GST and Tax Invoices

Is the entity, a solicitor, required to issue a tax invoice under subsection 29-70(2) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) to an insurer, where the insurer requests a tax invoice in respect of legal services provided by the entity to an injured worker?

No, the entity is not required to issue a tax invoice under subsection 29-70(2) of the GST Act, to an insurer where the insurer requests a tax invoice in respect of legal services provided by the entity to an injured worker.

The entity is a solicitor. The entity represented an injured worker in a worker's compensation claim against the injured worker's employer. This legal service was a taxable supply under section 9-5 of the GST Act.

The injured worker was successful in their claim for compensation. As such, the employer's insurer was liable to pay out the compensation claim. This pay out included an amount to cover the legal costs of the injured worker (ie the entity's fees).

The insurer has requested that the entity supply it with a tax invoice in relation to the services supplied by the entity to the injured worker. The insurer has requested that the tax invoice be made out in their name.

The entity is registered for goods and services tax (GST).

One of the requirements for a recipient of a supply to claim an input tax credit is that they must hold a tax invoice (subsection 29-10(3) of the GST Act). Under subsection 29-70(2) of the GST Act, the supplier of a taxable supply must give a tax invoice, for the supply, to the recipient of the supply, if requested by the recipient to do so.

Therefore, in order to determine whether the entity is required to issue a tax invoice to the insurer, it is necessary to establish who is the recipient of the entity's services.

Section 195-1 of the GST Act defines recipient, in relation to a supply, as the entity to which the supply was made.

In this case, the entity is making a taxable supply of legal services to the injured worker. Therefore, although the employer's insurer is, in effect, paying the legal fees of the injured worker, the recipient of the supply is the injured worker. Therefore, as the insurer is not the recipient of the supply, the entity is not required to issue a tax invoice under subsection 29-70(2) of the GST Act, to the insurer. [Note 1: If the injured worker requested a tax invoice, the entity would be required to issue the injured worker with a tax invoice within 28 days of the request (subsection 29-70(2) of the GST Act). Note 2: The GST treatment of court ordered costs or costs negotiated in a settlement and input tax credits is discussed in paragraphs 145 to 148 of GSTR 2001/4. Refer to footnote 70 in GSTR 2001/4 for a discussion of Workers Compensation cases and input tax credits.]