Edited version of private advice

Authorisation Number: 1051918780063

Date of advice: 11 November 2021l

Ruling

Subject: GST and supply of services to entities through an online platform

Question 1

Is there a taxable supply and which entity has a GST liability under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) under the business arrangement the Australian entity (you) will have in place?

Answer

Under the arrangement in, there will be three distinct supplies being made:

1.    A supply of booking services made by you to the Australian customers, the consideration being the x% added to the fee charged by the Australian supplier

2.    A supply of membership and a supply of platform services made by you to the Australian suppliers, the consideration being the membership fee and the y% commission for any supplies made by the Australian suppliers.

3.    A supply made by the Australian suppliers to the Australian customers, the consideration being the fees determined by the Australian suppliers and agreed by the Australian customers.

Supply of booking services to Australian customers

Your supply of booking services to the Australian customers will be connected with Australia as you will make the supply through a business that you carry on in Australia.

You are registered for GST; therefore your supplies to the Australian customers will be taxable supplies under section 9-5 of the GST Act. GST must be collected on the supply.

Supply of membership and platform services to Australian suppliers

Your supply of membership and platform services to the Australian suppliers will be connected with Australia as you will make the supply through a business that you carry on in Australia.

You are registered for GST; therefore your supplies to the Australian suppliers will be taxable supplies under section 9-5 of the GST Act, GST must be collected on the supply.

Supplies made by the Australian suppliers to the Australian customers

When you collect the payment from the Australian customer and remit the payment to the Australian supplier, you are acting as the supplier's agent in this transaction. The Australian supplier will be the entity that has made the supply to the Australian customers and they need to consider the GST implications of their transactions. Since you stated that you will issue invoices to their Australian customers on their behalf upon receipt of payment. they will need to notify you so that the correct information is shown in the invoices or tax invoice.

Question 2

Who should issue invoices or tax invoices for the supplies made under the business arrangement you will have in place and can Recipient Created Tax Invoice (RCTI) be issued to the supplier when remitting the payments to the supplier?

Answer

Your supplies to the Australian supplier

You must issue a tax invoice to the Australian supplier for your supply of membership and platform services.

You cannot issue an RCTI to the Australian supplier for the payments you will remit to the Australian supplier because you are not the recipient of their supply.

Your supplies to the Australian customer

You must issue a tax invoice to the Australian customer for your supply of platform access for which the booking fees are consideration.

Invoices/Tax invoices issued by you as an agent of the Australian supplier

Depending on your agreement with the Australian suppliers, you will in your capacity as their collecting agent also be issuing invoices or tax invoices on their behalf where the Australian suppliers are registered for GST.

Written agreement

Where you have a written agreement with the Australian supplier under which you can issue a tax invoice on their behalf for their supply to the Australian customer, you can issue one tax invoice to the Australian customer that will cover both your supply to the Australian customer and the Australian supplier's supply to the Australian customer. The tax invoice will need to meet the requirements for a tax invoice under subsection 29-70(1) of the GST Act for both supplies and will include in respect of each of the supplies information that is clearly ascertainable from the document.

If you are issuing a tax invoice on behalf of the Australian supplier, the Australian supplier cannot also issue a tax invoice to the Australian customer for the same supply.

You and the Australian supplier will have a GST liability for the respective taxable supplies each of you have made to the Australian customer.

No written agreement

Where there is no written agreement in place allowing you to issue tax invoices or invoices on behalf of the Australian supplier, the Australian supplier and not you, is responsible to issue their own tax invoices or invoices to the Australian customers.

Relevant facts

You are an Australian company and are registered for GST from 1 July 2021.

You have an online marketplace (platform) that will connect professional content creators with private and commercial customers on a freelance basis.

You will provide the platform to content creators/ freelancers (suppliers) who will advertise their profile and examples of their work so they can be found by customers, and similarly be a platform where customers can find the suppliers they need for their particular content requirements.

At this stage, the platform will only be available to suppliers based in Australia. You will only promote this service to suppliers and customers in Australia as a "buy local" initiative, in contrast to the "off-shoring" freelance model of other sites.

You have given us a copy of your terms and conditions and have advised us that your Terms and Conditions for using your platform are for both customers and suppliers.

The only service you will provide to the suppliers and customers is the role of a marketplace, where customers seeking a service can connect with suppliers offering their services. You will neither be offering services to the customer nor employing the suppliers.

Your supply to Australian suppliers

You will provide the Australian suppliers with a platform where they are able to be found and hired by customers on a private or commercial basis to deliver the customer's expressed content requirements.

Initially, you will be offering the services to suppliers who will provide a project management-style service.

To have their profile and portfolio featured on the site, and thus be discovered by potential customers, the Australian supplier registers with you, pays a membership fee, and then builds their professional profile to attract customers through the platform. The membership fee will be an annual charge or monthly payments and allows them to be a part of your platform.

On top of the membership fee, you will receive a commission rate of y% for any income earned by the Australian supplier for finding work through your platform.

The Australian suppliers will use your platform to earn income outside of their regular income/salary. They will need to have an ABN and will not be able to use the platform until they have provided you with their ABN. You envisage most Australian suppliers who register with you will not reach the GST turnover threshold of $75,000 and thus will not be registered for GST.

As per the platform's terms and conditions, all correspondence between the Australian supplier and Australian customer will be conducted through the site. Additionally, all payments will be made through the site, with the Australian supplier's fees to be distributed by you minus the platform's commission.

Initially, Australian suppliers will be unable to advertise their rates. In the following stages of development, the intention is to provide a function for suppliers to advertise their typical rates or fixed price packages, however this option will be at the sole discretion of the individual supplier.

The Australian supplier will have sole discretion and the final decision on what they charge the customer for their services.

The Australian suppliers will receive auto-generated emails alerting them that a project has been posted requesting services which fit their skill set. It is then up to the Australian supplier to decide if they would like to apply to work on that project, and a negotiation process will take place between the Australian customer and Australian supplier to determine whether they are successful. At all times during the negotiation phase, the Australian supplier has the discretion to accept or reject the project offer if the terms are unsuitable. You retain the right to reject/cancel projects but would only look to exercise that right if you are alerted to a project which is deemed offensive or inappropriate.

There is no refund on memberships. Membership fees give Australian suppliers access to the site, allowing them to provide services to Australian customers for the annual or monthly period for which they have subscribed.

Refund on services provided by the Australian supplier to the Australian customer is an issue between the Australian supplier and the Australian customer. The money paid for services is paid upfront, and then held until the Australian customer indicates they are satisfied with the service. The money will then be forwarded to the Australian supplier, minus your commission. Until the job is completed to the Australian customer's satisfaction, the Australian supplier will not be paid.

A job can be cancelled by the Australian customer at any time prior to an agreement being reached with an Australian supplier to deliver services.

If an agreement is in place, cancellations are still possible, but the Australian customer may not be entitled to a full refund of money already paid. This is to ensure the Australian supplier for example a graphic artist who may take three to four weeks to complete a particular project, is not left out of pocket for the time they already spent working on a project before cancellation. These payments will be passed onto the Australian supplier, minus the usual commissions taken by you.

The platform will alert you when a project is scheduled to be completed, when the Australian supplier has nominated they have delivered the project, and when an Australian customer nominates they are happy with the result of the project, thus allowing the fees to be released to the Australian supplier.

Your supplies to Australian customers

You will provide to Australian customers a platform where they can find and hire professional suppliers suitable for their needs and engage them through the site.

For this service, you will charge the Australian customer a x% service fee (booking fee) when making a booking with a supplier, on top of the professional fee negotiated between the Australian supplier and the Australian customer for completion of the project, as well as any applicable GST.

The Australian customer registers with you, advising whether they are an individual or company and whether it is for a private or commercial account. They can then begin searching for suppliers to suit their content needs based on skillsets and areas of expertise.

The Australian customers will deal directly with the Australian supplier and pay for the service of the Australian supplier up-front to provide surety for the Australian supplier. The payment will be held by a third party for a period of 90 days. The money will be released to the Australian supplier at the completion of the project to the customer's satisfaction.

The Australian customer must complete a questionnaire outlining the details of the project they would like to post. Information gathered is largely essential details such as delivery dates, locations, key contact information, a description of the project, and the category of services required. You have provided us with screenshots regarding the information the Australian customer is to provide to you.

The Australian customer will be bound to the agreement they have with you while they are completing the process of posting a project and sourcing the most suitable supplier(s). Your platform's terms and conditions are considered a binding agreement from the moment an Australian customer engages with you, and those terms and conditions will be in force between the Australian customer and you during the posting and selection process.

Engagement of Australian suppliers by Australian customers

The Australian customer will engage an Australian supplier for their services from one of the following ways:

An invoice would be issued under your name, itemising the booking fee and GST paid by the customer, as well as outlining a payment receipt for the services provided by the suppliers.

You act solely as a marketplace to connect the suppliers and customers. The platform does hold an agency relationship with suppliers.

The customer and supplier will be made aware that the upfront payment is placed on hold and paid to the supplier only when the work is done. This process will be detailed at the appropriate stages of the booking process.

Payments will be made in the first instance to your account you have with the third party. The fees owing to the respective supplier on completion of the project will then be distributed from your third party account. Suppliers will be asked to register their own account with the third party to facilitate a smooth payment process.

You have no control over the third party account. This is merely a payment gateway, where money is taken from the customer and held by the third party until successful completion of the project or termination of the agreement, leading to the release of the funds to the supplier or back to the customer.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 9-5

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

A New Tax System (Goods and Services Tax) Act 1999 Subdivision 153-A

Reasons for decisions

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

Your supply of services to the Australian customers and suppliers will be a taxable supply under section 9-5 of the GST Act.

Detailed reasoning

Under the arrangement in place, there are three distinct supplies being made:

1. A supply of booking services made by you to the Australian customers, the consideration being the x% added to the fee charged by the customers;
2. A supply of membership and a supply of platform services made by you to the supplier, the consideration being the membership fee and the y% commission for any supplies made by the supplier.
3. A supply made by the Australian supplier to the Australian customer, the consideration being the service cost determined by the supplier.

In this instance, you will be responsible for GST on the supplies you make to the customers and suppliers under the GST law.

Supplies made by the Australian supplier to the Australian customer

You advised that the Australian supplier will provide the supply to the customer and you will collect the payment for their supply on their behalf, issue an invoice to the customer and remit the payment to the Australian supplier after the work is done.

Goods and Services Tax ruling Goods and services tax: agency relationships and the application of the law (GSTR 2000/37) provides guidance on agency relationships and state the following:

11. An entity may be authorised by another party to do something on that party's behalf. Generally, the authorised entity is called an agent. The party who authorises the agent to act on their behalf is called the principal....
12. 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.

Thus, when you collect the payment from the Australian customers on behalf of the Australian supplier and you remit the payment to the Australian supplier after the work is done, you will be acting as the Australian supplier's agent in this transaction.

The Australian supplier will be the entity that has made the supply to the customers. They will be required to consider any GST implications of their supply to the customers and notify you so that the correct information is shown in the invoice (tax invoice if the supplier is registered for GST) you will issue to the customers.

Your supplies

Section 9-40 of the GST Act provides that you are liable for GST on any taxable supplies that you make.

A supply is a taxable supply under section 9-5 of the GST Act if:

a)    the supply is for consideration; and

b)    the supply is made in the course of an enterprise carried on by the supplier; and

c)    the supply is connected with Australia; and

d)    The supplier is registered or required to be registered for GST.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

Your supply of services to the Australian suppliers and customers will satisfy paragraphs (a) to (d) in section 9-5 of the GST Act as:

a)    you will make the supply for consideration; and

b)    your supply will be made in the course of a business that you carry on; and

c)    your supply will be connected with Australia as it will be made through a business that is in Australia; and

d)    you are registered for GST.

Based on the facts given your supply of services to the Australian customers and suppliers will not be GST-free or input taxed.

Accordingly, your supply of services to the Australian customers and suppliers will be a taxable supply under section 9-5 of the GST Act.

Question 2

Invoices and Tax invoices

Invoices

Goods and Services Tax Ruling GSTR 2000/34 provides guidance on invoice for the purpose of the GST Act (available at https://www.ato.gov.au/law/view/document?DocID=GST/GSTR200034/NAT/ATO/00001&PiT=99991231235958)

An invoice is a document notifying an obligation to make a payment[ whereas a tax invoice is a document that contains the information about a taxable supply required by the GST Act. This information may not always appear on an invoice.

According to paragraph 15 in GSTR 2000/34 document means any record of information, and includes:

a)    anything on which there is writing; and

b)    anything on which there are marks, figures, symbols or perforations having a meaning for persons qualified to interpret them; and

c)    anything from which sounds, images or writings can be reproduced with or without the aid of anything else; and

d)    a map, plan, drawing or photograph.

An invoice need not be issued in paper form and may be conveyed solely through electronic means.

An invoice is issued when the supplier sends a document which notifies the recipient of the obligation to pay. The actual date when the invoice issues may not be the preparation date. The actual date is the date when the invoice is electronically transmitted, posted, couriered, hand delivered or similar. This date determines the tax period to which the GST payable and input tax credits are attributed.

Tax invoices

Goods and Services Tax Ruling GSTR 2013/1 provides guidance on tax invoices (available at https://www.ato.gov.au/law/view/document?docid=GST/GSTR20131/NAT/ATO/00001).

A tax invoice is a document that complies with the requirements in subsection 29-70(1) of the GST Act which states the following.

1)    tax invoice is a document that complies with the following requirements:

a)    •it is issued by the supplier of the supply or supplies to which the document relates, unless it is a recipient created tax invoice (in which case it is issued by the recipient);

b)    •it is in the approved form;

c)    •it contains enough information to enable the following to be clearly ascertained:

                                      i.        the identity and ABN of the supplier

                                     ii.        if the total price of the supply or supplies is at least $1,000, or such higher amount as the regulations specify or if the document was issued by the recipient- the recipient's identity or the recipient's ABN;

                                    iii.        what is supplied, including the quantity (if applicable) and the price of what is supplied;

                                   iv.        the extent to which each supply included on the document is a taxable supply;

                                     v.        the date the document is issued;

                                   vi.        the amount of GST (if any) payable in relation to each supply included on the document; and

                                  vii.        such other matters as the regulations specify;

d)    it can be clearly ascertained from the document that the document was intended to be a tax invoice if it was issued by a recipient, a recipient created tax invoice;

When a supplier has not issued a tax invoice for a taxable supply and the recipient of the supply requests one, the supplier must issue the tax invoice to the recipient within 28 days of that request

A document does not have to be created for the sole purpose of satisfying the tax invoice requirements. A single document can be both an invoice and a tax invoice. Further, commercial documents such as lease agreements and contracts are tax invoices if they meet the requirements set out in the GST Act for tax invoices

A document for a supply that has separately identifiable taxable and non-taxable parts (a mixed supply) will meet the above requirement if the extent to which the mixed supply is a taxable supply can be found in or determined from information within the document. It does not matter that this information is not specifically stated or in a particular format.

If a transaction consists of a combination of fully taxable supplies and mixed supplies, the extent to which the supplies are mixed (and the extent to which those mixed supplies are taxable) and the extent to which they are fully taxable can be determined from a document where, for example, it:

• denotes the supplies that are fully taxable with a reference mark;
• denotes the supplies that are mixed supplies with a reference mark and the extent to which those supplies are taxable can be found or determined from information within the document;
• shows the price of each supply; and
• shows the total amount of GST payable.

A document in an electronic form that meets the requirements of subsection 29-70(1) of the GST Act will be in the approved form for a tax invoice.

For more information on invoice and tax invoice issued in an electronic form refer to GSTD 2005/2 which is available at https://www.ato.gov.au/law/view/document?docid=GSD/GSTD20052/NAT/ATO/00001

Recipient Created Tax Invoice (RCTI)

Subsection 29-70(3) of the GST Act defines an RCTI as a tax invoice belonging 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.

For more information on RCTI refer to Goods and Services Tax Ruling GSTR 2000/10 available at https://www.ato.gov.au/law/view/print?DocID=GST/GSTR200010/NAT/ATO/00001

Special rules that affect tax invoices

The GST Act has special rules for certain types of taxable supplies that affect tax invoices, and the special rules include tax invoices issued by agents.

Tax invoices and agents

Subdivision 153-A has special rules about tax invoices and agents. It reflects the position at common law that when an agent uses his or her authority to act for a principal, then any act done on behalf of that principal is an act of the principal. An entity therefore makes a supply or acquisition if their agent makes it on their behalf.

If the principal makes a taxable supply through an agent, the principal will be liable for the GST payable on the taxable supply.

An agent can issue a tax invoice on behalf of the principal for the taxable supply made by the principal. However, the principal must not issue a tax invoice for a taxable supply if the agent issues a tax invoice for the taxable supplies made by the principal.

For more information on the application of GST regarding tax agency relationships refer to Goods and Services Tax Ruling GSTR 2000/37 available at https://www.ato.gov.au/law/view/document?locid=%27GST/GSTR200037/NAT/ATO%27&PiT=20080311000001.

Your case

Your supplies to the customers

As discussed in question 1 your supply of booking services to the customer will be a taxable supply. As a result, you are required to issue valid tax invoices to the customers for your supplies of platform booking services to the customers.

Invoices/tax invoices issued to customers as an agent

The information you gave to us indicates there is no written agreement between you and the supplier about you issuing an invoice or tax invoice on behalf of the supplier when collecting the payments from the customer for the supplies to be made by the supplier to the customer.

No written agreement

For supplies made by the supplier to the customer, where there is no written agreement that allows you to issue an invoice or tax invoice on behalf of the supplier to the customer, the supplier is responsible for issuing their own tax invoices or invoices to the customer. This can be done when quoting the amount to the customer. Where the supply is a taxable supply, the supplier must specify the GST component for the taxable supply in the tax invoice. You may send an acknowledgment to the customer regarding receipt of the payment.

For your supplies to the customer, you must issue a tax invoice under your ABN. Your tax invoice must show the amount of GST that has been charged to the customer

Written agreement

In the event you decide to have a written agreement with the supplier under which it is agreed that you will issue the tax invoice to the customer on behalf of the supplier, you will be able to issue one tax invoice for both your supply and the supply made by the supplier.

The one tax invoice issued to the customer will have:

•         your ABN and the ABN of the supplier,

•         detail of each supply, the price for your supply and the price for the supplier;

•         the GST component collected on each taxable supply.

In this instance, the supplier should not issue a tax invoice to the customer when supplying them with quotes as only one tax invoice can be issued for each supply, but they can issue an invoice for the quote.

You and the supplier will have a GST liability for the respective taxable supplies each of you have made to the customer.

Your supply to suppliers

As discussed in question 1 your supply of membership and platform services to the suppliers are taxable supplies under section 9-5 of the GST Act. You will be required to issue tax invoices to the suppliers.

The supplier will not make any supplies to you and therefore you will not be the recipient of any supply made by the supplier. As such you cannot issue an RCTI for the payments that you collect on behalf of the supplier.

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 that you will have in place.