ATO ID 2001/474: GST and payments for seconded employees
Date of decision: 13 September 2001
Business line: Indirect Tax

Issue
Is a government related entity, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it receives payment for the secondment of its employees to a non-government entity?

Decision
Yes, the government related entity is making a taxable supply under section 9-5 of the GST Act when it receives payment for the secondment of its employees to a non-government entity.

Facts
The entity is a government related entity (entity). It has reciprocal arrangements for the secondment of its employees to a non-government entity (recipient). The secondment to the entity does not change the employment status of the entity's employees. The entity enters into agreements to charge the recipient the antispiated costs of employing the seconded employees during the duration of the secondments. Tha calculation takes into account the salaries of the employees, plus the relevant on-costs such as annual leave, long service leave, payroll tax, workers compensation, superannuation, use of entity's motor vehicles and mobile pghone and the entity's administration costs. The entity is registered for goods and services tax (GST). The supply of the services that are provided by the entity's seconded employees are connected with Australia. The payment by the recipient is not covered by an appropriation under Australian Law.

Reasons for decision
Summary: Under section 9-5 of the GST Act, an entity makes a taxable supply if: The existence of a 'supply' itself is an essential element in determining whether the transaction is a taxable supply under section 9-5 of the GST Act. Section 9-10 of the GST Act discusses the meaning of the word 'supply' for GST purposes. Paragraph 9-10(2)(b) of the GST Act states that a supply includes a supply of services. In this case, it is considered that the entity makes a supply of services that are performed by the seconded employee when it seconds its employees to the recipient. The term 'consideration' is defined in section 195-1 of the GST Act and for a supply or acquisition, means any consideration , within the meaning given by section 9-15, in connection with the supply or acquisition. Paragraph 9-15(1)(a) of the GST Act includes any payment, or any act or forbearance, in connection with a supply of anything as consideration. The entity has entered into a written agreement with the recipient which specifies an amount to be paid for the secondment of the employee. Therefore, the payment that the entity receives is consideration for the supply of its employees' services. Subsection 9-20(1) of the GST Act defines an enterprise as an activity, or series of activities, which include such things as 'in the form of a business'. The supply made by the entity to the recipient is in the course or furtherance of its enterprise. The entity carries on activities in the form of a business, and the provision of the services of its employees constitute a supply made in connection with those activities. The entity is registered for GST and the transaction is a 'supply' that fulfils all of the requirements of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply of services under 9-5 of the GST Act when it receives payment for the secondment of its employees to another entity.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 9-10 paragraph 9-10(2)(b) paragraph 9-15(1)(a) subsection 9-20(1) Division 38 Division 40 Section 195-1
Related ATO interpretative decisions: ATO ID 2013/54
Subject references: Goods and services tax GST supplies and acquisitions GST consideration GST enterprise GST supply Taxable supply Appropriation