Private ruling: Goods and services tax (GST) and agency and invoicing
Date of advice: 17 September 2015
Published: September 2015

Ruling: Q1: Should you charge GST on an invoice you issue to a customer (an entity that purchases a performance) for a performance by a performer who is not registered for GST? | A1: No.

Relevant facts and circumstances: You are registered for GST. You operate as an entertainment agent representing performers. Some of the performers are not registered for GST. You enter into performance services contracts with customers (entities that purchase performance services). You and the performer agree that you are acting as an agent for the performer when you enter into performance services contracts with third party customers. You and the performer agree that you will invoice the customer on behalf of the performer. The invoice is the written performance services contract with the customer. The invoice details the terms of the performance agreement, for example, the venue. The invoice includes your ABN and the performer's ABN. A performer is contractually bound to provide a performance to a customer as a result of the performance services contract you enter into with the customer. You and the performer agree that you will receive a commission where you enter into a performance services contract with a customer on the performer's behalf and you invoice the performer for a commission. The performer tells you how much money they would like to receive for a performance (after deduction of your commission) and you charge the customer a price that is the sum of that amount and the amount of the commission. There is no agreement between you and a performer to the effect that you will buy a performance from the performer.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 subsection 7-1(1) | A New Tax System (Goods and Services Tax) Act 1999 section 9-5

Reasons for decision: Summary: GST should not be charged on the invoice that is issued to a customer (that buys performance services) where the performer is not registered for GST, because the performer is making the supply specified in that invoice and the performer is not registered for GST. | Detailed Reasoning - Detailed reasoning: GST is payable on taxable supplies. You make a taxable supply where you satisfy the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), which states: You make a taxable supply if: (a) you make the supply for *consideration; and (b) the supply is made in the course or furtherance of an *enterprise that you *carry on; and (c) the supply is *connected with the indirect tax zone; and (d) 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. (*Denotes a term defined in section 195-1 of the GST Act). In accordance with paragraph 9-5(d) of the GST Act, if a supplier is not registered for GST, GST is not payable on the supply that it makes. Paragraph 11 of Goods and Services Tax Ruling GSTR 2000/37 defines 'agent'. It states: 11. For commercial law purposes, an agent is a person who is authorised, either expressly or impliedly, by a principal to act for that principal so as to create or affect legal relations between the principal and third parties. In accordance with paragraph 45 of GSTR 2000/37, when an agent is authorised to undertake a transaction on behalf of the principal, thereby binding the principal to the legal effects of the transaction, the transaction is made by the principal through the agent. Paragraph 28 of GSTR 2000/37 provides guidance on determining whether a principal and agent relationship exists between two parties. It states: 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. We consider that you are acting as an agent for principals, being the performers, when you enter into performance services contracts with third parties, because: • You operate as an entertainment agent representing performers. • You and the performer agree that you are acting as an agent for the performer when you enter into performance services contracts with third party customers (the entities that purchase the performance services). • You and the performer agree that you will invoice the customer on behalf of the performer and the invoice is the written performance services contract with the customer. Therefore, the issue of these invoices involves an exercise of an authority that the performer gives you to enter into legal relations with third parties. • A performer is contractually bound to provide a performance to a customer as a result of the performance services contract you enter into with the customer. • The written performance services contract consists of an invoice, which you issue to the customer, on which you include the performer's ABN, which effectively amounts to you acting in the name of the performer. • You and the performer agree that you will receive a commission where you enter into a performance services contract with a customer on the performer's behalf and you invoice the performer for a commission. • There is no agreement between you and a performer to the effect that you will buy a performance from the performer. As you are acting as an agent for a principal (the performer) when you enter into a performance services contract with a third party customer, the performers are making a supply of a performance through you as agent, to the customer. The performance fee is consideration for that supply. Therefore, GST does not apply to the performance fee that the customer pays if the performer is not registered for GST. Hence, you should not be charging GST on the invoice that you issue to a customer where the performer is not registered for GST (the invoice should not specify or indicate a GST amount and the word 'tax' should not appear before the word 'invoice' and no party has a GST liability to the Australian Taxation Office in respect of the price on this invoice).