in turnover may require a further review

......

Meaning of 'likely to make' or 'likely to be made'

21.  The phrase 'likely to make' appears in sections 188-15 and 188-20. The phrase 'likely to be made' appears in section 188-25. Both phrases refer to a similar level of expectancy, although the GST Act defines neither. The words retain their ordinary meaning in the context of the legislation.

22.  In Australian Telecommunications Commission v. Krieg Enterprises Pty Ltd (1976) 14 SASR 303, Bray CJ considered the meaning of 'likely' in the phrase 'likely to interfere with or damage property'. His Honour said at pages 312-313: 'Here we are concerned with the word "likely" in a statute. As I have said, the ordinary and natural meaning of the word is synonymous with the ordinary and natural meaning of the word "probable" and both words mean,... that there is an odds-on chance of the thing happening. That is the way in which statutes containing the words have usually been construed. ...I think that "likely" in the sub-section means "probable" and I think that that means that there is a more than fifty per cent chance of the thing happening.'

23.  For the purposes of sections 188-15, 188-20 and 188-25, the expressions, 'likely to make', and 'likely to be made', mean that on the balance of probabilities, it can be predicated that the supply is more likely than not to be made.

24.  When a supply is made, is determined in each case by reference to the terms of the particular contract, if applicable, and the nature of the supply. For the purpose of calculating supplies likely to be made, we will accept a calculation based on a bona fide business plan, accounting budget or some other reasonable estimate.

You have advised us that due to the COVID19 pandemic in the 20XX/20XX financial year you were not able to predict that your projected turnover was going to reach $75,000. It was upon submitting your 20XX/20XX income tax return you realised that you had reached this threshold.

Giving consideration to your accounting budgets, business plans and other reasonable estimate if it is your view that when assessed objectively you could not have predicted that your turnover was likely to meet the GST registration threshold, then, you may use the actual figures to determine when you were required to be registered for GST.

You have advised us that based on your actual figures you reached the GST registration turnover threshold in a particular month 20XX. As such you were required to be registered in that particular month.

Note - the Commissioner has not reviewed your accounting budgets and/or other business plans in reaching this conclusion and it is merely based on the facts provided by you in your Private Ruling application.

Additional information

How long should you be registered for GST?

Pursuant to section 23-55 of the GST Act, you are required to stay registered for 12 months from the time that you become registered for GST (provided you are still carrying on an enterprise).

However, under section 25-57 of the GST Act the Commissioner may cancel your registration if:

•         less than 12 months after being registered, you apply for cancellation and

•         the Commissioner is satisfied that you are not required to be registered.

In considering an application for cancelation of registration, the Commissioner may have regard to:

•         how long you have been registered; and

•         whether you have previously been registered; and

•         any other relevant matters.

Consequences of registering for GST or becoming required to be registered for GST

GST payable

The supplies you made through enterprise A during the time that you were registered or required to be registered for GST are taxable supplies. Meaning that you were/are required to remit GST on these supplies to the ATO.

This is because section 7-1 of the GST states that GST is payable on taxable supplies.

What is a taxable supply?

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.

Supplies you made through enterprise A meet these requirements of a taxable supply under paragraphs 9-5(a) to 9-5(d) of the GST Act. These supplies are neither GST-free no input taxed under any of the provisions in the GST Act.

Accordingly, you were required to remit GST on these supplies you made when you were required to be registered for GST.

The amount of GST payable is 1/11^th of the price charged/chargeable to your clients.

GST claimable

You are entitled to claim input tax credits on GST included in the creditable acquisitions you made during the time you were registered or required to be registered for GST (provided you hold a valid tax invoice).

3.    Are the payments received from the recipient of your supplies made through enterprise B subject to GST?

To address this issue, the first step is to identify the supplies you make to the recipient through enterprise B.

The term 'supply' is defined in subsection 9-10(1) of the GST Act as 'any form of supply whatsoever' and includes a creation, grant, transfer, assignment or surrender of any right (paragraph 9-10(2)(e) of the GST Act). This definition requires an entity, the supplier, to make the supply and generally another entity, the recipient, to acquire the supply.

The Commissioners' views on supplies are outlined in several goods and services tax rulings. Goods and services ruling, GSTR 2006/9, Goods and services tax: Supplies provides ten propositions that are considered relevant in analysing a transaction in relation to a supply.

Proposition 11 GSTR 2006/9 provides that the agreement is the logical starting point when working out the entity making the supply and the recipient of that supply.

Therefore, to determine the nature of the supply regard must be given to the terms and conditions set out in enterprise B's contract.

We consider that you make a supply to the recipient through your enterprise B and this supply is a GST-free supply under item 2 in the table in subsection 38-190(1) of the GST Act.