Private ruling: GST and agency
Published: June 2012

Ruling: Q1: Do you have a GST liability where you charge and collect amounts through your e-lodgment platform, which relate to fees due and payable by the Subscribers to the State Authorities, and subsequently pay these amounts to the State Authorities? | A1: No. Facts You are the entity charged with establishing and delivering a uniform national platform to facilitate the electronic lodgment of government forms in Australia (e-lodgment). E-lodgment is about moving from a paper based system for lodging government forms to an electronic system that is national, secure and seamless. The platform will interface with State and Territory government offices (State Authorities), financial institutions, and service providers (Subscribers). This will provide a single interface for all State Authorities and all Subscribers in relation to lodgment transactions in Australia. The intention of e-lodgment is to remove time-consuming manual steps that have ordinarily been associated with traditional paper process, which has involved the preparation and lodgment of many documents with different parties to be formally made with a State Authority. E-lodgment will allow for the automated compliance of documents and verification to ensure that all parties are meeting their requirements. The e-lodgment system will also enable the collection of amounts due and payable by Subscribers to the State Authorities that the State Authorities would otherwise charge directly to the subscribers or customers of the Subscribers. By providing access to the e-lodgment platform and associated services in relation to e-lodgment, you will be making supplies to the Subscribers and State Authorities. You will charge various fees for the supplies that you make. These fees and supplies are not the subject of this private ruling application. The State Authorities' fees would include fees owed by the Subscribers to the State Authorities. Some of these fees will include an amount in respect of GST, while others will not. This will depend on what the State Authority is charging the fee for and whether there is any exception that excludes such as fee from being an amount of consideration for a supply which is subject to GST. You intend to make a lump sum payment of fees due by various Subscribers to the State Authorities. It is possible that some of the lump sum payment will include amounts that are yet to be recovered from a particular Subscriber. You would seek a repayment of such amounts from the Subscribers directly. Making a lump sum payment to the State Authorities is easier and more efficient for both you and the State Authorities as it reduces the number of transactions the parties have to process and means payments can be made on a periodic and regular basis to the State Authorities. The e-lodgment platform is still in the development stage. You provided a copy of a draft agreement which provides that the State Authority has authorised you to collect the fees as its agent. The draft agreement also provides that you must remit to the State Authority all fees you collected on their behalf on the same business day as you received them. You and the State Authorities do not intend on entering into a Division 153-B of the GST Act agreement to treat the State Authorities' supplies and acquisitions as separate supplies or acquisitions to you. You do not currently envisage charging a separate fee to the Subscribers or the State Authorities for your agency services, as you have already factored this cost into the various ongoing fees that you will charge to the Subscribers. You are registered for GST. You contend that you are acting as an agent of the State Authorities in respect of the State Authorities transactions with the Subscribers.


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 9-15. | A New Tax System (Goods and Services Tax) Act 1999 Section 9-40. | A New Tax System (Goods and Services Tax) Act 1999 Section 9-70. | A New Tax System (Goods and Services Tax) Act 1999 Section 195-1.

Reasons for decision: Summary: Section 9-40 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states that you must pay the GST payable on any taxable supply that you make. Section 9-5 of the GST Act sets out the requirements of a taxable supply and it states: You make a taxable supply if: · you make the supply for *consideration; and · the supply is made in the course or furtherance of an *enterprise that you *carry on; and · the supply is *connected with Australia; and · you are *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. (* denotes a term defined in section 195-1 of the GST Act.) On the information provided, your supply of providing access to the e-lodgment platform satisfies the requirements of paragraphs 9-5(a), 9-5(b), 9-5(c) and 9-5(d) as: · the supply is for consideration · the supply is made in the course or furtherance of your enterprise · the supply is connected with Australia and · you are registered for GST. There are no provisions in the GST Act or in any other Act that makes your supply GST-free or input taxed. Accordingly, your supply is a taxable supply under section 9-5 of the GST Act. Hence, you are liable to pay the GST. Section 9-70 of the GST Act provides that where you make a taxable supply, the GST payable is 10% of the value of the taxable supply. Generally, the value of the taxable supply is the total GST exclusive consideration received for the supply. 'Consideration' is defined in section 9-15 of the GST Act to include any payment, act or forbearance, in connection with, in response to or for the inducement of a supply of anything. The amount paid by a Subscriber includes amounts for fees payable to the State Authorities. These items may be separately identified on the invoice you give to the Subscriber. Therefore, it needs to be determined whether the part of the amount received from the Subscriber that is for State Authority fees is consideration for your supply. That is, is the Subscriber paying you for your services or is it paying the State Authority for the government fees. Goods and Services Tax Ruling GSTR 2000/37 discusses the principal and agency relationship and explains the application of the GST law to transactions involving these relationships. Paragraph 11 of GSTR 2000/37 states that 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. Paragraph 28 lists factors that may indicate that an agency relationship exists: · 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 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 some situations, these factors may be difficult to establish. However, documents used by the parties and the conduct of the parties may still indicate the existence of an agency relationship. Paragraphs 48 to 54 of GSTR 2000/37 consider the effects of an agency relationship on disbursements incurred by agents in the ordinary course of providing their services to a client. Although GSTR 2000/37 uses the example of solicitors acting as agents, the GST principles outlined in GSTR 2000/37 can generally apply to situations involving service providers and their clients. Paragraphs 48 and 49 of GSTR 2000/37 state: 48. Agents may incur expenses on a client matter both as an agent of the client and as a principal in the ordinary course of providing their services to the client. For example, in most cases, even though agreements between solicitors and clients may not use the term agent or agency, it is clear that the clients have authorised the solicitors to act on their behalf in the particular matter. When the solicitor acts as an agent for the client, the general law of agency applies so that the solicitor is 'standing in the shoes' of the client. 49. If a disbursement is made by a solicitor and incurred in the solicitor's capacity as a paying agent for a particular client, then no GST is payable by the solicitor on the subsequent reimbursement by the client. This is because the goods or services to which the disbursement relates are supplied to the client, not to the solicitor, by a third party. Also, the reimbursement forms no part of the consideration payable by the client for the supply of services by the solicitor. However, if goods or services are supplied to the solicitor to enable the solicitor to perform services supplied to the client, GST is payable by the solicitor on any reimbursement by the client of expenses incurred on those goods or services, whether the reimbursement is separately itemised or included as part of the solicitor's overall fee. This is because the reimbursement is part of the consideration payable by the client for services supplied by the solicitor. To make the distinctions clearer paragraphs 50 to 53 of GSTR 2000/37 describe the type of fees that a solicitor may pay on behalf of a client and describes when those fees would be paid as an agent and as a principal. Paragraphs 50 and 51 state: 50. The following are examples of common fees and charges, for which a client is liable, that may be paid for by a solicitor as a paying agent of the client. If the solicitor makes the payment, GST is not payable on the subsequent reimbursement by the client to the solicitor for: · application fees; · registration fees; · court fees; · barrister's fees when the barrister is engaged by the client; · incorporation fees; · most fees in connection with registering and maintaining the status of particular legal relationships such as companies, partnerships, societies or associations; · fines, penalties, stamp duty and taxes; and · probate fees. 51. The following are examples of common disbursements that, depending upon the contractual arrangements between the client and the solicitor, can be incurred by a solicitor and then reimbursed by a client as part of the consideration payable for legal services provided to the client by the solicitor. If the following disbursements are incurred by a solicitor, GST is payable on the subsequent reimbursement by the client to the solicitor: · search fees; · municipal search fee (eg rates; zoning; permits); · birth/death/marriage certificate fees; · barrister's fees when the barrister is engaged by the solicitor; · witness fees; · fees for recording court proceedings; · service of document fees; · fees for expert report or attendance in court; and · fees to obtain court transcript. · fees to obtain court transcript. You have advised that you have been charged with delivering e-lodgment in Australia. The e- lodgment system will enable the collection of amounts due and payable by Subscribers to the State Authorities. These amounts relate to fees that the State Authorities would otherwise charge directly to the Subscribers or customers of the Subscribers. The draft agreement provides that the State Authority has authorised you to collect various fees from the Subscriber as its agent. The draft agreement also provides that you must remit to the State Authority all fees collected on their behalf. In accordance with the draft agreement you are acting as an agent for the State Authority, in respect of the collection of the fees. Accordingly, these amounts do not form part of the consideration payable for your supply of providing access to the e-lodgment system. Hence you are not liable to pay GST on these amounts. You advised that you intend to make a lump sum payment of fees due by various Subscribers to the State Authorities. We consider that when you remit these amounts to the State Authorities, you are merely performing your role as an agent of the State Authorities. These amounts do not form part of the consideration payable for any acquisitions you make from the State Authorities. Hence, GST is not payable. You also have advised that it is possible that some of the lump sum payment you make to the State Authorities will include amounts for fees that are yet to be recovered from a particular Subscriber. You would then seek a reimbursement of such amounts from the Subscriber. We consider that when you initially pay these amounts to the State Authorities you are merely paying for the costs on behalf of the Subscriber. This is because the Subscriber is still liable to pay the applicable fees and the obligation rests with them. In this instance, you are acting as a paying agent for the Subscriber for these fees and charges. Accordingly, any subsequent reimbursements you seek from the Subscriber for these fees do not represent consideration for a supply that you make to them. Hence, you are not liable to pay GST on these reimbursements.

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