ATO ID 2001/195: GST and the Agency Relationship
Date of decision: 31 March 2000
Business line: Indirect Tax

Issue
Is the entity, an owner of commercial premises who is not registered or required to be registered for goods and services tax (GST), making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when those premises are supplied to a tenant through a real estate agent who is registered for GST?

Decision
No, the entity, who is not registered or required to be registered for GST, is not making a taxable supply of commercial premises under section 9-5 of the GST Act when those premises are supplied to a tenant through a real estate agent who is registered for GST.

Facts
The entity is an owner of commercial premises. The premises, which are being leased to a tenant, are managed by a real estate agent. The rental payments are collected by the real estate agent from the tenant. The real estate agent has the authority to act on behalf of the entity. The entity is not registered or required to be registered for GST. The real estate agent is registered for GST.

Reasons for decision
Summary: Section 9-5 of the GST Act states that 'you' make a taxable supply if certain requirements are met. Therefore, before examining the elements of section 9-5 of the GST Act, it is necessary to identify who is actually making the supply. The issue in this case is whether the entity, the owner of the commercial premises, or the real estate agent is making the supply of the commercial premises. Goods and Services Tax Ruling GSTR 2000/37 discusses the general law in relation to agency relationships. Paragraph 10 of GSTR 2000/37 explains that: 'An intermediary may be authorised by another party to do something on that party's behalf. Generally, the intermediary is called an agent. The party who authorises the agent to act on their behalf is called the principal.' Paragraph 15 of GSTR 2000/37 goes on to state 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.' In this case, the real estate agent has the authority to act on behalf of the entity. The entity, being the owner of the commercial premises is, therefore, the principal and the real estate agent is the agent. As such, any act performed by the real estate agent is considered to be an act of the entity. Although the agent manages the property and collects the rent from the tenant, these acts are considered to be acts performed by the entity. As a result, it is the entity, not the real estate agent that is making the supply of the commercial premises to the tenant. Therefore, if the supply of the commercial premises by the entity satisfies the requirements of section 9-5 of the GST Act, the supply is a taxable supply. Paragraph 9-5(d) of the GST Act requires that for a supply to be a taxable supply, the supplier must be registered or required to be registered for GST. In this case, the entity is not registered or required to be registered for GST. Consequently, the entity, the owner of the commercial premises, is not making a taxable supply under section 9-5 of the GST Act when it supplies those premises to a tenant through a real estate agent who is registered for GST.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 9-5 paragraph 9-5(d)
Related public rulings and determinations: Goods and Services Tax Ruling GSTR 2000/37
Subject references: Goods and Services Tax Taxable supply