Private ruling: GST and country loadings
Published: December 2012

Ruling: Q1: Is your employer required to include GST in an amount that your employer pays to you in respect of the country loadings? | A1: No, your employer is not required to include GST in an amount that your employer pays to you in respect of the country loadings.

Relevant facts and circumstances: You are engaged by an entity as an employee solicitor. You primarily conduct workers compensation matters around country areas. Under the Workers Compensation Acts , costs for solicitor's services include professional fees and regulated disbursements. This is supported by Workers Compensation Regulation 2010 Part 17 subdivision 2 as follows: Subdivision 2 Maximum costs recoverable by legal practitioners and agents in compensation matters 98 Maximum costs recoverable (1) The costs that are recoverable, and the maximum costs that are recoverable, for: (a) legal services or agent services provided in or in relation to a claim for compensation, and (b) matters that are not legal or agent services but are related to a claim for compensation, are the costs set out in Schedule 6, except as otherwise provided by this Part. Note. The effect of this clause is that a legal practitioner or agent cannot recover any costs in relation to a claim for compensation unless those costs are set out in Schedule 6, except as otherwise provided in this Part. Regulated disbursements are provided in Part 3 of Schedule 6 of the Workers Compensation Regulation 2010. Country/interstate loadings (including travel and accommodation expenses) are dealt with under Item 1 in the table. This is payable in accordance with Motor Accidents Compensation Regulation 2010 , Schedule 1, clause 3 or 4 (as relevant); and clause 15 of Part A applies as well. The Motor Accidents Compensation Regulation 2005 Schedule 1 provides for maximum costs for legal services. Part 3 deals with country loadings. This regulation sets out the loadings which are applicable. Regulation 16 of the Motor Accidents Compensation Regulation 2005 states that GST can be added to costs when any GST is payable in respect of the service to which the cost relates (there are some costs that would not attract GST and therefore it would not be added in relation to those items). In certain workers compensation matters, the insurer was required to pay the workers costs in relation to a statutory workers compensation claim. When an agreement is reached with the workers compensation insurer, it is agreed that the solicitor's country loading should be a regulated amount plus GST. A cheque is sent to your employer as part of the costs and disbursements, plus medical reports and the Applicant's worker's reimbursement of travel expense. Your employer has adopted a policy that the travelling employee solicitor is only entitled to the country loading without the GST component. You are not required to vouch expenses or refund unexpended amounts to your employer.

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 Subsection 9-5 | A New Tax System (Goods and Services Tax) Act 1999 Subsection 9-20(1) | A New Tax System (Goods and Services Tax) Act 1999 Subsection 9-20(2) | A New Tax System (Goods and Services Tax) Act 1999 Section 9-20(4)

Reasons for decision: Summary: Subsection 7-1(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that GST is payable on taxable supplies. Section 9-5 of the GST Act provides that 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. As such, we need to consider whether you are carrying on an enterprise. Subsection 9-20(1) of the GST Act provides the definition of enterprise for GST purposes. This definition includes an activity or series of activities done in a form of a business; or in the form of an adventure or concern in the nature of trade. Subsection 9-20(2) of the GST Act explains that an enterprise does not include an activity or series of activities done as an employee or in connection with earning withholding payments covered by subsection 9-20(4) of the GST Act. Withholding payments covered by subsection 9-20(4) of the GST Act include 'payment to employee'. In your case, as an employed solicitor, any supply that you make in the course of your duties as an employee is not considered to be in the course or furtherance of an enterprise that you carry on. Consequently, when you receive a payment from your employer for your travel in the course of your duties as an employee, it is not consideration for a taxable supply that you made. As such, no GST is payable under subsection 7-1(1) of the GST Act and there is no GST included in the payment. Paragraphs 48, 49 and 53 of Goods and Services Tax Ruling GSTR 2000/37, provide guidance on the treatment of solicitors' disbursements for GST purposes. | Detailed Reasoning - Agency relationship and disbursements: 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. 53. The following are examples of costs that a solicitor may incur in carrying on the business of providing a legal service to the client. GST is payable on any subsequent payment by the client to the solicitor for the supply of the legal service for: · telephone expenses; · postage expenses; · photocopying expenses; · courier expenses; · word processing expenses; and · travel expenses of the solicitor and staff. In your case, your travel expenses as a staff member (employee solicitor) will be one of the costs that your employer incurs in carrying on the business of providing a legal service to the client. It is not one of the costs that you incur in providing a legal service to the client. Therefore, when your employer pays you an amount for travel expenses, this is an amount incurred in carrying out your duties as an employee. It is not an amount earned in carrying out your enterprise. As such, no GST is included in the amount paid to you. Please note that the amount that your employer pays to you in respect of travel expenses as an employee is not governed by GST law and the ATO cannot comment on the quantum of the payment to you.

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