GST issues registers
Primary production industry partnership6 Agents
6.1.1 Where Subdivision 153-B is operating, what is the effect on instalment income of both parties for PAYG and BAS implications?
Question
(a) Where an agent acts as a Principal under Subdivision 153-B, does the agent collect and remit GST?
(b) Does an agent have to include this in their GST Turnover Threshold?
(c) Where Subdivision 153-B is operating, what is the effect on instalment income of both parties for PAYG and BAS implications?
Note: The answers provided below depend, in part, on the views of the Australian Taxation Office as set out in Draft Ruling GSTR 2000/D20. Accordingly, the answer provided may be subject to change if the Draft Ruling is not adopted in full as a final ruling.
Question
(a) Where an agent acts as a Principal under Subdivision 153-B, does the agent collect and remit GST?
Decision
Yes.
Reason for Decision
Section 153-50 provides that entities may enter into an arrangement under which an agent will be treated as a separate supplier and/or acquirer. That is, the agent will be treated as a principal in its own right.
To enter this arrangement there must be a written agreement under which:
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- the agent arranges to make supplies and/or acquisitions to or from third parties on behalf of the principal;
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- the kinds of supplies and/or acquisitions to which the arrangement applies are specified;
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- the agent is treated for the purposes of GST law as a principal in making supplies or acquisitions;
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- the agent will issue all tax invoices and adjustment notes relating to those supplies to third parties in the agent's name and the principal will not issue such documents; and
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- both parties must be registered.
The effect of entering into these arrangements is that the principal and the agent treat the supply of goods or services that the principal makes to third parties through the agent as two separate supplies, and that they are treated as acting between themselves as principal to principal for GST purposes.
A taxable supply made to a third party is taken to be a taxable supply made by the agent. In addition, the principal is taken to have made a taxable supply to the agent.
Question
(b) Does an agent have to include this in their GST Turnover Threshold ?
Decision
No.
Reason for Decision
Paragraph 92 of Goods and Services Tax Draft Ruling GSTR 2000/D20, Goods and services tax: agency relationships and the application of the GST law, provides:
"Section 188-24 allows an agent the option of calculating their turnover as if the arrangement was not entered into. If the agent chooses not to use this basis of calculation, their turnover is calculated by using the value of the supplies they are taken to make under the arrangement as per sections 153-55 and 153-60."
Where the option available under section 188-24, of the GST Act, is exercised, provided the value of the taxable supply you make as an agent is the same amount as the creditable acquisiton you make as an agent, there will be no net effect.
Question
(c) Where s153-B is operating, what is the effect on instalment income of both parties for PAYG and BAS implications?
Decision
Subdivision 153B of the GST Act, does not alter the treatment for PAYG instalment purposes.
A Subdivision 153B of the GST Act agreement does not alter the fact that the sale proceeds are derived by the principal not the agent.
The full amount of the sale price (excluding any GST component) is included in the instalment income of the principal (unless the sale is of a capital item).
The principal's agent only includes in their instalment income any commission or fee (excluding any GST component) that they are entitled to. This is because for income tax purposes, the sale money is not income of the agent; it is income of the principal.
An agreement under subdivision 153-B does not create a supply between the principal and the agent for PAYG withholding purposes - Section 12-190 of the Taxation Administration Act 1953 (TAA). Whilst it would be rare for a principal not to quote an ABN to the agent under this arrangement, if this happened to be the case the agent should not withhold given that section 12-190, of the TAA, does not recognise that a supply has been made.
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