GST and receipt of a trailing commission from an investment fund for introducing an investor to the investment fund

Is the entity, a tax agent, 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 trailing commission from an investment fund for introducing an investor to the investment fund?

Yes, the entity is making a taxable supply under section 9-5 of the GST Act when it receives a trailing commission from an investment fund for introducing an investor to the investment fund.

The entity is a tax agent. It provides taxation and investment advice to an investor for which it charges a fee. The entity introduces the investor to an Australian investment fund. The investment fund pays the entity a trailing commission.

The entity is registered for goods and services tax (GST). The entity provides the taxation and investment advice in the course of an enterprise that the entity carries on in Australia.

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'. Paragraph 9-10(2)(b) of the GST Act states that a supply includes a supply of services. In this case, the entity provides a service of introducing the investor to an investment fund. Therefore, the entity is making a supply of services as defined in section 9-10 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 investment fund pays a trailing commission to the entity for introducing an investor to the investment fund. These payments constitute 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 trailing commission from an investment fund for introducing an investor to the investment fund.