1 Is the company (you) making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when you supply financial advice (through your Australian based Authorised Representatives) to overseas based financial product providers (OBFPP), but provide the financial advice to the OBFPP's Australia based members?
You are making a taxable supply of financial advice. GST is to be applied to these payments. Question 2 Are you making a taxable supply under section 9-5 of the GST Act when you supply financial advice (through your overseas based Authorised Representatives) to OBFPPs, but provide the financial advice to the OBFPP's Australia based members? Answer You are making a taxable supply of financial advice. GST is to be applied to these payments. Question 3 Are you making a creditable acquisition under section 11-5 of the GST Act when your Authorised Representatives (Overseas based financial advisers) supply financial advice to the OBFPP's Australian based members in return for a percentage of the advice fees and are you required to pay GST on these transactions under the reverse charging provisions of Subdivision 84A of the GST Act? Answer You are not making a creditable acquisition under section 11-5 of the GST Act and as the supply is not connected to the Indirect Tax Zone, it is not a taxable supply to you. You are not required to pay GST on these transactions under the reverse charging provisions.
GST is not to be applied to these payments and you should not provide a Recipient Created Tax Invoice (RCTI). Question 4 Are you making a creditable acquisition under section 11-5 of the GST Act when you make payments of a portion of income to other overseas based individuals, companies, advisers and parties in return for work performed and are you required to pay GST on these transactions under the reverse charging provisions of Subdivision 84A of the GST Act? Answer No, you are not making a creditable acquisition under section 11-5 of the GST Act. As the supply is not connected to the Indirect Tax Zone, it is not a taxable supply to you. You are not required to pay GST on these transactions under the reverse charging provisions. GST is not to be applied to these payments and you should not provide an RCTI. This ruling applies for the following periods : any tax periods ending on or after 1 July 2023 The scheme commenced on: 1 July 2023
You hold an Australian Financial Services License (AFSL) and are regulated by ASIC. You provide financial advice services to Australia based individuals. As well as the usual Australian financial advice AFSL's provide, you also provide financial advice to clients regarding their UK pension accounts, US retirement accounts and retirement/pension/superannuation accounts held in other countries. You have authorised individuals that hold approved Australian qualification, to provide advice under your AFSL, as Authorised Representatives. Some of these Authorised Representatives live overseas and are not Australian tax residents. Some of them live in Australia and are Australian tax residents. You provide Australia based clients with an engagement document, through which the client approves the payment to you, of a fee for financial advice on overseas based retirement/pension/superannuation accounts. The client usually authorises their overseas retirement/pension/superannuation provider to pay you fees, in respect of that advice. The overseas retirement/pension/superannuation provider pays these fees into the Australian bank account you hold, in overseas currencies.
The overseas retirement/pension/superannuation provider, being an overseas based entity, is not registered in Australia for GST. You make payments to other individuals, companies and parties. These include Authorised representatives, staff, contractors, service providers, etc. Some of these are based in Australia, some are based in overseas countries. The overseas based individuals, companies and parties, are not residents of Australia for tax purposes and are not registered in Australia for GST.
A New Tax System (Goods and Services Tax) Act 1999 section 9-5 A New Tax System (Goods and Services Tax) Act 1999 section 9-25 A New Tax System (Goods and Services Tax) Act 1999 subsection 9-25(7) A New Tax System (Goods and Services Tax) Act 1999 section 9-26 A New Tax System (Goods and Services Tax) Act 1999 section 11-5 A New Tax System (Goods and Services Tax) Act 1999 section 11-20 A New Tax System (Goods and Services Tax) Act 1999 section 38-190 A New Tax System (Goods and Services Tax) Act 1999 Subdivision 84A A New Tax System (Goods and Services Tax) Act 1999 section 84-5 A New Tax System (Goods and Services Tax) Act 1999 subsection 84-5(1A) A New Tax System (Goods and Services Tax) Act 1999 section 84-10
Questions 1 and 2 A supply of an intangible (something other than goods or real property) to a non-resident who is not in the indirect tax zone (Australia) is GST-free under table item 2 of subsection 38-190(1) of theGST Act (item 2) if: (a) the supply is not a supply of work physically performed on goods situated in Australia when the work is done, nor a supply directly connected with real property situated in Australia; or (b) the non-resident recipient acquires the thing in carrying on their enterprise but is not registered or required to be registered for GST. However, there are some exclusions from GST-free status of supplies covered by item 2. Work physically performed on goods situated in Australia and supplies directly connected with real property situated in Australia The supplies that you make to the OBFPP are not supplies of work physically performed on goods situated in Australia when the work is done, nor are they supplies directly connected with real property situated in Australia. Therefore, the requirements of paragraph (a) in item 2 are met. Subsection 38-190(3) of the GST Act
If a supply of a service is made to a non-resident but provided to a third party in Australia, the supply may be excluded from GST-free treatment under item 2 due to subsection 38-190(3) of the GST Act, which states: Without limiting subsection (2) or (2A), a supply covered by item 2 in that table is not GST-free if: (a) it is a supply under an agreement entered, into, whether directly or indirectly, with a *non-resident; and (b) the supply is provided, or the agreement requires it to be provided, to another entity in the indirect tax zone; and (c) for a supply other than an input taxed supply - none of the following applies: (i) the other entity would be an *Australian-based business recipient of the supply, if the supply had been made to it; (ii) the other entity is an individual who is provided with the supply as an employee or *officer of an entity that would be an Australian based business recipient of the supply, if the supply had been made to it; or (iii) the other entity is an individual, who is provided with the supply as an employee or officer of the recipient, and the recipient's acquisition of the thing is solely for a *creditable purpose and is
not a *non-deductible expense. Paragraph 38-190(3)(a) of the GST Act You are making a supply of financial advice to the OBFPP, under an agreement with a non-resident company. Therefore, the requirement of paragraph 38-190(3)(a) of the GST Act is met. Paragraph 38-190(3)(b) of the GST Act Goods and Services Tax Ruling GSTR 2005/6 Goods and services tax: the scope of subsection 38-190(3) and its application to supplies of things (other than goods or real property) made to non-residents that are GST-free under item 2 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GSTR 2005/6)provides guidance on determining whether a supply made to a non-resident is provided to a third party who is in Australia. Paragraphs 59 to 62 of GSTR 2005/6 explain the meaning of 'provided to an entity'. They state: The meaning of 'provided to another entity'
59. The word 'provided' is used in subsection 38-190(3) to contrast with the term 'made' in item 2. In the context of section 38-190, the contrasting words indicate that if a non-resident contracts for a supply to be provided to another entity, the place of consumption should be determined with regard to the entity to which the supply is provided, not the entity to which the supply is made. 60. The example in the Explanatory Memorandum accompanying the Bill that introduced subsection 38-190(3) illustrates this. In that example, non-resident parents contract for the supply of education services to be provided to their children in Australia. The contractual flow of the services is to the parents, while the actual flow of the services is to the children. The supply is made to the parents (non-residents) and provided to another entity, each child, in Australia.
61. Thus the expression 'provided to another entity' means, in our view, that in the performance of a service (or in the doing of something), the actual flow of that supply is, in whole or part, to an entity that is not the non-resident entity with which the supplier made the agreement for the supply. The contractual flow is to one entity (the non-resident recipient) and the actual flow of the supply is to another entity. 62. For example, if a supply of entertainment services is made to a non-resident company and in the performance of that service the employees are the entities that are entertained, the actual flow of that service is to another entity, each employee (see above where the meaning of 'another entity' is discussed). The supply is made to the non-resident company (the employer) and provided to another entity (each employee). Based on the following circumstances, we consider that you make a supply of financial advice to the OBFPP but provide the supply to the OBFPP's Australia based members, which is another individual/entity based in Australia, You enter into an arrangement with the OBFPPs to provide financial advice to their Australia based clients.
You provide the Australia based clients, with an engagement document, through which the client approves the payment of a fee for financial advice on overseas based retirement/pension/superannuation accounts. Under such an arrangement, there is only a supply of financial advice by you to the individual Australia based client. This view is further supported by recent guidance material that the ATO has published on "Advisor Fees" on 13 December 2023 (see link below). The Commissioner's view is that under tripartite arrangements of this nature, there is only a supply of financial advice by the adviser to the individual. Eligibility of super funds and investor-directed portfolio services investment platforms to claim reduced input tax credits on adviser fees | Legal database (ato.gov.au) Therefore, the requirement of paragraph 38-190(3)(b) of the GST Act is met. Paragraph 38-190(3)(c) of the GST Act Goods and Services Tax Ruling GSTR 2005/6 provides guidance on the application of subsection 38-190(3) of the GST Act but has not been updated to reflect an amendment to the GST Act, being the insertion of paragraph 38-190(3)(c). Your supply is not an input taxed supply.
Subsection 9-26(2) of the GST Act provides that an entity is an Australian-based business recipient of a supply made to it if it is registered for GST and carrying on an enterprise in Australia and the acquisition is not solely of a private or domestic nature. As the OBFPP's Australia based members are individuals, acquiring financial advice pertaining to investing, varying, transferring, or converting the whole or any part of their investment portfolio (including their British pension and superannuation and investment accounts) the acquisitions made by them would be of a private or domestic nature, and they would not meet the requirements of subsection 9-26(2) of the GST Act. The OBFPP's Australia based members are not Australian based business recipients of your supply of financial advice services, therefore the requirements of paragraph 38-190(3)(c) of the GST Act are met. As all the requirements of subsection 38-190(3) of the GST Act are met, the GST-free status of the supplies of services is negated by subsection 38-190(3) of the GST Act. No other GST-free or input taxed treatment exclusions apply.
Therefore, you are making a taxable supply of financial advice to the individual Australia based client under item 2. GST is payable on taxable supplies in accordance with section 9-5 of the GST Act. Hence, GST is payable on your supply of financial advice made to the OBFPP but provided to the OBFPP's Australia based members. Questions 3 and 4 Input Tax Credits Section 11-20 of the GST Act provides that an entity is entitled to an input tax credit for any creditable acquisitions that it makes. Under section 11-5 of the GST Act, an entity makes a 'creditable acquisition' if: • the entity acquires anything solely or partly for a creditable purpose; and • the supply of the thing to the entity is a taxable supply; and • the entity provides, or is liable to provide, consideration for the supply; and • the entity is registered or required to be registered for GST. You are entitled to the input tax credits on any purchase you make that satisfies all of the above conditions.
When you acquire the services of the Authorised Representatives (Overseas based financial advisers) and the work performed by other overseas based individuals, companies, advisers and parties (overseas based suppliers), those services are made for a creditable purpose because they are made in the course of your enterprise and do not relate to making input taxed supplies. As you are registered for GST and provided consideration, you would be entitled to input tax credits if the supplies by the overseas based suppliers are taxable supplies under section 9-5 of the GST Act. Taxable Supplies Section 9-5 of the GST Act provides that the supply of services by the overseas based suppliers will only be a taxable supply if: • the overseas based supplier makes the supply for consideration; and • the supply is made in the course or furtherance of an enterprise that they carry on; and • the overseas based supplier is registered, or required to be registered for Australian GST; and • the supply is connected with the indirect tax zone; and. • the supply is neither GST-free nor input taxed.
The supplies made to you by the overseas based suppliers will be taxable supplies if they meet all of the above conditions. The supplies are made for consideration and are in the course or furtherance of an enterprise, no provisions in the GST Act would make the supplies GST-free or input taxed, and you have advised the overseas based suppliers are not registered for GST. However, if the supplies are either not connected with the indirect tax zone, or the suppliers are required to be registered for GST, then the supplies of services to you will not be taxable supplies. Supplies connected with the Indirect Tax Zone Subsection 9-25(5) of the GST provides that a supply of services is connected with the indirect tax zone if the services are: • performed in Australia; or • the supplier makes the supply through an enterprise that the supplier carries on in Australia. Paragraph 37 of the Goods and Services Tax Ruling, Goods and services tax: supply of anything other than goods or real property connected with the indirect tax zone (Australia)
(GSTR 2019/1) explains that the location of the entity performing a service is relevant in considering whether a supply is connected with the indirect tax zone. 37. If the 'thing' being supplied is a service, the service is typically done where it is performed. If the service is performed in Australia, the service is done in Australia and the supply of that service satisfies paragraph 9-25(5)(a) even if the recipient of the supply is outside Australia. You have advised that the suppliers are not located in Australia. Their supplies will not be connected with the indirect tax zone if they are not provided through an enterprise that they carry on in Australia or performed in Australia. Enterprises carried on in the indirect tax zone Section 9-27 of the GST Act provides that an enterprise is carried on in Australia if: • the enterprise is carried on through a fixed place (premises) within Australia; or • the enterprise has been carried on through on or more places within Australia for more than 183 days in a 12 month period; or
• it is intended that the enterprise is carried on through one or more places in the indirect tax zone for more than 183 days in a 12 month period. The Law Companion Ruling, GST and carrying on an enterprise in the indirect tax zone (Australia) (LCR 2016/1) provides a detailed explanation of when a supplier carries on an enterprise in Australia, within the meaning of section 9-27 of the GST Act. As the overseas based suppliers do not provide their services within Australia and do not provide those services thorough an enterprise that is carried on through a place within Australia, their services are not connected with the indirect tax zone. Therefore, the supplies of services by the overseas based suppliers are not taxable supplies. Consequently, your acquisitions of the services provided by the overseas based suppliers are not creditable acquisitions and there is no GST charged on the acquisitions. There is also no entitlement to any input tax credits (GST paid) on those acquisitions. Offshore supplies - reversed charged Table item 1 of section 84-5 of the GST Act provides that a supply of an intangible thing such as the provision of a service is a taxable supply if:
• the supply is for consideration; and • the recipient is registered, or required to be registered for GST; and • the supply is not connected with the indirect tax zone; and • the recipient acquires the thing in the course of its enterprise but does not acquire the thing wholly for a creditable purpose. Section 84-10 provides that the GST payable on a supply that is taxable because of section 84-5 is payable by the recipient and is not payable by the supplier. As mentioned above, an acquisition is not made for a creditable purpose if the acquisition relates to making input taxed supplies (such as financial supplies or supplies of residential premises) or the acquisition is not made in the course or furtherance of an enterprise. The acquisition of services by the company from the overseas based suppliers are not taxable supplies under section 84-5 of the GST Act as they are made wholly for a creditable purpose. Consequently, you are not required to pay GST on its acquisitions of services from the overseas based suppliers under the reverse charging rules in section 84-10 of the GST Act.