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1 Is Entity A (you) making creditable acquisitions under section 11-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when making payments to service providers in respect of certain organisations?

1 Yes. Question 2 Is Enity A making creditable acquisitions section 11-5 of the GST Act when making payments to a service provider on behalf of certain persons? Answer 2 Yes. This ruling applies for the following period: XX/XX/20XX to XX/XX/20XX

and circumstance This private ruling is based on the facts and circumstances set out below. If your facts and circumstances are different from those set out below, this private ruling has no effect and you cannot rely on it. Find out more about when you can rely on your private ruling at ato.gov.au/relyonprivateruling. You are an Australian government agency and registered for GST. You are established and governed through Acts of parliament. Under an Act, you engage with Service Providers for the supply of goods to third party Persons or Organisations. You provide payment to the Service Provider who do not charge fees to these third-party Persons or Organisations. Supply arrangements are governed by the law and supported by rules and determinations related to subsidy mechanisms. A supply of goods to a Persons or Organisations provided is a GST-free supply. The Minister has the authority to make 'special arrangements' for the supply of goods. The relative legal instruments make a special arrangement for the supply of goods for certain persons. You make these payments to the Service Providers as part of arrangements involving several parties.

There are no contractual agreements between parties. Service providers supply goods are remunerated an amount that is pre-determined. The third parties are not required to make any contribution towards the cost of the goods supplied once they ordered on the approved form and supplied by a service provider. You provide a recipient created tax invoice to the service providers upon making a payment to the service providers in respect of a supply of goods to Persons.

A New Tax System (Goods and Services Tax) Act 1999 section 9-5 A New Tax System (Goods and Services Tax) Act 1999 section 9-10 A New Tax System (Goods and Services Tax) Act 1999 section 9-15 A New Tax System (Goods and Services Tax) Act 1999 section11-5 A New Tax System (Goods and Services Tax) Act 1999 section 11-10 A New Tax System (Goods and Services Tax) Act 1999 section 11-15 A New Tax System (Goods and Services Tax) Act 1999 section 38-50 A New Tax System (Goods and Services Tax) Act 1999 section 195-1

Question 1 Summary Under the arrangement with third parties, the payments which are the subject of this ruling are the payments made by you to service providers of goods supplied to third parties. Detailed reasoning Section 11-5 of the GST Act provides that you make a 'creditable acquisition' if: (a)          you acquire anything solely or partly for a creditable purpose (b)          the supply of the thing to you is a taxable supply (c)           you provide, or are liable to provide, consideration for the supply, and (d)          you are registered or required to be registered for GST. Section 11-10 of the GST Act defines an 'acquisition' as any form of acquisition whatsoever. Section 11-15 of the GST Act provides that you acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise. We must examine if all of the requirements of section 11-5 of the GST Act will be satisfied to determine if the fees you pay are for creditable acquisitions to you from the service providers.

Section 9-5 of the GST Act provides that you make a taxable supply if amongst other things if you make the supply for consideration. The term 'supply' is defined in section 9-10 of the GST Act as 'any form of supply whatsoever' and includes: an entry into, or release from an obligation: to do anything to refrain from an act, or to tolerate an act or situation. 'Recipient' is defined in section 195-1 of the GST Act to mean the entity to which the supply was made. You make payments to the service providers as part of arrangements involving you, service providers, third party and eligible persons. In relation to the requirement in paragraph 11-5(b) of the GST Act, if you are the recipient and the supply is a taxable supply, then this element would be satisfied. The supplies that you are paying for are taxable supplies. For the supplies that are taxable supplies we need to determine if you are the recipient for paragraph 11-5(b) of the GST Act to be satisfied. It is important to note that the recipient of the supply will not necessarily be the entity who pays the supplier. An analysis of an arrangement may reveal that:

•                     a supply is made to one entity (the recipient) but be provided to another entity •                     two or more supplies are made for the one activity, or •                     a supply is made and provided to one entity but the consideration for the supply is paid by a third party. Proposition 15 of Goods and Services Tax Ruling GSTR 2006/9 Goods and services tax: supplies (GSTR 2006/9) (at [217]-[221S]), considers the circumstances where there may be two or more supplies arising from the one set of activities. This proposition is illustrated in Federal Commissioner of Taxation v Secretary to the Department of Transport (Vic) [2010] FCAFC 84 ( Department of Transport

). A number of factors are set out in paragraph 221B (see below) of GSTR 2006/9 which may point to a supply being made to a payer under a tripartite agreement. Ultimately, it is a question of fact and degree whether a supply to the payer can be identified in a tripartite arrangement. Even where all of the factors listed in paragraph 221B are present, there may be something else in the total fact matrix which points to the payment not being consideration for a supply to the payer (GSTR 2006/9, [221G]). The primacy of the facts in each case, in analysing supplies made in a tripartite arrangement, was emphasised by Edmonds J in Professional Admin Services Centres Pty Ltd v FC of T [2013] FCA 1123. This sentiment is also reflected in the comments by the majority in Department of Transport , at [39], and the economic realities of the transaction were seen as important in TT-Line Company Pty Ltd v Commissioner of Taxation [2010] FCAFC 147 , at [17] & [[50], see also Saga Holidays Ltd v Commissioner of Taxation (2005) 149 FCR 41; Federal Commissioner of Taxation v Reliance Carpet Co Pty Ltd (2008) 236 CLR 342.

The following paragraph of GSTR 2006/9 highlights factors that may point to a supply being made to a payer where there is a supply to a third party: 221B. The Commissioner considers that the following factors, in combination, may point to a supply being made by the supplier to the payer under a tripartite arrangement that involves a supply by the supplier to the customer, even where there is no binding obligation between the payer and the supplier for the supplier to make a supply to the customer: (a) there is a pre-existing framework or agreement 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; (b) the pre-existing framework or agreement: (i) identifies a mechanism by which the particular third parties or the class of third parties are to be identified such that the supplies made to them come within the scope of the framework or agreement; and

(ii) 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; (c) the framework or agreement 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); (d) the supplier makes the supply to the third party in conformity with the pre-existing framework or agreement between the parties; and (e) the obligation of the payer to make payment pursuant to the pre-existing framework or agreement is not an administrative arrangement 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 agreement applies, the framework or agreement 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.

The framework between you and the service providers about the manner in respect of supplies made by the service providers to third parties. The mechanism for service providers to verify if supplying to a third party is through a number which is issued on approval and provided to service providers. You are under an obligation to pay the service suppliers for the supply of goods to the third party according to the relevant determinations. Service providers are aware in advance that you are obliged to pay some or all of the consideration in the event of the supply to the third party. The service providers have a statutory entitlement to payment by you which has a corresponding statutory obligation to make the payment to the service providers on behalf of a third party. The service providers make the supply to the third parties in conformity with the pre-existing framework set out in the relevant determination and under an Act. You are not just paying on behalf of the third party; You have established a framework that rests the liability with you rather than the third party. Section 221E of GSTR 2006/9 states: 221E. The pre-existing framework or agreement must:

•                    be capable of allowing the supplier to identify the third parties (or classes of third parties) and the supplies that come within the scope of the framework and must be in existence before the relevant supply is made; and •                    set out the authorisation process, in advance of the supply, by which the obligation arises for the payer to make payment. In your case, the service provider has the capability to identify the third party through unique registration number, what supplies are allowed to be made to the third party under the statutory framework. Based on the facts, the service providers have made two distinct supplies simultaneously: •                     Supply to third party: of goods (GST free) •                     Supply to the payer (you): of the obligation to make supplies to third parties. This is a taxable supply to You. Consequently, the requirements of paragraph 11-5(b) of the GST Act have been met and you make creditable acquisitions. You are, therefore, entitled to input tax credits when you make payments third party payments. Question 2 Summary

Under the arrangements, the payments which are the subject of this question are the payments made by you to service providers for goods supplied to third parties. Detailed reasoning We must examine if all of the requirements of section 11-5 of the GST Act will be satisfied to determine if the fees that the government agency pay are for creditable acquisitions. In relation to the requirement in paragraph 11-5(b) of the GST Act, if you are the recipient and the supply is a taxable supply, then this element would be satisfied. For taxable supplies we need to determine if you are the recipient for paragraph 11-5(b) to be satisfied. It is important to note that the recipient of the supply will not necessarily be the entity who pays the supplier. As discussed earlier, Proposition 15 of GSTR 2006/9 (at [217]-[221S]), considers the circumstances where there may be two or more supplies arising from the one set of activities. A number of factors are set out in paragraph 221B of GSTR 2006/9 which may point to a supply being made to a payer under a tripartite agreement.

You make these payments to service providers as part of arrangements involving you, the service providers, third parties and the certain persons. An Act set out the framework between you and the service providers in respect of the fees by service providers to third parties. You have the obligation to pay the service providers if there is a relevant supply of goods to third parties and you have a mechanism in place to authorise such payments. The service providers make the supply to the third parties in accordance with the pre-existing framework set out an Act and Determination. The service providers verify third parties such that the supplies made to them come within the scope of the framework. When an order is filled, an obligation under an Act is met . This obligation is owed to you as established by an existing framework that rests the liability with you rather than the third party. You make payments to service providers of behalf of third party as part of these arrangements. The service provided by the service providers to you is the provision and distribution of goods on behalf of the Commonwealth.

Based on your facts, the service providers have made two distinct supplies simultaneously: •                     Supply to the third party (GST-free) and another •                     Supply to you of the obligation on behalf of the Commonwealth. This is a taxable supply to you The 'recipient of the supply' is the entity that that enters into the agreement with the service providers. You administer the program payments under an Act. You are the recipient of the supply of the obligation to provide and distribute goods. As such, the payment you make is consideration for a taxable supply. The recipient of goods is the third party. Therefore, you make an acquisition under section 11-10 of the GST Act. Given the above, you are permitted to continue issuing recipient-created tax invoices to service providers under subsection 29-70(3) of the GST Act.