Private ruling: GST and supply of agency services
Date of advice: 9 August 2016
Published: September 2016

Ruling: Q2: Is the commission that you received from the owner consideration for a taxable supply under section 9-5 of the GST Act in regard to the sales of the owner's goods under the Agency Agreement? Advice/ Yes, the commission that you have received from the owner is consideration for a taxable supply under section 9-5 of the GST Act in regard to the sales of the owner's goods under the Agency Agreement.


Relevant legislative provisions: A New Tax system (Goods and Services Tax) Act 1999 section 9-5

Reasons for decision: Summary: The sale of the goods to the purchaser is not a taxable supply under section 9-5 of the GST Act since the owner of the goods is not registered for GST. The payment you receive from the purchaser is therefore not consideration for a taxable supply. | Detailed Reasoning - Detailed reasoning: GST is payable on a taxable supply. A supply is a taxable supply under section 9-5 of the GST Act if: a) the supplier makes the supply for consideration; and b) the supply is made in the course or furtherance of an enterprise that the supplier carries on; c) the supply is connected with the indirect tax zone; and d) the supplier is registered or required to be registered for GST. However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. From the information received, you have made an agency sale when you sell the goods on behalf of the owner as their agent to the purchaser. 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. 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, then the transaction is made by the principal through the agent. Under the GST Act the supplier is generally responsible for determining the GST status of its supply. Accordingly, it is your responsibility to determine the GST status of the sale that you made on behalf of the principal when selling the goods to the purchaser. You must also provide this information to the principal because the principal is bound by the legal effect of your action. GST status of supply made through you One of the requirements of a taxable supply is that the supplier is registered for GST. You advised that the principal is not registered for GST. In this instance paragraph 9-5(d) of the GST Act is not satisfied and GST would not be applicable to the supply of goods made by you to the purchaser. The payment you received from the purchaser is therefore not consideration for a taxable supply. You will need to notify the principal that they will not be liable for GST on this sale as they are not registered for GST. Further you will need to notify the purchaser that they cannot issue you with an RCTI since the supply was not a taxable supply | Summary: The commission you received for your supply of agency services to the principal is a taxable supply under section 9-5 of the GST Act | Detailed Reasoning - Detailed reasoning: From the information received your supply of agency services to the principal is a taxable supply under section 9-5 of the GST Act as: • you make your supply for consideration (commission received); • you make the supply through a business that you carry on; • the supply is connected with the indirect tax zone as the agency services is done in Australia and made through a business that you carry on in Australia; • you are registered for GST; and • your supply is neither an input taxed nor a GST-free supply. You are therefore liable to pay GST for your supply of agency services to the principal.

Question 1: Is the payment that you received from the Australian purchaser consideration for a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when you sold the goods to the purchaser on behalf of the owner under the Agency Agreement you have with the owner? | No, the payment that you have received from the purchaser is not consideration for a taxable supply under section 9-5 of the GST Act when you sold the goods on behalf of the owner under the Agency Agreement because all the requirements in section 9-5 of the GST Act are not satisfied. | Relevant facts: You are registered for the goods and services tax (GST) and carry on your business in Australia. | You have entered into an Agency Agreement with an Australian individual who is not registered for GST. In the agreement you agreed that you will act as a Commission agent for the sale of the goods owned by the individual (referred as principal in the agreement). You will receive a commission on completion of the sale. | In the Agency Agreement you and the principal agree that you will only act as an agent and you do not hold the goods in your own right. You will sell the goods on behalf of the owner and you do not set the sale price of the goods. | You sold the goods to an Australian purchaser. The purchaser issued you with a Recipient Created Tax Invoice (RCTI) for your sale. You have given us with a copy of the RCTI that shows the total price and a GST component.