GST and sharing costs between entities

Is entity A, a business operator, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it charges entity B for using its (entity A's) photocopier?

Yes, entity A is making a taxable supply under section 9-5 of the GST Act when it charges entity B for using its (entity A's) photocopier.

Entity A and entity B share office premises and share some office costs, including the use of a photocopier.

Entity A owns the photocopier and any invoices pertaining to the photocopier are sent to entity A. Entity B's share of the photocopying expenses is determined by the number of copies it makes in relation to the total number of copies made on the photocopier. Entity B pays entity A for its share of the photocopier expenses.

Both entities are registered for goods and services tax (GST), but do not form a GST group. The transaction satisfies the other positive limbs of section 9-5 of the GST Act.

Section 9-5 of the GST Act sets out the requirements that must be met for an entity to make a taxable supply. The existence of a 'supply' itself is an essential element in determining whether the 'transaction' is a taxable supply under section 9-5 of the GST Act.

Section 9-10 of the GST Act discusses the meaning of the word 'supply' for GST purposes. Paragraphs 9-10(2)(a) and (b) of the GST Act states that a supply includes: • a supply of goods; and • a supply of services.

In this case, entity B pays for the actual use of the photocopy machine, and the photocopies. Accordingly, the supply entity A is making to entity B is a combination of goods (the photocopies) and services (the use of the machine).

Entity A is registered for GST and the transaction is a 'supply' that fulfils the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, entity A is making a taxable supply under section 9-5 of the GST Act. [NOTE: Entity B is entitled to claim an input tax credit for the GST component included in the supply, provided that it is making a creditable acquisition under section 11-5 of the GST Act.]