Edited version of private advice

Authorisation Number: 1052328997777

Date of advice: 7 November 2024

Ruling

Subject: GST - Agency

Question

Does the insurance levy received by you from members form part of your GST turnover for the purposes of subsection 23-5(b) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No, the insurance levy received by you from members does not form part of your GST turnover as it is consideration for a supply that is made by you.

This ruling applies for the following period:

1 July 20YY to 30 June 20YY

The scheme commenced on:

16 August 20YY

Relevant facts and circumstance

You are a non-profit incorporated association.

Your members pay a yearly membership fee.

You arrange public liability and third-party insurance for your members through an insurance broker.

The contract of membership contains a clause stating that you have negotiated 3rd party insurance on behalf of your members and act as the members agent in relaying the insurance levy to the insurance company.

The broker supplies insurance under a group policy and issues you a tax invoice for payment of premiums and broker fees.

The insured under the policy are members of your association.

You are not a registered insurance broker and do not hold an Australian Financial Services Licence.

You are not a beneficiary of the insurance policy.

You pay the total premium for all your members to the insurance broker.

You keep the insurance fees separate from all your other income and expenses in your accounting records.

Your annual GST turnover is less than $150,000. You have not included the cost of insurance when calculating your GST annual turnover.

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 9-10

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 subsection 23-5(b)

A New Tax System (Goods and Services Tax) Act 1999 section 23-15

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

A New Tax System (Goods and Services Tax) Act 1999 section 188-15

A New Tax System (Goods and Services Tax) Act 1999 subsection 188-15(1)

A New Tax System (Goods and Services Tax) Act 1999 section 188-20

A New Tax System (Goods and Services Tax) Regulations 2019 Regulation 23-15.02

Reasons for decision

Section 23-5 of the GST Act 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 that *asterisk denotes a defined term in section 195-1 of the GST Act

The GST registration turnover threshold for a non-profit entity is outlined in section 23-15 of the GST Act and regulation 23-15.02 of the A New Tax System (Goods and Services Tax) Regulations 2019. The current GST registration turnover threshold for a non-profit entity is $150,000.

GST Turnover

Under subsection 188-10(1) of the GST Act it explains that you have a GST turnover that meets a particular turnover threshold if:

(a)           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

(b)           Your projected GST turnover is at or above the turnover threshold.

Section 188-15 of the GST Act provides the meaning of 'current GST turnover'. Your current GST turnover at a time during a particular month is the sum of the values of all the supplies that you have made, or are likely to make, during the 12 months ending at the end of that month, subject to certain exclusions.

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

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) at paragraphs 11 and 12 provides that in determining 'current GST turnover' and 'projected GST turnover', this is subject to the exclusions listed in paragraph 14, Paragraph 14 provides a list of supplies that are excluded from current GST turnover and projected GST turnover and includes 'supplies not made in connection with an enterprise that you carry on'.

As a general rule, membership to a particular club or association of persons is a supply that is made to the member as it provides the member with a benefit through the right of membership.

In this case you make a supply of rights or services (the membership) in return for membership fees. Accordingly, you are making a supply to the members which is a supply under section 9-10 of the GST Act. However, in this case what needs to be determined is whether the insurance premiums charged by you are paid as part of your supply of membership.

Agency

Goods and Services Tax Ruling 2000/37 Goods and services tax: agency relationships and the application of the law (GSTR 2000/37) considers the GST consequences of agency relationships.

Factors that indicate an agency relationship

28. 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 this case, you are not an insurance broker and do not hold a financial services licence. Therefore, you are unable to provide insurance in your own right. Further the Contract of membership expressly provides that you have negotiated 3rd party insurance on behalf of your members and act as the members agent in relaying the members insurance levy to the insurance company. The insurance broker supplies the group policy, which covers the member, subject to payment of the premium. The premium is collected by you as an 'insurance levy' at the same time as invoicing for membership.

Based on the information provided, we consider that the insurance levy received by you from members does not form part of your GST turnover for the purposes of subsection 23-5(b) of the GST Act. Relevantly, you are acting as a paying agent for a supply made to the insured members. On this basis the insurance levy does not represent consideration for any supply made by you and is not included in your GST turnover.