Edited version of private advice

Authorisation Number: 1052005606984

Date of advice: 13 July 2022

Ruling

Subject: GST and agency

Question 1

Does the XX Fee money collected on behalf of the XX by you fall within an 'agency relationship' and therefore the collected funds can be excluded from your GST turnover when assessing if the GST turnover threshold has been reached?

Answer

Yes, the fees collected as agent of and on behalf of affiliate clubs can be excluded when working out your GST turnover.

Question 2

Does the money collected for the insurance products provided to XX fall within an 'agency relationship' and therefore the collected funds can be excluded from your GST turnover when assessing if the GST turnover threshold has been reached?

Answer

No. The funds for insurance products are not collected as part of an agency relationship with members and members of affiliate clubs and is considered to be supplies made and therefore will not be excluded from XX GST turnover test.

This ruling applies for the following period:

1July 20XX - 30 June 20XX

The scheme commences on:

XX July 20XX

Relevant facts and circumstances

•         The XX (XX) (You) is a registered entity for XXXX.

•         You are currently not registered for GST but know at some point in the future you will need to be registered.

•         You collect funds from XX for their client base and also other affiliate XX organisations from their separate clients.

•         This collected money is clearly distinguished on the payment portal and directly paid to the affiliate XX organisations with no fees or administration charges.

•         There is split responsibility between the XX and the XX clubs in the services they each provide to members.

•         Within the XX constitution it states the following:

For affiliated XX the XX will:

1.    support new and developing clubs with guidance on administration and operations

2.    collect members' fees

3.    provide club insurance

4.    support club improvements and activities with club grants

5.    include club information on the XX website

6.    provide promotional materials such as flyers, banners and templates

7.    collect membership data

8.    provide technology and support to assist clubs with efficient communications

9.    subsidise club copies of XX publications

•         You provide insurance to both your members but also members of XX entities.

•         This insurance is supplied by XX who charge you a flat fee for up to XX members.

•         This insurance is optional for members and covers XX and XX.

•         You currently run at a small loss on this insurance, with XX charging $XX per policy and $XX for new policies.

•         You charge a flat rate of $XX to policy holders.

•         Due to you being considered a "XX", you are not allowed to profit on the policy as it is purchased for XX.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 sections 9-5, 23-5, 118-15 and 118-20

Reasons for decision

GST Turnover

Section 23-5 states that you are required to be registered for GST if:

(a) you are carrying on an enterprise; and

(b) your GST turnover meets the registration turnover threshold (currently $75,000 or $150,000 if you are a non-profit body).

The term 'enterprise' is defined in section 9-20 and includes an activity, or series of activities, done on a regular or continuous basis, in the form of a lease, licence or other grant of an interest in property.

In your case, you are operating a XX located in the indirect tax zone. This activity falls within the scope of an 'enterprise' for GST purposes and as such paragraph 23-5(a) is satisfied.

The next issue to consider is whether your GST turnover meets the registration turnover threshold (currently $75,000, or $150,000 for non-profit bodies).

The meaning of GST turnover is contained in Division 188. Subsection 188-10(1) provides that your GST turnover will meet the registration turnover threshold if:

(i) your current GST turnover is at or above $75,000 ($150,000 for Not for Profit entities) and the Commissioner is not satisfied that your projected GST turnover is less than $75,000; or

(ii) your projected GST turnover is at or above $75,000 ($150,000 for Not for Profit entities).

Your 'current GST turnover' is defined in section 188-15 as the sum of the values of all of your supplies made in a particular month and the preceding 11 months.

Your 'projected GST turnover' is defined in section 188-20 as the sum of the values of all of your supplies made in a particular month and the following 11 months.

For both 188-15 and 188-20 your GST Turnover will not include:

(a) supplies that are input taxed; or

(b) supplies that are not for consideration (and are not taxable supplies under section 72-5); or

(c) supplies that are not made in connection with an enterprise that you carry on.

In your case, once your GST turnover reaches either limb (i) or (ii) of subsection 188-10(1) you will be required to register for GST.

Agency

Goods and services tax ruling (GSTR 2000/37) describes what is meant by principal/agent relationships ('agency relationships') and explains the operation of Subdivisions 153-A (General) and 153-B (Principals and intermediaries as separate suppliers or acquirers). The facts provided indicate that Subdivision 153-B does not apply in this case. Further, the special rules in Division 57 that apply to resident agents acting for non-residents does not apply in this case as the entity is a resident of Australia.

Factors that indicate an agency relationship

In most cases, any relevant documentation about the business relationship, the description used by the parties and the conduct of the parties establish the existence of an agency relationship. Therefore, the following factors may show that you are an agent under an agency relationship, although no single factor (by itself) is determinative:

•         any description of you as an agent, having authority to act for another party, in an agreement (expressed or implied) between you and the other party;

•         any exercise of the authority that you are given to enter into legal relations with a third party;

•         whether you bear any significant commercial risk;

•         whether you act in your own name;

•         whether you are remunerated for your services by way of commissions and whether you are entitled to keep any part of your remuneration secret from another party; and

•         whether you decide the price of things that you might sell to third parties.

In some situations, these factors may be difficult to establish. For example, situations may arise where:

•         the existence of a principal is disclosed but not named; or

•         the existence of a principal is not disclosed to third parties.

However, documents used by the parties and the conduct of the parties may still indicate the existence of an agency relationship

Transactions made through an agent

Divisions 57 and 153 apply when a principal makes a relevant transaction (i.e., taxable supply, taxable importation, creditable acquisition or creditable importation) through an agent. 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.

Summary

In your case, you have a written XX which must be adhered to by your members, your committee and also your affiliate members. This constitution which clearly indicates the agency agreement between yourself and your affiliate members, and how you help to grow these entities. This includes collecting their XX fees at no cost and streaming this money to the correct entity. Due to you acting as an agent in the collection of XX fees for affiliate organisations, you do not bear the supplies and they would not count towards the current or projected turnover tests found in s188-15 and s188-20 respectively.

However, you do not have such an agreement for the insurance, and instead members of both affiliates and your own direct members are required to pay you directly for this insurance product offered. You do not bear significant commercial risk in the transactions; you act for whoever wishes to utilise the group policy and you do not receive commission from the insurance provider. As such, there is no agency relationship involved in offering group insurance through the provider and instead this amount is a taxable supply and would meet the requirements under 188-15(1) and 188-20(1) to be counted under the GST Turnover tests.