Edited version of private advice

Authorisation Number: 1052328229794

Date of advice: 07 November 2024

Ruling

Subject: GST and resident agents acting for non-residents

Question 1

Will you be liable to pay goods and services tax (GST) on the commission you receive from Company A?

Answer 1

No

Question 2

Will you be liable to pay GST on the share of the payments distributed to content creators?

Answer 2

No

This ruling applies for the following period:

DD MM YYYY to DD MM YYYY

The scheme commenced on:

DD MM YYYY

Relevant facts and circumstances

You are a resident of Australia and are based solely in Australia.

You are not registered for GST.

Company A is a distributor based outside Australia. Company A does not have its own establishment in Australia.

Company A owns the intellectual property for a variety of assets (assets). Company A authorises the use of these assets in online content created by others.

Company A provides the rights to use the assets to content creators along with account management services and customer support. Company A enters into a 'supply agreement' with each content creator.

Content creators are based both in Australia and outside Australia and use the assets in content that is shared on a content sharing platform.

You have entered into an 'agency agreement' with Company A, under which you act as an agent to facilitate the supply of account management services, customer support, and the rights to use assets from Company A to content creators. You are responsible for managing contracts between Company A and content creators and for distributing settlement funds from Company A to content creators.

You are also responsible for marketing and advertising the assets owned by Company A to content creators.

The content sharing platform handles the monetisation of the content shared on its platform and pays to Company A, who retains a percentage as consideration for their supply of rights and services to the content creators.

You distribute the remaining share to the content creators on behalf of Company A and retain a percentage as commission for the services you supply to Company A.

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 9-25

A New Tax System (Goods and Services Tax Act 1999, section 9-40

A New Tax System (Goods and Services Tax Act 1999, section 23-5

A New Tax System (Goods and Services Tax Act 1999, section 38-190

A New Tax System (Goods and Services Tax Act 1999, Division 83

A New Tax System (Goods and Services Tax Act 1999, Subdivision 84-A

Reasons for decision

Question 1

Section 9-40 of the GST Act provides that you are liable to pay GST on any taxable supply that you make. Section 9-5 of the GST Act provides that 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.

Supply made for consideration

Company A gives you a commission as payment for your services. The commission is consideration for the supply of your services; thus, paragraph 9-5(a) of the GST Act is satisfied.

Supply made in the course or furtherance of an enterprise you carry on

You supply your services to Company A in the course of operating your business; therefore, paragraph 9-5(b) of the GST Act is satisfied.

Supply is connected with the indirect tax zone

Section 195-1 of the GST Act defines the indirect tax zone as Australia, excluding external Territories and certain offshore areas.

Paragraph 9-25(5)(b) of the GST Act provides that a supply of anything other than goods or real property is connected with Australia if the supplier makes the supply through an enterprise that the supplier carries on in Australia. You operate your business in Australia, therefore the supply of your services to Company A is connected with Australia. Paragraph 9-5(c) of the GST Act is satisfied.

GST registration

You are not registered for GST. However, you will meet the requirement of paragraph 9-5(d) of the GST Act if you are required to be registered for GST. In accordance with section 23-5 of the GST Act, an entity is required to be registered for GST if it is carrying on an enterprise and its GST turnover meets the registration turnover threshold. Currently, the registration turnover threshold is $XX ($XX for non-profit entities).

You are carrying on an enterprise. You will be required to be registered for GST if your current or projected GST turnover equals or exceeds $XX. If your GST turnover is below this threshold, you may choose to register voluntarily.

If you register for GST or become required to be registered for GST, paragraph 9-5(d) of the GST Act will be satisfied and the supply of your services to Company A will be a taxable supply unless it is GST-free or input taxed. If the supply is GST-free or input taxed, no GST is payable on the supply.

Is the supply input taxed?

There is no provision in the GST Act under which the supply would be input taxed.

Is the supply GST-free?

Division 38 of the GST Act covers GST-free supplies.

Under section 38-190 of the GST Act, certain supplies of things, other than goods or real property, for consumption outside Australia are GST-free.

Item 2 in the table in subsection 38-190(1) of the GST Act (Item 2) provides that a supply made to a non-resident who is not in Australia when the thing supplied is done is GST-free where:

(a)           the supply is neither a supply of work physically performed on goods situated in Australia when the work is done nor a supply directly connected with real property situated in Australia; 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.

Goods and Services Tax Ruling GSTR 2004/7 examines when a supply is made to a non-resident or other recipient of a supply who is not in Australia when the thing supplied is done for the purposes of items 2 and 3 in the table in table in subsection 38-190(1) of the GST Act.

Paragraphs 374 and 375 of GSTR 2004/7 provide that if an agent carries on the business of a non-resident company in Australia at a fixed and definite place for a sufficiently substantial period of time, then the non-resident company is in Australia. However, the supply of services by the agent to the non-resident company in the course of the agent's own business may still be GST-free.

For supplies of agency services made by the agent to the non-resident company, the non-resident company is not in Australia in relation to the supply of those agency services. If the other requirements of Item 2 are met, the supply of services and other things made by the agent in the course of its own business to the non-resident company is a GST-free supply.

You supply various services to Company A, namely agency, contract management, advertising and marketing, and revenue distribution services. In accordance with GSTR 2004/7, Company A is a non-resident company who is not in Australia in relation to your supply of those services.

None of the services you supply to Company A involve work physically performed on goods situated in Australia, nor are they directly connected with real property situated in Australia, so paragraph (a) of Item 2 is satisfied. It is no longer necessary to consider paragraph (b) of Item 2.

The GST-free status of the supply is not negated by subsection 38-190(2), 38-190(2A) or 38-190(3) of the GST Act.

The supply of your services to Company A is therefore GST-free under Item 2 and you will not need to pay GST on the commission you receive as consideration for your supply of these services.

Note that in determining whether you are required to be registered, GST-free supplies count towards your GST turnover despite not being subject to GST.

Question 2

GST is payable on taxable supplies. Section 9-40 of the GST Act provides that GST is payable by the entity that makes a taxable supply. However, GST may be payable by the recipient of a taxable supply under Division 83 or Subdivision 84-A of the GST Act. It must be determined whether the content creators are making a taxable supply to you for which you may be liable to pay GST under either of these provisions.

The distribution of the payments to the content creators is a service you provide to Company A in accordance with your agency agreement with Company A. There is no contract or agreement between you and each of the content creators under which they make any supply to you. The payments that you distribute to the content creators are not consideration for a taxable supply they make to you. As you are not the recipient of a taxable supply, Division 83 and Subdivision 84-A of the GST Act do not apply. Therefore, you are not liable to pay GST on the payments you distribute to the content creators.