Private ruling: GST and carrying on an enterprise and GST registration.
Date of advice: 20 July 2018
Published: September 2018
Ruling period: Not applicable
Date scheme commenced: Not applicable

Ruling: Q1: Are the partners carrying on an enterprise of providing disability services under an agreement with X and required to be registered for goods and services tax? | A1: Yes.

Relevant facts and circumstances: You provide full time care for a child with a disability. You entered into a contractor agreement (agreement) with an entity in respect to providing care to the child. You are defined as a contractor within the agreement. The relationship between you and the entity is defined as: The contractor performs services for the entity in relation to the Assignments as an independent contractor, not as an employee. This agreement does not create any partnership or joint venture between the parties. The Contractor is not an agent of the entity and does not have authority to enter into any commitment on behalf of the entity. The contactor will be responsible for all remuneration, entitlements, benefits, tax and insurances for or associated with any staff which it employs or engages. You provide the following services to the child: ● Provide accommodation to the child; ● Actively involve the child in family and household activities; ● Ensure that the child attends regular social, recreational, educational or work related activities; ● Support the child in attending medical appointments and reviews and administer medication when required; ● Liaise with people providing support to the child, including medical staff, the child’s family, staff of the entity and government agencies. ● And other obligations required to be performed by you as outlined in the agreement. The entity receives funding from a State Disability Services under the Alternative Family Placement fund for each child participating in the respite out of home care program. Each fortnight or month, you send an invoice to the entity for payments. Either party to the agreement may terminate the contract by giving 14 days’ notice. Your annual turnover is well over $XXX. You do not have any written agreement with the parents or representatives of the child to provide the disability services.

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 23-5 | A New Tax System (Goods and Services Tax) Act 1999 – section 188-10 | A New Tax System (Goods and Services Tax) Act 1999 – section 195-1

Reasons for decision: Summary: Section 23-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that you are required to be registered if you are carrying on an enterprise and your annual turnover meets the registration turnover threshold. According to section 23-15 of the GST Act, the registration turnover threshold is $75,000 unless you are a non-profit body ($150,000 for non-profit body). Section 188-10 of the GST Act describes when you will meet the registration turnover threshold in terms of either your current annual turnover or projected annual turnover. You reach the GST turnover threshold if either your turnover for the current month and the previous 11 months is $75,000 or more or; your turnover for the current month and the next 11 months is likely to be $75,000 or more. Your annual turnover in relation to the disability services provided under the agreement with the entity is more than $75,000. Therefore, the requirement of meeting the registration turnover threshold under section 23-5 of the GST Act is satisfied. | Detailed Reasoning - Carrying on an enterprise: Section 9-20 of the GST Act defines ‘enterprise’, amongst other things, as 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. The Tax Office view of what is an enterprise is contained in Miscellaneous Taxation Ruling MT 2006/1 (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. Goods and Services Tax Determination GSTD 2006/6 provides that the guidelines in MT 2006/1 are to apply to the meaning of the terms ‘entity’ and ‘enterprise’ as used in the GST Act and can be relied upon for GST purposes. In accordance with paragraph 159 of MT 2006/1, whether or not an activity or series of activities amounts to an enterprise is a question of facts and degree, having regard to all the circumstances of the case. It is important that the relevant activity or series of activities are identified in order to determine whether an enterprise is being carried on. This is because one activity may not amount to an enterprise but that activity taken into account with other activities may form an enterprise. All activities need to be taken into account including activities from the commencement to the termination. An adventure or concern in the nature of trade includes a commercial activity that does not amount to a business. These are the transactions of a commercial nature which are entered into for profit making, but are not part of the activities of an ongoing business. The activities carried on by you under the agreement are in the nature of commercial transactions. You will be issuing invoice to the entity and will receive payment as per the terms and conditions of the agreement. There is an intention of making profit from the supply of disability services. Therefore, based on the facts provided, it is our view that you are carrying on an enterprise of providing disability services. | Detailed Reasoning - Taxable supply: Section 9-5 of the GST Act provides that you make a taxable supply if you make the supply for consideration; the supply is made in the course or furtherance of an enterprise; the supply is connected with the indirect tax zone; and you are registered or required to be registered. However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. For a supply to be taxable all of the requirements of section 9-5 of the Act must be satisfied. You receive consideration from the entity for the supply of disability services; the supply is made in the course of your enterprise; the supply is connected with the indirect tax zone; and you are required to be registered for GST as your annual turnover is well over $75,000. There are no provisions in the GST Act that would make the supply of disability services as input taxed. Therefore, it should be determined whether you are making a GST-free supply of disability services under the agreement with the entity. | Detailed Reasoning - Recipient of the supply: Section 195-1 of the GST Act defines recipient in relation to a supply to mean the entity to which the supply was made. Where there are only two parties to the supply of services (the entity that supplies disability support services and the patient), generally there is a single supply to which the GST Act applies and the recipient of the supply is the patient. However, where there is a third party payer involved in a transaction there may be one or more supplies to which the GST Act applies and it is necessary to determine what is being supplied and to whom. For example, tripartite arrangements may result in a supply of professional services to a third party payer by an entity that supplies health services with a further supply of services to a patient. Goods and Services Tax Ruling GSTR 2006/9 provides further guidance on supplies made in multi-party arrangements. Paragraph 156 states: 156. In some fiduciary relationships it may be necessary for one party to give consent to the supply of a health service for another party. For example, a custodial parent gives consent for the medical treatment of a child. The Commissioner accepts in these circumstances that the other party, the child, is the recipient of the supply. In this case you do not have a written agreement with the parents or custodians of the child. You provide the disability services to the child based on the written agreement with the entity. You do not receive any payments from the parents or custodians of the child. The entity pays you for the disability services provided by you. Therefore, under the agreement you are providing the disability services to the child on the instruction of the entity. Under certain multi-party arrangements, an entity may make a GST-free supply of goods or services to an individual which results in the supplier making a further supply to a third party. The supply made to the third party will not be GST-free under provisions within Subdivision 38-B that requires the individual receiving the relevant goods and services to be the recipient of the supply. A GST-free supply of health service cannot be made to a business entity or a non-profit body. Based on the terms and conditions of the agreement, it is our view that you are providing a professional service to the entity by performing the disability services. | Detailed Reasoning - Specialist disability services: A supply of specialist disability services is GST-free under section 38-40 of the GST Act when provided to disabled people, where the supplier receives government funding under the Disabilities Services Act 1986 or under a complementary State law or Territory law in respect of the services. In this case, the entity receives funding directly from the State Disability Services for the disability services provided to the child. The entity had contracted with you to provide the service to the child. You will be receiving payments from the entity in accordance with the agreement. Therefore, the supplies made by you to the entity under the agreement will not be GST-free. You will be providing the disability services on behalf of the entity but will not satisfy section 38-40 of the GST Act as you do not receive the funding directly from the State Disability Services. | Detailed Reasoning - Conclusion: The activities carried on by you and your annual turnover will satisfy both requirements of section 23-5 of the GST Act. Therefore, you are required to be registered for GST. Under the agreement you are providing a professional service to the entity to provide disability care to the child and receive payments from the entity. The professional service provided by you is not GST-free and therefore it will be a taxable supply as explained above.