Private ruling: Goods and services tax (GST) and on-charge of business costs
Date of advice: 22 April 2016
Published: June 2016

Ruling: Q1: Are you liable to pay GST on your charge for mileage (kilometres travelled) expended, to attend on-site works? | A1: Yes.

Relevant facts and circumstances: You are registered for GST. You are a business that provides on-site consultancy services. You carry on your business in Australia only. The services relate to land in Australia only. You supply your services in exchange for a fee, which includes an amount for mileage (kilometres travelled) expended to attend on-site works such as surveys and meetings. The charge for mileage is to recover the estimated fuel cost in travelling. There is no private component to the travel mileage - it is entirely a business cost and is essential to deliver your on-site consultancy services.

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 | A New Tax System (Goods and Services Tax) Act 1999 section 9-15 | A New Tax System (Goods and Services Tax) Act 1999 section 9-70 | A New Tax System (Goods and Services Tax) Act 1999 subsection 9-75(1)

Reasons for decision: Summary: You are liable to pay GST on the charge for mileage because this charge is part of the consideration for your taxable supply of consultancy services. | Detailed Reasoning - Detailed reasoning: You are liable to pay GST on any taxable supplies that you make. 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 the GST Act) The indirect tax zone is Australia. You meet the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act. This is because: • you supply your consultancy services for consideration • your make the supplies in the course or furtherance of your enterprise • these supplies are connected with Australia, and • you are registered for GST. There are no provisions in the GST Act under which your supply of the consultancy services is GST-free or input taxed. As all of the requirements of section 9-5 of the GST Act are met, you are liable to pay GST on your supply of consultancy services. Consideration for the supply In accordance with subsection 9-15(1) of the GST Act, consideration includes any payment in connection with, or in response to, a supply of anything. Pursuant to section 9-70 and subsection 9-75(1) of the GST Act, the amount of GST payable on a taxable supply is 1/11 th of the price (consideration) for the supply. For a payment to be consideration for a supply, the payment must have a sufficient nexus with that supply. See Goods and Services Tax Ruling 2001/4 at paragraphs 89 to 96 and Goods and Services Tax Ruling GSTR 2001/6 at paragraphs 64 to 72 (type in GSTR 2001/4 or GSTR 2001/6 into an internet search engine). Where an entity makes a taxable supply in exchange for a fee that includes an amount that represents an on-charge of an associated business cost, that on-charge forms part of the consideration (price) for the taxable supply that the entity makes. Therefore, the entity/supplier is liable to pay GST on the on-charged amount. For further information on the GST treatment of business expenses that are on-charged see Goods and Services Tax Ruling GSTR 2000/37 and Goods and Services Tax Determination 2000/10. Where you supply consultancy services in exchange for a fee that includes an amount for mileage (kilometres travelled), the charge you impose for mileage is an on-charge of a business cost you incur in order to make your supply of consultancy services. The charge you impose for mileage has a sufficient nexus with your supply of consultancy services and is in response to that supply. Hence, as your supply of consultancy services is a taxable supply, the charge you impose for mileage is part of the consideration for your taxable supply. Therefore, you are liable to pay GST on the charge you impose for mileage. Please note that we cannot advise you on how to calculate the GST inclusive mileage charge because this is a contractual and pricing matter. That is, whether you add an additional 10% to the amount that you on-charge, or absorb the GST on that amount, is a matter between you and the recipient of the supply. There are no provisions in the GST Act which specify how a supplier should determine the price for their supply.