Private ruling: GST and instructor payments
Date of advice: 23 July 2020
Published: September 2020

Ruling: Q1: Are the payments consideration for taxable supplies made by the instructors to you and therefore resulting in you being entitled to input tax credits? | A1: No, the payments are not consideration for taxable supplies made by the instructors to you. Therefore, you are not entitled to input tax credits because you do not make creditable acquisitions.

Relevant facts and circumstances: You are registered for goods and services tax (GST).

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 9-20 | A New Tax System (Goods and Services Tax) Act 1999 section 11-20

Reasons for decision: Summary: You have requested advice on whether the payments that you make are consideration for a taxable supply being made by the instructors to you, and therefore resulting in you being entitled to an input tax credit for any GST included in the price. Section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that you are entitled to an input tax credit for any creditable acquisition that you make. You make a creditable acquisition if: It is the second dot point above that needs to be explored, that is, whether the supplier is making a taxable supply to you. Under section 9-5 of the GST Act, a supplier makes a taxable supply if: | Detailed Reasoning - Supplier: It needs to be determined who is the supplier of any potential supply in this case. The entity is receiving the monies on behalf of the instructors. The entity is required to pass these monies directly on to the relevant instructors and are not permitted to retain any of these monies. Therefore, it is the instructors who could potentially be making supplies to you. Consideration You provide payments which are consideration, via the entity, to the instructors. | Detailed Reasoning - Enterprise: It needs to be determined if the instructors are making a supply in the course or furtherance of any enterprise they carry on. The term 'enterprise' is defined in subsection 9-20(1) of the GST Act to include, among other things, an activity or series of activities, done in the form of a business or in the form of an adventure or concern in the nature of trade. However, subsection 9-20(2) of the GST Act provides that an enterprise does not include an activity, or series of activities, done, among other things: (a) by a person as an employee (b) as a private recreational pursuit or hobby, or (c) by an individual without a reasonable expectation of profit or gain. Whether or not an activity, or series of activities, amounts to an enterprise is a question of fact and degree having regard to all of the circumstances of the case. Miscellaneous Taxation Ruling MT 2006/1: The New Tax System: the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian Business Number (MT 2006/1) provides guidance on the meaning of the term 'enterprise' for the purposes of entitlement to an Australian Business Number (ABN). Goods and Services Tax Determination GSTD 2006/6 Goods and services tax: does MT 2006/1 have equal application to the meaning of 'entity' and 'enterprise' for the purposes of the A New Tax System (Goods and Services Tax) Act 1999 (GSTD 2006/6), confirms the discussion in MT 2006/1 applies equally to the term 'enterprise' in the GST Act. A private recreational pursuit or hobby is specifically excluded from the definition of enterprise by paragraph 9-20(2)(b) of the GST Act. 330. Activities may be excluded from the definition of enterprise by more than one of the exclusions. Activities may be excluded from the definition of enterprise because they are a private recreational pursuit or hobby. The same activities may also be excluded because there is no reasonable expectation of profit or gain. You have stated that the instructors complete an ATO Statement by a supplier form that is retained by the entity. On the ATO Statement by a supplier form, instructors select that the supply is made in the course of a private recreational pursuit or hobby. Therefore, the instructors have determined that they are performing their duties, for which they receive the payment, as a private recreational pursuit or hobby and it is not in the course of any enterprise that they carry on. As such, the supply is not a taxable supply by the instructors to you. Therefore, you are not entitled to input tax credits for the consideration you provided.

you acquire anything solely or partly for a creditable purpose, | the supply of the thing to you is a taxable supply, | you provide, or are liable to provide, consideration for the supply, and | you are registered or required to be registered for GST. | they make the supply for consideration, | the supply is made in the course or furtherance of any enterprise that you carry on, | the supply is connected with the indirect tax zone, and | the supplier is registered or required to be registered for GST.