Private ruling: GST accounting for agents
Published: September 2011

Ruling: Q1: Are you required to account for the GST for the goods and services supplied on behalf of the other entity and entitled to claim input tax credits for the goods and services acquired for the other entity? | A1: No (please refer to reasons for the decision).

Relevant facts and circumstances: You are a member of an organisation (the other entity) formed to coordinate some activities. The other entity is governed by a Committee made up of representatives from participating members. You are registered for goods and services tax (GST). According to the arrangement in place, each participating member holds the finance for the other entity for a period of time, by rotation. You will charge no fees for this service to the other entity. You are the current and the first member appointed to hold the finances for the other entity, who is not registered for GST purposes. All money received by you on behalf of the other entity is paid into a separate fund account. All money spent by you to make purchases for the other entity is paid for out of the separate fund account. At the end of your rotation you will forward the balance in the separate fund account to the next participating member, who will hold the finances for the other entity. You provide a copy of the documents which explain further about the above arrangement (explanatory documents). You provide copies of your tax invoices issued to various recipients where you collect fees for the other entity. You also state that most tax invoices for acquisitions are issued by third party providers to the other entity, not to you. Two of them are issued to you, however, in the description of the supply, the third party provider states that the supply is for the other entity. You also state that all invoices which you authorise for payments from the separate fund account. are acquisitions on behalf of the other entity You state that there is no written agreement between you and the other entity.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 9-40 | A New Tax System (Goods and Services Tax) Act 1999 section 153-15 | A New Tax System (Goods and Services Tax) Act 1999 section 9-5 | A New Tax System (Goods and Services Tax) Act 1999 section 11-20

Reasons for decision: Summary: Section 9-40 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) deals with the liability for GST on taxable supplies. This section states 'You must pay the GST payable on any taxable supply that you make". 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. Section 11-20 of the GST Act states "you" are entitled to the input tax credit for any creditable acquisition that "you" make. Therefore it is necessary to identify who is making the creditable acquisition. Although you issue tax invoices to various recipients in your name, you state that you are acting as an agent for the other entity when you collect the fee from various recipients for the other entity's service to the recipients. Similarly you state that you are acting as an agent when you purchase and pay for goods and services from third parties for the other entity. Goods and Services Tax Ruling GSTR 2000/37 discusses the general law in relation to agency relationships . Under the general law, agency is a relationship between two persons where the principal, expressly or impliedly, consents that the other (the agent) should act on the principals behalf. The agent must also consent to act as an agent. Generally, the term agency connotes an authority or capacity for the agent to create or effect legal relations for the principal and third party. Whether an agency relationship exists between parties is a question of fact. The fact that the parties adopt the terminology of agency is not decisive, and cannot be given effect if that would contradict the effect of the agreement as a whole. As Gray J stated in Re Porter; Re Transport Workers Union of Australia (1989) 34 IR 179 at 184 : Although the parties are free, as a matter of law, to choose the nature of the contract which they will make between themselves, their own characterisation of that contract will not be conclusive. A court will always look at all of the terms of the contract, to determine its true essence, and will not be bound by the express choice of the parties as to the label to be attached to it. Therefore, the matter to be determined is whether you have made taxable supplies or acquired goods and services under the explanatory documents as an agent for the other entity, or as a principal. Paragraph 28 of Goods and Services Tax Ruling (GSTR) 2000/37 states as follows: 28. In most cases, any relevant documentation about the business relationship, the description used by the parties and the conduct of the parties establish the existence of an agency relationship. Therefore, the following factors may show that you are an agent under an agency relationship, although no single factor (by itself) is determinative: · any description of you as an agent, having authority to act for another party, in an agreement (expressed or implied) between you and the other party; · any exercise of the authority that you are given to enter into legal relations with a third party; · whether you bear any significant commercial risk; · whether you act in your own name; · whether you are remunerated for your services by way of commissions and whether you are entitled to keep any part of your remuneration secret from another party; and · whether you decide the price of things that you might sell to third parties. In this instance, you have an oral agreement that you are handling the finance for the other entity for a set period of time, whereupon you are allowed to collect the fee set by the other entity from various recipients of the other entity's service. You can purchase and pay for goods and services on behalf of the other entity. However, according to the tax invoices issued by third party providers, the other entity seems to be a disclosed principal in relation to your purchases for the other entity. . All money received by you on behalf of the other entity is paid into a separate account. All money spent by you to make purchases for the other entity is paid for out of the separate account. At the end of your rotation you will forward the balance in the separate account to the next participating member, who will hold the finances for the other entity. Paragraph 10 of GSTR 2000/37 states as follows: 10. 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 as follows: 15. 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… When all the factors listed above are taken into account together with your explanatory documents, we agree that you have the authority to act on behalf of the other entity and you are acting as an agent of the other entity. The other entity is, therefore, the principal and you are the agent. As such, any act performed by you is considered to be an act of the other entity. Although you manage the service and collect the fee from the various recipients, these acts are considered to be acts performed by the other entity. As a result, it is the other entity, not you, that is making the supply of the service to the various recipients. Paragraph 55 of GSTR 2000/37 states 55. If you are an agent at general law, you are an agent for GST purposes unless Subdivision 153-B applies. Accordingly, if you are an agent (where taxable supplies are made through you), the principal is liable for any GST payable on the supplies. Also, if you are an agent (where creditable acquisitions are made through you), the principal is entitled to any input tax credits You state that you have not entered into a written agreement under Subdivision 153-B of the GST Act with the other entity. Paragraph 24 of GSTR 2000/37 explains that Subdivision 153-B of the GST Act simplifies the way you can account for GST by allowing an option for entities to enter into an arrangement under which an agent is treated as a separate supplier and/or acquirer. Accordingly, as an agent you are not liable for the GST payable on the taxable supplies you make on behalf of the other entity. Nor do you have an entitlement to input tax credit on the acquisitions you make on behalf of the other entity. | Detailed Reasoning - Additional information:: Paragraphs 61 of GSTR 2000/37 states as follows: 61. Paragraph 29-70(1)(a) requires that the principal (as the supplier) must issue a tax invoice for a taxable supply. However, if a principal makes a taxable supply through an agent, section 153-15 allows either a principal or an agent, but not both, to issue the tax invoice. A principal may be liable to a penalty, under the TAA, if the principal and agent both issue separate tax invoices for the same taxable supply. Paragraphs 62 to 71 of GSTR 2000/37 provides in detail the requirements that the principal and the agent must comply with when an agent issues a tax invoice or adjustment notes in particular circumstances.

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.