GST and living away from home allowance paid to a contractor

Does a living away from home allowance paid to the entity, an independent contractor, by the recipient of its services, form part of the consideration for the entity's taxable supply of services to the recipient under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Yes, a living away from home allowance paid to the entity by the recipient of its services, does form part of the consideration for the entity's taxable supply of services to the recipient under section 9-5 of the GST Act.

The entity is an independent contractor. In the course of this enterprise, the entity is contracted to provide services to a recipient. The supply of these services is a taxable supply under section 9-5 of the GST Act.

The provision of part of these services requires that the entity lives away from home. In addition to a set hourly rate, the recipient of the entity's services pays the entity an allowance for each day that the entity has to live away from home.

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

Under section 9-5 of the GST Act, an entity makes a taxable supply if: • it makes a supply for consideration; • the supply is made in the course or furtherance of an enterprise that it carries on; • the supply is connected with Australia; and • the entity is registered or required to be registered for GST.

The entity is making a taxable supply of services to the recipient. However, it needs to be determined whether the payment of the living away from home allowance forms part of the consideration for the entity's taxable supply of services to the recipient.

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 allowance is an additional payment for the entity's supply of services provided away from the entity's home. Therefore, it forms part of the total consideration for the entity's supply of services.

The living away from home allowance paid to the entity by the recipient of the entity's services, does form part of the consideration for the entity's taxable supply of services to the recipient under section 9-5 of the GST Act. [Note 1: As the allowance forms part of the total consideration received for the entity's services, it must be included in calculation of the entity's GST liability. Note 2: Where a living away from home allowance is paid by an employer to an employee, the payment is not consideration for a taxable supply as activities carried out by an employee are not in the course or furtherance of an enterprise (paragraph 9-20(2)(a) of the GST Act).]