Private ruling: Supply of adviser services
Published: February 2015

Ruling: Q1: Is the supply of adviser services by X Ltd in relation to an Australian expatriate retail client (client) who is a resident of [ ] and has been accepted as a member of the superannuation products offered by A Ltd that form part of the A Superannuation Fund a taxable supply where the consideration for that supply is either an upfront member advice fee or ongoing member advice fee (together Adviser Service Fee or ASF) which is deducted from the client's account by A Ltd and paid to X Ltd? | A1: No. The Commissioner considers that the one set of activities performed by X Ltd for the payment of an ASF results in X Ltd making a supply of adviser services to both the client and A Ltd. The Commissioner also considers that in making the ASF payment to X Ltd, A Ltd is doing so as a result of an obligation A Ltd has entered into with X Ltd. However, X Ltd's supply of adviser services to A Ltd (for the ASF payment made by A Ltd) is not a taxable supply because the supply is not connected with Australia (for the avoidance of doubt the Commissioner also confirms that the supply of adviser services made to the client is not a taxable supply as it is neither made for consideration given by the client nor made in connection with Australia). Consequently, Division 84 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) potentially applies to the supply of adviser services by X Ltd to A Ltd (the resulting implications of which for A Ltd are explained in the Additional Information section of this ruling).

Relevant facts and circumstances: X Ltd is a company which is incorporated and resident overseas and has no presence in Australia. X Ltd has obtained an Australian Financial Services (AFS) licence for the purpose of advising o and dealing in Australian retail financial products. As a condition of obtaining that AFS licence X Ltd has also obtained an Australian Business Number (ABN). X Ltd supplies services to retail clients (client) who are Australian expatriates resident overseas seeking access to Australian financial products. A Ltd A Ltd is the Responsible entity for the superannuation products offered by A Ltd that form part of the A Superannuation Fund. A Superannuation Fund Application Form: X Ltd supplied to the ATO a copy of the A Superannuation Fund Application Form (Application Form) whereby X Ltd's client chooses to open an A Superannuation account. The name and Australian Business Number (ABN) of each of A Ltd and the A Superannuation Fund appear at the foot of the Application Form. Pursuant to the numbered Steps in the Application Form the client chooses the type of account, provides personal and bank account details, details of initial contributions, transfers and rollovers, tax file number, investment instructions for managed funds and other investments and ASX securities, and selects an auto sell-down profile in the event that the balance in the client's cash account falls below the required minimum level. Step WW of the Application Form allows the client to nominate a person as the client's financial adviser (being the person entitled to adviser remuneration) and the amounts of any upfront member advice fee and ongoing member advice fee. Where an AFS licensee (e.g. X Ltd) is nominated as adviser the client is required to include the name of the individual adviser acting as the AFS licensee's representative. Step ZZ sets out the matters that the client agrees to by applying for membership of the A Superannuation Fund, including authorising A Ltd to disclose to the nominated adviser information regarding the application and related investments and for A Ltd to pay the fees outlined in Step WW to the adviser named in Step WW. Step ZZ also states that the client acknowledges that A Ltd has not given the client any advice with regard to the A Superannuation Fund. Product Disclosure Statement A Supplementary PDS for the A Superannuation Fund amends the original PDS by stating that member advice fees are agreed between the client and the client's adviser for services provided by the adviser and that when the client signs the Application Form the client agrees to pay the upfront and ongoing member advice fees. The original PDS stated that the amount of fee to be deducted from the client's account will differ from the amount of fee agreed with the client's adviser because the A Superannuation Fund is entitled to receive a Reduced Input Tax Credit (RITC) on the GST payable on certain fees, the value of which is passed on to the client by reducing the fee by the amount of the RITC. The clause in the original PDS dealing with RITCs was deleted by the Supplementary PDS. Licensee Registration Form X Ltd supplied a copy of a Licensee Registration Form issued by A Ltd which registers X Ltd with A Ltd as a Licensee/Dealer. The Terms and Conditions in the Licensee Registration Form begin with X Ltd's obligations to A Ltd as an Adviser Representative, including ensuring that X Ltd holds an AFS Licence which authorises X Ltd to distribute A Ltd's products, familiarisation with the current versions of the relevant PDS issued by A Ltd, and agreeing not to deal with a client's investments except in accordance with the client's instructions. The Terms and Conditions then deal with A Ltd's obligations to X Ltd (as Adviser Representative) including endeavouring to ensure that PDSs comply in all material respects with the law and regulatory policy. The Terms and Conditions state that X Ltd acknowledges that X Ltd is responsible for all advice to the client in relation to A Ltd's products and that A Ltd does not provide investment advice. The Terms and Conditions also deal with GST, including an acknowledgement by X Ltd that X Ltd is registered for GST and that X Ltd can issue a tax invoice in respect of the provision of services to A Ltd but agrees not to because A Ltd will instead issue a RCTI to A Ltd. The copy of the particular Licensee Registration Form signed on X Ltd's behalf amends the Terms and Conditions related to GST by stating that X Ltd is not GST registered and holds a GST private ruling which states that X Ltd is not required to register for GST. Deduction of GST from ASF paid to X Ltd For a period A Ltd took an ASF out of the Superannuation account of a client resident in [ ] who nominated X Ltd as adviser and paid the ASF to X Ltd without making any GST deduction. However, subsequently A Ltd began deducting GST from the ASF before paying the balance of the ASF to X Ltd. Submissions A Ltd submitted that the relevant supply is between the adviser (e.g. X Ltd) and the client, not the A Superannuation Fund. X Ltd relied on the description of the upfront member advice fee and ongoing member advice fee in the PDS. X Ltd further submitted that A Ltd was not the recipient of an imported service for the purposes of Division 84 of the GST Act for the same reason, i.e. the recipient of the supply made by X Ltd is the client, not A Ltd.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 , Section 9-5.

Reasons for decision: Summary: The supply of adviser services by X Ltd for which an ASF is consideration is made to both the Australian expatriate retail client resident in [ ] and to A Ltd. However, X Ltd's supply of adviser services to A Ltd (for the ASF payment made by A Ltd) is not a taxable supply as it is not connected with Australia. Consequently Division 84 of the GST Act potentially applies to the supply of adviser services by X Ltd to A Ltd. | Detailed Reasoning - Detailed reasoning: Taxable supply Section 9-5 of the GST Act 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 Australia; 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. A taxable supply is made by one entity (the supplier) to another entity (the recipient) if all of the requirements in section 9-5 are satisfied. Paragraph 9-5(a) imposes on the supplier the fundamental requirement that it must make a 'supply' (within the meaning of section 9-10) for 'consideration' (within the meaning of section 9-15). Subsection 9-15(1) states that the 'consideration' for a supply includes any payment 'in connection with', 'in response to' or 'for the inducement of' a supply. Subsection 9-15(2) further establishes that the payment does not have to be made by the recipient of the supply. In determining whether a payment is consideration under section 9-15 and whether there is a supply made for consideration', paragraph 180 of Goods and Services Tax Ruling GSTR 2006/9 states that: • the test is whether there is a sufficient nexus between the supply and the payment made; this test is objective; • regard needs to be had to the true character of the transaction; and • an arrangement between the parties will be characterised not merely by the description that the parties give to the arrangement, but by looking at all of the transactions entered into and the circumstances in which the transactions are made. Paragraph 180B of GSTR 2006/9 states: In identifying the character of the connection, the word 'for' ensures that not every connection between supply and consideration meets the requirements for a taxable supply. That is, merely having any form of connection of any character between a supply and payment of consideration is insufficient to constitute a taxable supply. The principles set out in proposition 16 in GSTR 2006/9 provide that, in this case the true nature of a transaction involving the payment of an ASF (in terms of answering the statutory questions of 'who is making a supply to whom' and 'what is being supplied') depends upon an examination of the total fact situation. Characterisation process To determine who is making a supply to whom in relation to payment of an ASF, paragraphs 222 to 223 of GSTR 2006/9 provides the following guidance: 222. Where the parties to a transaction have reduced their understanding of the transaction to writing, that documentation is the logical starting point in determining the supplies that have been made. An examination of any relevant documentation and the surrounding circumstances, which together form the total fact situation, is also important in determining whether the documentation captures the nature of a transaction for GST purposes. 223. Australian courts have held that an arrangement between the parties will be characterised not merely by the description the parties give to the arrangements, but by looking at the transactions entered into and the circumstances in which the transactions are made… Relevantly, the correct approach to the characterisation of a tri-partite arrangement is also informed by the observations of Edmonds J in the Full Federal Court case ATS Pacific Ltd v Commissioner of Taxation [2014] FCAFC 33 who noted that in determining the character of a supply pursuant to an executory contract: …a court is not to be "handcuffed" by the terms embodied in the four corners of the contract, the more so if those terms and conditions do not represent all the terms and conditions of the contract, or where the contract is but one link in the chain of contracts, the performance of each being related to, if not dependent on, performance of the immediately preceding contract: or where, by reference to the factual matrix of the entirety of the arrangements, the commercial or practical reality points to the conferral or provision of a supply which goes beyond the conclusion that might otherwise be drawn from a confined analysis of the terms and conditions of one contract in the chain. Further, in identifying whether the entry into, or things done in the performance of, these obligations, constitutes a 'supply' for GST purposes, the High Court in Commissioner of Taxation v MBI Properties Pty Ltd [2014] HCA 49 at 33 and 35 relevantly observed that: 33. Federal Commissioner of Taxation v Qantas Airways Ltd shows that it is wrong to consider that one transaction must always involve the making of just one supply. It is similarly wrong to consider that the making of a supply must always involve the taking of some action on the part of the supplier. …. 35. A transaction which involves a supplier entering into and performing an executory contract will in general involve the supplier making at least two supplies: a supply which occurs at the time of entering into the contract, in the form of a contractual obligation to perform: and a supply which occurs at the time of contractual performance, even if contractual performance involves nothing more than the supplier observing a contractual obligation to refrain from taking some action or to tolerate some situation during a contractually defined period. In the present case it is not immediately clear which particular agreement (i.e. the Application Form, the PDS, or the Licensee Registration Form) represents the 'logical starting point' to begin the GST analysis. That is, it is not obvious from these documents who between A Ltd and the client, enters into an obligation to pay an ASF to X Ltd. Therefore, in order to determine the essential character of an ASF payment transaction it is necessary to firstly identify who, between A Ltd and the client, is under a legal obligation to make an ASF payment to X Ltd. Identifying the entity liable to pay the ASF to X Ltd The PDS states that an ASF is agreed between the client and the client's adviser for services provided by the adviser in relation to the client's interest in the A Superannuation Fund and that when the client signs the Application Form the client authorises A Ltd to pay the ASF. The following inferences may be drawn from this statement: • that the client has entered into a separate agreement with X Ltd under which the following rights and obligations have been created and exchanged: • X Ltd has entered into obligation to provide the client with services in relation to the client's interest in A Ltd's financial product (which creates in favour of the client the right to the performance of those services by X Ltd); and • the client has entered into an obligation to pay X Ltd the agreed ASF (which creates in favour of X Ltd a right to receive such a payment from the client upon X Ltd's performance of its obligations); • that A Ltd agrees (as part of accepting the client as a member of A Ltd's financial product) to perform the client's obligation to pay X Ltd the agreed ASF amount (upon X Ltd's performance of its obligations to provide services to the client in relation to the client's interest in A Ltd's financial product). Despite the impression given by the above PDS extract that it is the client which initially incurs the liability to pay X Ltd the ASF, no such evidence to this effect has been tendered. In the absence of such information, it is relevant to consider the alternative proposition that the ASF liability is first and foremost incurred by A Ltd. In this regard, it is noted that X Ltd must be registered with A Ltd before X Ltd can distribute A Ltd's financial products. This is achieved through the completion of the Licensee Registration Form. The Licensee Registration Form identifies that as a registered 'Licensee', X Ltd is entitled to receive all commission payments for the clients X Ltd registers with A Ltd as an Adviser Representative. Further, the Terms and Conditions evidence that it is through the Licensee Registration Form that X Ltd becomes bound by the terms of the PDSs insofar as they are relevant to X Ltd. On this basis, it may be argued that the Licensee Registration Form, together with the PDS and the Application Form, create a framework for the negotiation, consent, recognition and payment of remuneration to X Ltd insofar as it relates to X Ltd's: • distribution of A Ltd's financial products; and/or • performance of services in relation to a client's interest in A Ltd's financial products. That is, in offering and supplying its financial products, A Ltd contemplates the adviser/client relationship and brings it within the scope of its contractual framework. Further, because the adviser/client relationship is critical to the effective and efficient operation of A Ltd's financial products, A Ltd agrees to remunerate the adviser on the terms that have been negotiated between the adviser and its client. On this basis, the Commissioner considers that the ASF liability is incurred by A Ltd and arises from a combination of the operation of the terms and conditions of the Licensee Registration Form, the relevant PDS and the relevant Application Form. It follows from this view that that the ASF liability is not incurred as a consequence of A Ltd assuming the liability from the client. Support for viewing A Ltd as the 'liable' entity may also be drawn from the observation that the contributions received by A Ltd from the client form part of the assets of the financial product which are legally owned by A Ltd for the benefit of the client. In turn, A Ltd will notionally allocate this value to the client's account, which is then debited by the value of the investments selected, together with any fees and charges levied by A Ltd. At any given time, the value of the client's account (which includes the crediting of income entitlements derived from the selected investments), together with the value of the selected investments, represents the value of the client's interest in the financial product/retirement benefit. For GST purposes, the debiting of fees from the client's account recognises the notional allocation of a cost, rather than the actual payment by a client for a supply. Hence, when an ASF is incurred by A Ltd, A Ltd will be able to call upon the terms of the governing trust deed/constitution to pay that expense out of the assets of the financial product (or else be entitled to a reimbursement out of those assets). Upon doing so, A Ltd will notionally allocate the cost to the client account. As such, the debiting of the ASF from the value of the client account does not represent the payment of that expense by the client, or the provision of consideration for a supply made by X Ltd. Having found that A Ltd is the entity which incurs the liability to pay the ASF to X Ltd, this doesn't automatically establish A Ltd as the recipient of the supply made by X Ltd. Rather, consistent with the principle in paragraph 115 of GSTR 2006/9, an examination of the total fact situation of the tri-partite arrangement involving X Ltd, the client and A Ltd may reveal that: • X Ltd is making and providing a supply to the client for consideration that is paid by A Ltd; • X Ltd is making a supply to A Ltd, but providing that supply to the client; or • X Ltd is making and providing a supply to both A Ltd and its client (i.e. the one set of activities constitutes the making of supplies to two different entities). Identifying the true nature of an ASF payment transaction From the documentation cited, it is clear that the only express obligations owed by X Ltd to A Ltd are those described under the terms and conditions of the Licensee Registration Form. While the performance/observation of these obligations by X Ltd has a 'connection' with the receipt of an ASF from A Ltd, the Commissioner considers that they are not done 'for' the payment of an ASF so as to constitute a supply that is made by X Ltd to A Ltd for consideration given by A Ltd. Further, representations contained in the Licensee Registration Form make it clear that X Ltd is not placed under any obligation to A Ltd to provide the client with advice on A Ltd's behalf. Accordingly, the arrangement between the parties cannot be characterised as one involving X Ltd being placed under an obligation to A Ltd to provide something to the client. Equally, no evidence has been provided establishing that X Ltd is placed under an obligation to the client to do particular things the performance of which would constitute a supply being made to the client. Consequently, the circumstances surrounding an ASF payment transaction are somewhat unique in that X Ltd is clearly performing a service for consideration, however X Ltd appears to be doing so without being placed under legally enforceable obligations by either A Ltd or the client. This is possibly explained by the nature of the financial products being offered by A Ltd and the role that X Ltd plays in delivering those product benefits to clients. On this basis, the Commissioner considers that an ASF payment transaction is better characterised in light of the nature of both the financial products offered by A Ltd and the authority granted by a client when the client nominates X Ltd as the client's 'adviser representative'. In terms of these financial products, A Ltd essentially provides an administrative service (involving execution, administration, settlement and reporting functions) that 'wraps' around the client's investment portfolio (i.e. the client's beneficial interest in the financial product). The investment portfolio is picked by the client by way of choosing from the investment menu offered by A Ltd. The administrative 'service' is typically provided through a trust structure which, in the case of the superannuation products, complies with the necessary regulatory requirements to enable the concessional tax treatment of the contributions paid in, the income derived and the benefits paid out. As such, A Ltd provides the client with the capacity to control the investment of the client's funds in a streamlined manner which reduces the client's compliance burden (which would otherwise be the case if for example the client operated its own self-managed super fund). Further, the financial products are designed with the client's financial adviser in mind as they enable the client / financial adviser relationship to continue within the product's framework. That is, when a client appoints X Ltd as its 'adviser representative', X Ltd will have the full authority to act on the client's behalf on matters concerning the client's account and investments. X Ltd does this by accessing A Ltd's secured website under the terms and conditions of the Licensee Registration Form previously entered into with A Ltd. Through being granted access A Ltd's website, X Ltd obtains access to A Ltd (to send and receive instructions / notifications) and to the client's account. Additionally, having resort to A Ltd's website enables X Ltd to take advantage of product features (i.e. investment selection, execution and settlement of trades and reporting functionality) which enhance the management of the client's interest in the product. In this way, A Ltd is also providing X Ltd with the ongoing ability to manage the financial interests of X Ltd's clients through A Ltd's product framework. In turn, this enables A Ltd to provide clients with the benefit of A Ltd's financial products. On this basis, the Commissioner takes the view that an ASF payment secures the ongoing involvement of X Ltd in relation to the client's investment in A Ltd's financial product. Further, this 'involvement' takes the form of X Ltd actively managing the client's interest in A Ltd's financial product (devised outside of the scope of the arrangement entered into with NIL), which may be described as the performance of 'adviser services'. As previously discussed, the Commissioner does not consider that there is contractual support to find that X Ltd is placed under an obligation to A Ltd to provide X Ltd's client with adviser services. Accordingly, the GST characterisation of an ASF payment transaction ultimately depends on whether X Ltd is making and providing a supply of adviser services: • to both their client and A Ltd; or • to their client with consideration being paid A Ltd (as a third party payer) Application of 'Proposition' 15 of GSTR 2006/9 GSTR 2006/9 establishes a number of propositions for characterising and analysing supplies. In particular, Proposition 15 provides guidance for determining whether one set of activities constitutes the making of two or more supplies. Relevantly paragraph 217 of GSTR 2006/9 states: This proposition is illustrated by Federal Commissioner of Taxation v. Secretary to the Department of Transport (Vic) ( Department of Transport ), where the activity undertaken by the taxi operator of transporting the eligible passenger resulted in two distinct supplies being made: (i) supply of transport to the passenger; and (ii) supply to the Department of the service of transporting the eligible passenger. As explained in paragraph 221A of GSTR 2006/9, while there was no indication on the facts in Department of Transport that there was a binding obligation between the Department and the taxi operator for the latter to provide transport to the eligible passenger, the Full Federal Court concluded that there was a supply of the service of transport of the eligible passenger by the taxi operator to the Department. That is, Department of Transport is an example of a supply being made to the payer under a tripartite arrangement that also involves a supply by the supplier to the customer, even where there is no binding obligation between the payer and the supplier to make the supply to the customer. In practice, whether a similar supply can be identified in a different arrangement will require careful consideration of all the relevant facts and circumstances. In this regard, the Commissioner considers that the following factors, which are outlined in paragraph 221B of GSTR 2006/9, in combination, may point to a supply being made by the supplier to the payer under a tripartite arrangement: there is a pre-existing framework or arrangement between the payer and the supplier which contemplates that the parties act in a particular manner in respect of supplies by the supplier to particular third parties or a class of third parties; the pre-existing framework or arrangement: identifies a mechanism by which the particular third parties or the class of third parties are to be identified so that the supplies made to them come within the scope of the framework or arrangement; and specifies that the payer is under an obligation to pay the supplier if there is a relevant supply by the supplier to a third party and also sets out a mechanism by which such payment is authorised; the framework or arrangement and the mechanism for authorising the payment are in existence before the supply by the supplier to the third party (that is, the supplier knows in advance that the payer is obliged to pay some or all of the consideration in the event of the supply to the third party); the supplier makes the supply to the third party in conformity with the pre-existing framework or arrangement between the parties; and the obligation of the payer to make payment pursuant to the pre-existing framework or arrangement is not merely an administrative mechanism or direction 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 arrangement applies, the framework or arrangement establishes a liability owed by the payer (not the third party) to the supplier in the event that there is a supply by the supplier to the third party. As previously discussed, the tripartite arrangement in the present case involves X Ltd supplying adviser services, even though there is no binding obligation between either A Ltd (as payer of the ASF) or the client. That aside, it is necessary to consider the arrangement (governed by an interlocking set of relationships/contracts) in light of the abovementioned factors to determine whether or not A Ltd (as the payer of the ASF to X Ltd) is the recipient of a supply of adviser services from X Ltd. In doing so the Commissioner considers that: • there is a pre-existing framework (established by the combined operation of the Licensee Registration Form/PDS/Application Form) which contemplates the manner in which A Ltd and X Ltd act in respect of the supply of adviser services to a client who acquires an interest in A Ltd's financial product; • a client who acquires an interest in A Ltd's financial product does so through the mechanism of an Application Form is identified so that the supply of adviser services to that client comes within the scope of and is governed by the 'pre-existing' framework; • the terms of the Licensee Registration Form/PDS/Application Form make A Ltd liable to pay an ASF to X Ltd which is effectively authorised by the mechanism of the acceptance of the client's Application Form to acquire an interest in A Ltd's financial product; • the framework and mechanism for authorising payment of the ASF is in existence before X Ltd makes a supply of adviser services to a client (that is X Ltd knows in advance that A Ltd will pay all of the consideration in the event that X Ltd makes a supply of adviser services to the client); • X Ltd makes the supply of adviser services in conformity with the pre-existing framework (the ASF only compensates X Ltd for actively managing the client's investment strategy that is being implemented through A Ltd's product platform); and • when viewed in light of all the surrounding circumstances, A Ltd's obligation to make a payment of an ASF arises from the supply of adviser services under the framework and not from A Ltd assuming a ASF liability owed by the client to X Ltd established outside the framework. • A Ltd's supply of services through its products are the administration of client's superannuation and investment accounts, which includes the deduction and payment of ASF from client to the adviser, for which A Ltd receives administration fees, as defined in its product disclosure statements. X Ltd has no interest in A Ltd's administration fees. Consequently, the Commissioner considers that the factors mentioned when viewed in combination show that the one set of activities carried out by X Ltd involves X Ltd making a supply of adviser services to both its client and to A Ltd. Further, X Ltd makes the supply in order to obtain the payment of an ASF by A Ltd, as defined in above paragraphs. That is, while X Ltd is furnishing the client with adviser services when X Ltd manages the client's interest in A Ltd's financial product (for an ASF that is negotiated between these parties), A Ltd is also deriving a benefit from the supply of these services through the administration of its products. This is because the ongoing involvement of X Ltd is a fundamental design feature of the operation of a financial product offered by A Ltd. Therefore, recognising A Ltd as also being the acquirer of adviser services reflects the commercial reality of an ASF payment transaction and, by extension, is not a misapplication of the 'Redrow' principle. It follows, that the facts do not support the a characterisation of the an ASF payment transaction as giving effect to an administrative arrangement between the client and A Ltd for A Ltd to pay on behalf of the client a liability that the client owes to X Ltd. The Commissioner also considers that viewing A Ltd as the recipient of the adviser services supplied by X Ltd is not affected by the client and X Ltd separately entering into contractual arrangements for the payment of 'ongoing fees'. In this regard, the Commissioner notes that an ASF is likely to fall within the scope of an 'ongoing fee arrangement' in section 92A of the Corporations Act 2001 for the purposes of the application of certain Future of Financial Advice reforms. Supply of adviser services not connected with Australia It follows that the supply of adviser services made by X Ltd to A Ltd is made for consideration for the purposes of section 9-5(a) of the GST Act. However, X Ltd does not make a taxable supply as the supply is not made in connection with Australia as required by paragraph 9-5(c). | Detailed Reasoning - Additional Information: While X Ltd is not made liable to pay GST under section 9-40, Division 84 of the GST Act potentially applies to the supply of adviser services by X Ltd to A Ltd as that supply relates to A Ltd making supplies that would be input taxed. Where A Ltd is liable to pay GST under the provisions of Division 84, A Ltd may be able to partially offset that liability by claiming an input tax credit (ITC) under Division 11 and/or a reduced input tax credit (RITC) under Division 70. Where A Ltd is liable to pay GST on the acquisition it makes from X Ltd and is entitled to an ITC and/or RITC, it is reasonable to expect that the difference will be a cost that A Ltd is able to allocate to the client account. In doing so, the client will ultimately bear the cost of the GST incurred by A Ltd, however this does not mean that the client has provided consideration (or directly incurred GST) for the supply of adviser services by X Ltd.