Issue
Is the entity, an Australian investor, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it receives a rebate from a tax agent for investing in a particular investment fund?
Decision
Yes, the entity is making a taxable supply under section 9-5 of the GST Act when it receives a rebate from the tax agent for investing in a particular investment fund.
Facts
The entity is an Australian investor. It engages a tax agent to provide it with taxation and investment advice. The tax agent recommends and arranges for the entity to invest in a particular investment fund.
The tax agent receives a commission from the investment fund for introducing the entity to the fund. There is an agreement between the entity and the tax agent whereby if the entity agrees to invest in a particular investment fund recommended by the tax agent, the tax agent will rebate either all or part of the commission that it receives, to the entity.
The entity is registered for goods and services tax (GST). The entity makes the investment in the course of an enterprise that the entity carries on in Australia.
Reasons for Decision
Under section 9-5 of the GST Act, an entity makes a taxable supply if : • it makes the supply for consideration; • it makes the supply in the course or furtherance of an enterprise that it carries on; • the supply is connected with Australia; and • it is registered, or required to be registered for GST.
The issue in this case is whether there is a 'supply' for 'consideration'.
Section 9-10 of the GST Act defines 'supply'. Subparagraph 9-10(2)(g)(i) of the GST Act states that a supply includes an entry into an obligation to do anything. In this case, the agreement between the entity and the tax agent is an entry into an obligation by the entity to invest in a particular investment fund. Therefore, the entity is making a supply as defined in subparagraph 9-10(2)(g)(i) of the GST Act.
'Consideration' is defined in subsection 9-15(1) of the GST Act to include any payment, act or forbearance in connection with, in response to or for the inducement of a supply of anything. In this case, the tax agent pays part or all of the commission that it receives from the investment fund to the entity for investing in that particular investment fund. This rebate is consideration as defined in subsection 9-15(1) of the GST Act.
The entity is registered for GST and the supply meets the other positive requirements 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, the entity is making a taxable supply under section 9-5 of the GST Act when it receives a rebate from the tax agent for investing in a particular investment fund. [Note: Where the entity is not registered, or required to be registered for GST, the elements of section 9-5 of the GST Act are not satisfied and the supply is not subject to GST].