GST and transitional funeral agreements - additional services under separate agreement

Is the entity, a supplier of funeral services, making a GST-free supply under subsection 15(2) of the A New Tax System (Goods and Services Tax Transition) Act 1999 (Transition Act), when it provides it provides an additional service that was not included in a funeral agreement made with the deceased before 1 December 1999, but is supplied as a result of a separate agreement entered into after 30 June 2000?

No, the entity is not making a GST-free supply under subsection 15(2) of the Transition Act when it provides an additional service that was not included in a funeral agreement made with the deceased before 1 December 1999, but is supplied as a result of a separate agreement entered into after 30 June 2000.

The entity is a supplier of funeral services. The entity entered into a funeral agreement with the deceased before 1 December 1999. The deceased died after 30 June 2000. The entity provides the funeral services as detailed in the funeral agreement. At the request of the family of the deceased, the entity also provides an additional service that was not included in the funeral agreement with the deceased. The entity receives full consideration for the services before 1 July 2005.

The entity is registered for goods and services tax (GST). The supply of the additional services satisfies the other positive limbs of section 9-5 of the GST Act.

Subsection 15(2) of the Transition Act provides that if an entity enters into an agreement before 1 December 1999 to provide a funeral and the funeral is provided on or after 1 July 2000, the supply is GST-free to the extent that the consideration for the supply is paid before 1 July 2005.

The entity is making supplies under two agreements: • The entity is making a supply of funeral services under an agreement, entered into before 1 December 1999, with the deceased; and • The entity is also making a supply of an additional service under an agreement, entered into after 30 June 2000 with the family of the deceased.

The supply of the additional services under an agreement with the deceased's family is separate to the supply of the funeral services under the agreement with the deceased.

As the entity entered into the agreement to provide the additional service with the deceased's family after 1 December 1999, the entity is not making a GST-free supply under subsection 15(2) of the Transition Act when it supplies the additional service.

The entity is registered for GST and the supply of the additional service satisfies 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, the entity is not making a GST-free supply under subsection 15(2) of the Transition Act when it provides an additional service that was not included in a funeral agreement made with the deceased before 1 December 1999, but is supplied as a result of a separate agreement entered into after 30 June 2000.

[Note: The supply of the funeral services under the agreement with the deceased is a separate supply. The entity entered into a funeral agreement with the deceased before 1 December 1999, provided the funeral services as detailed in the funeral agreement after 30 June 2000 and received full payment for the funeral services before 1 July 2005. Therefore the entity is making a GST-free supply under subsection 15(2) of the Transition Act when it supplies the funeral services under the agreement with the deceased (see ATO ID CW229871A].