Private ruling: GST and under claimed ITC
Published: December 2012

Ruling: Q1: Are you entitled to input tax credits (ITC) for payments for services under the scheme (Scheme)? | A1: Yes. | Q2: Will the Commissioner exercise his discretion to treat the documents held as a tax invoice? | A2: Yes.

Relevant facts and circumstances: You are registered for goods and services tax (GST). You are seeking to a refund of unclaimed ITC. For the tax periods some of the tax periods the Scheme was run by another entity. For later tax periods you assumed the responsibilities of the Scheme following the split. The GST status of the supply to you and to the former entity is considered to be the same. You operate the Scheme to provide financial assistance to an eligible person (Member). The Scheme is a program aimed at aiding Members without access to certain facilities. The Scheme provides the Member with up to $X per financial year to spend access to services from participating providers. To become a Member eligible individuals are required to present an indentifying document (ID) and lodge their application for a Scheme card. Approved applications are processed and the applicant receives a card (Card). The Card shows the Scheme's name and the name of the issuing entity. It has a specific identifying number and the cardholder's name. It also states that the card is used for the Scheme's purposes only. It includes an expiry date. In order to take advantage of the Scheme the Member presents their Card and ID at the point of purchase to a participating provider. The Card is swiped by the provider and the value of the purchase is deducted from the Card. The Member is not required to make payment unless there are insufficient funds remaining on the Card. You have engaged a separate entity (Cashing Agent) to manage invoicing and payment to the relevant suppliers under the Scheme. You make payment for the supplies under the Scheme through the Cashing Agent. On regular basis the Cashing Agent reconciles the invoices (which are GST inclusive) purchased under the Scheme. The Cashing Agent subsequently issues an invoice to you for the amount payable for the week, including a detailed schedule listing each individual transaction. Neither you nor the Cashing Agent receives a tax invoice from the individual suppliers in relation to services purchased through the electronic payment system. You are requesting that the Commissioner exercise the discretion under section 29-70 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) to treat the invoice and the associated transaction listing as a valid tax invoice on the basis that it contains all of the information required for a tax invoice. You advise that the transaction listing contains the following: § The relevant Scheme card number § The Member's details (name and address) § The date of the transaction § The value of the transaction (GST exclusive and GST inclusive) § The amount of the GST payable in relation to each transaction § The provider's identity and Australian business number § A description of the thing supplied. The majority of the individual supplies have a GST value of less than $75 and as such a tax invoice is not required to claim the ITC. You use the non-cash basis of accounting for GST purposes.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 Section 9-5 | Section 9-20 | Section 11-5 | Section 11-15 | Subsection 29-10(1) | Subsection 29-10(2) | Subsection 29-10(4) | Subsection 29-70(1) | Subsection 29-70(1B) | Subsection 29-80(3) | Division 93 of the GST Act | Subregulation 29-80.01 of the A New Tax System (Goods and Services Tax) Regulations 1999 Section 105-55 of Schedule 1 to the Taxation Administration Act 1953

Reasons for decision: Summary: You are entitled to claim the ITC in relation to the supplies made under the arrangement as we consider you have acquired the services and the requirements of section 11-5 of the GST Act are satisfied. | Detailed Reasoning - Detailed Reasoning: Goods and Services Tax Ruling 2006/9 (GSTR 2006/9) examines the meaning of 'supply' in the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) which also has relevance to acquisitions. Of particular relevance in this case are paragraphs 53-56 of GSTR 2006/9 which state: 53. The meaning of 'acquisition' in section 11-10 is the corollary of the meaning of supply in section 9-10. Subsection 11-10(1) provides that, 'An acquisition is any form of acquisition whatsoever'. Subsection 11-10(2) refers to the thing acquired, such as goods, services or a right, and the means by which the thing is acquired, such as its receipt or acceptance. 54. To make an acquisition you have to be the 'recipient' of the supply of the thing you are acquiring. Although the term 'recipient' does not appear in Division 11, it is defined in section 195-1 to mean the entity to which the supply was made. This definition suggests that there is a supplier, a recipient and that something is passed from the supplier to the recipient. 55. The supplier and the recipient have to be different entities because an entity cannot make a supply to itself. Also, the recipient has to be identified, as you cannot make a supply to the world at large. However, a supply can be made for no consideration. Creditable acquisitions and input tax credits 56. If you make an acquisition and the other requirements of section 11-5 are met then the acquisition is a creditable acquisition. However, if you are not the recipient of the supply you will not have made a creditable acquisition, even if you provide consideration for the supply. It is first necessary to determine whether you are the recipient of a supply when you make a payment through your Cashing Agent to the supplier. Where no supply is made to you in return for the payment, it is considered that you are only making a third party payment and the payment is not made for any acquisition by you. In this case, we need to establish whether there are two separate supplies made by the suppliers being: § the supply made by the them to the customer who is eligible under the Scheme- supply 1. § the supply made to you for the consideration of the payment - supply 2. Supply 1 is not within the scope of this Ruling and is not discussed further. As stated in the draft addendum GSTR 2006/9DA, the Commissioner considers that the following factors, in combination, may point to a supply being made by the supplier to the payer in a tripartite arrangement that involves a supplier providing a service or goods to the customer, and where there is no binding obligation between the payer and the supplier for the supplier to provide the service or goods to the customer: § There is a pre-existing framework or agreement between the payer and the supplier which contemplates that the parties act in a particular manner in respect of supplies that are to be provided by the supplier to particular third parties or a class of third parties. § The pre-existing framework or agreement identifies a mechanism by which the particular third parties or the class of third parties are to be identified such that the supplies provided to them come within the scope of the framework. § The pre-existing framework or agreement specifies that the payer is under an obligation to pay the supplier if the supplier provides a relevant supply to a third party and also sets out a mechanism by which such payment is authorised. § The framework or agreement and the mechanism for authorising the payment are in existence before the supplier provides the supply to the third party (i.e. the supplier knows in advance that the payer is obliged to pay some or all of the consideration where that supply is provided to the third party) § The supplier provides the supply to the third party in conformity with the pre-existing framework or agreement between the parties; and § The obligation of the payer to make payment pursuant to the pre-existing framework or agreement is not an administrative arrangement to pay on behalf of the third party for a liability owed by the third party to the supplier. Rather, once the supply becomes a supply to which the framework or agreement applies, the framework or agreement establishes a liability owed by the payer (not the third party) to the supplier in the event that the supplier provides the relevant supply to the third party. Where the above conditions are met there will be two supplies. These are the supply of a service to the Member and the supply to you of the service of providing that service to the Member. | Detailed Reasoning - Pre-existing framework for the supplier to act in a particular manner: You advise that in this case that a pre-existing framework exists between you and suppliers that require them to act in a particular manner in respect of supplies made to Members. Specifically, the framework requires that participating suppliers accept to provide the service on presentation of the customer's ID and Card. The suppliers agree to do so on the basis that they will subsequently be reimbursed by you under the Scheme. | Detailed Reasoning - Mechanism for identifying eligible recipients: To become a Member, eligible pensioners are required to present their PCC and lodge their application for the Card at a participating outlet. Approved applications are processed and the applicant receives a Card. The Card is shows the Scheme's name and the name of the issuing authority. It has a specific identifying number and the cardholder's name. It also states that the card is the Scheme's purposes only. It includes an expiry date The PCC and Card together are in themselves advance authorisation from you that the Member is entitled to the benefits under the Scheme. The Member presents their PCC and Card to the supplier and it is at this point that the supply becomes a supply under the Scheme and you assume liability to make payments under the Scheme. | Detailed Reasoning - Requirement to pay the supplier and an established mechanism for making payment: At the completion of the supply the Member presents their Card. Payment for the supply is made on your behalf via the agency responsible for the managing of the Card processing function under the Scheme. The framework or agreement and the mechanism for authorising the payment are in existence before the supplier provides the supply to the Member i.e. the supplier knows in advance that the payer is obliged to pay some or all of the consideration where the supply is provided to the Member The Card can only be used with participating suppliers. The suppliers are aware that they must accept the Card when presented by a Member as payment for the supply. They are also aware that the amount payable for the supply will be paid by you in accordance your obligations under the Scheme. You advise that your Cashing Agent handles payment to the suppliers. By arrangement payment is paid to the suppliers on the basis of information provided to the Cashing Agent. | Detailed Reasoning - Supplier provides the supply in accordance with the pre-existing framework or agreement: Where the requirements of the arrangement between you and the are followed in accordance with these arrangements there will be a supply to you. | Detailed Reasoning - Liability is owed by you: When the Card is presented the supply becomes a supply under the Scheme and you assume liability to make payments under the Scheme. You owe the amount payable to the suppliers under the terms of the Scheme. | Detailed Reasoning - Conclusion: In considering the above factors a supply has been made to you. Section 9-5 of the GST Act provides that the supply by the suppliers is a taxable supply where they have provided a supply for consideration in the course of their enterprise, the supply is connected with Australia and they are registered for GST. There are no provisions in GST Act or any other Act to make the supplies GST-free or input taxed. The supply to you is a taxable supply where the aforementioned conditions are satisfied. Section 11-5 of the GST Act provides that you will have made a creditable acquisition where: § you acquire the thing 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. You have satisfied the first point in the foregoing as you have acquired the services in carrying on your enterprise and it is not in relation to making supplies that are input taxed or private or domestic. The services have been acquired as part of your enterprise per section 9-20 of the GST Act. You also provide the consideration and you are registered for GST. Where the supply to you is taxable all of the conditions of section 11-5 are satisfied. You are therefore entitled to ITC in respect of the acquisition. However, attribution of the ITC will occur in the tax period when you hold a tax invoice for the relevant supply. | Detailed Reasoning - Question 2: Will the Commissioner exercise his discretion to treat the documents held by you as a tax invoice? | Summary: Where the value of the transaction does not exceed $75 you are not required to hold a tax invoice. The ITC can be attributed in the tax period in which you paid any of the consideration or in the current tax period For those transactions the value of which exceeds $75 the Commissioner will treat the information contained in the invoice and associated transaction listing as a tax invoice. For those transactions you may attribute the ITC in the tax period in which the transactions would have been attributable had you held a tax invoice or you can attribute the ITC in a current tax period. | Detailed Reasoning - Low value transactions - GST exclusive amount does not exceed $75: Per subsection 29-80(1) of the GST Act a tax invoice is not required for low value transactions. For the purposes of subsection 29-80(1) of the GST Act with effect from 1 July 2007 the amount of $75 is specified. Where an entity uses the non-cash basis of accounting for GST purposes it can attribute the ITC in the tax period that it provided any of the consideration. However under subsection 29-10(4) of the GST Act an entity is able to attribute the ITC in a later tax period subject to Division 93 of the GST Act which is about time limits on entitlements to ITC. In your case Division 93 of the GST Act does not apply as we consider your ruling request to be a notice under section 105-55 of Schedule 1 to the Taxation Administration Act 1953 for the purposes of preserving your entitlement. Consequently, for low value transactions you are able to revise the earlier activity statements or attribute the ITC on a current or later activity statement. | Detailed Reasoning - Transactions - GST exclusive amount exceeds $75: Amendments to the tax invoice regime were enacted and apply in relation to net amounts for tax periods commencing on or after 1 July 2010. Subsection 29-70(1) of the GST provided the Commissioner with a discretion to treat as a tax invoice a document/s that is not a tax invoice for tax periods prior to this date. For tax periods commencing on or after 1 July 2010 subsection 29-70(1B) of the GST Act provides the Commissioner with a discretion to treat a document/s as a tax invoice. Neither you nor your Cashing Agent receive a tax invoice from the individual suppliers in relation to service processed through the electronic payment system. You have advised that your Cashing Agent on a weekly basis provides you with a summary invoice and transaction listing for the supplies made under the Scheme. The following information can be ascertained by you from these documents: § the relevant Scheme card number § the Member's details (name and address) § the date of the transaction § the value of the transaction (GST exclusive and GST inclusive) § the amount of the GST payable in relation to each transaction § the supplier's identity and Australian business number, and § a description of the thing supplied. We consider that this information is sufficient to determine the GST payable if any and hence the ITC to each transaction and the Commissioner will exercise his discretion under subsection 29-70(1B) of the GST Act to treat the summary invoice and transaction listing as a tax invoice. For transactions where the GST-exclusive amount is greater than $75 you can include the ITC in the net amount for the original tax period or the current tax period. As stated above the ruling requests is considered to be a notice for the purposes of section 105-55 of Schedule 1 to the TAA and Division 93 will not apply to restrict your entitlement to claim the ITC.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.