Edited version of private ruling

Authorisation Number: 1011831806977

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Ruling

Subject: GST and Application of Subdivision 153-B

Questions

1. Are the legal and commercial arrangements between you and X sufficient to satisfy the new 'facilitation' requirements under subdivision 153-B of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

2. If the answer to Question 1 is in the affirmative, is the statement currently issued by you to X, sufficient to satisfy the tax invoice requirements under section 29-70 of the GST Act?

3. If the answer to Question 2 is in the negative, will the Commissioner exercise his discretion afforded to him under subsection 29-70(1B) of the GST Act, to treat the statement as a tax invoice?

Decisions

1. Yes, if you and X enter into a subdivision 153-B arrangement, the legal and commercial arrangements between you and X will be sufficient to satisfy the new 'facilitation' requirements under subdivision 153-B of the GST Act.

2. Yes, if you enter into a subdivision 153-B arrangement with X, the statement currently issued by you will satisfy the tax invoice requirements under section 29-70 of the GST Act.

3. As the answer to Question 2 was in the affirmative, there is no need for the Commissioner to exercise his discretion under subsection 29-70(1B) of the GST Act and issue a tax invoice determination.

Relevant facts

You are an energy distributor and supply energy to a population residing in a particular Australian state (state).

X is an energy retailer . Under state legislation, X is a licensed energy retailer.

Background

Within the state, the relationship that exists between a distributor, a retailer and a customer is referred to as a 'triangular arrangement'. Both the retailer and distributor have a direct legal relationship with the customer. As a result, from a legal perspective, the distributor provides distribution services direct to the customer. However, a distributor and a retailer have common customers.

In order to avoid duplication of services such as billing, collection and customer communications, state legislation requires the distributors and retailers to coordinate their activities that involve common customers.

Under state legislation, distribution and retail entities must enter into a 'coordination agreement'. It acknowledges that both parties have common customers and attempts to relieve the need for duplicated services. If an agreement is not entered into, the parties are deemed to have entered into the default coordination agreement.

As per the agreement, a distributor is required to provide a retailer with a statement for the relevant billing period containing all distribution charges levied against the common customers. Distribution charges are defined to mean charges in relation to the provision of customer connection services, which are defined to include connection of premises to a supply network and supply of energy to those premises.

As per the agreement, the distributor appoints the retailer as its agent for GST purposes, in order to bill and collect any distribution charges due from customers to the distributor under the relevant connection contracts. Amongst other things, this ensures that customers do not receive two separate invoices, one from the retailer and one from the distributor, in respect of their energy consumption.

You and X have not executed a written coordination agreement. The parties are acting in accordance with the default coordination agreement.

Statement

The statement is the only billing document sent from you to X, which is sent electronically each month. You make the following comments specifically in relation to the statement issued by you.

· The statement reflects a summary of all relevant data that relates to the common customers of you and X from a distribution charges perspective. It is a formal invoicing document sent from you to X.

· In order to generate the monthly statement, meters must be manually read and validated by you prior to the file being uploaded and automatically sent. There is a fairly complex process involved in getting to a point where a statement can be issued to a retailer. This has been developed and heavily tested to ensure compliance with the relevant legislative requirements.

· The statement is a data file sent via email and automatically by you and complies with particular specifications agreed to by the industry.

· The document used in the state, outlines the design of the statement specific to the state network billing process. This document defines the various data fields that constitute the statement.

· The document contains various mandatory data fields. They are summarised and cross referenced to the sample data file submitted by you. An explanation of some of the data in the statement was provided.

Miscellaneous facts

Once X receives this data, a series of validation steps are undertaken to confirm the accuracy, completeness and veracity of the data and distribution charges. Validated data is paid in full within the agreed time period. Data that failed validation is subjected to a series of disputed charges steps that once resolved are paid in full.

Most retail customers of a retailer are on market based retail contracts. These retail contracts prescribe various tariff rates such as peak and off peak and supply charge rates. The supply charge component of a customer contract will include distribution charges. Except for large customers, network distribution charges do not appear separately on a customer's invoice. Rather, they are bundled into a single rate that is paid by the customer.

You and X intend to enter into a subdivision 153-B agreement if the Commissioner is prepared to treat the statement of charges as a valid tax invoice. Such an arrangement will have to go through the internal legal review processes of both parties prior to finalising and execution.

A statement is issued to X at the beginning of each month, for the meters read during the previous month. The statement gives energy supply data for each customer individually and also summarised figures for the relevant month.

The data format of the statement has been extensively tested and made compatible between you and X. Even making a slight change is very costly. A slight change to the settings could alter the data format and X's system will not be able to read it. Any correction will require costly and time consuming system changes. That is why both parties want to retain the format of the statement as it is.

Each piece of data on the statement including the corrections are captured into the general ledgers of both parties. The general ledger records energy supply to each customer, billings and payments. In case of a tax audit of either party, transactions in respect of each customer can be extracted and verified.

Reasons for the decisions

Decision 1

Subdivision 153-B of the GST Act refers to principals and intermediaries as separate suppliers or acquirers and state:

153-50 Arrangements under which intermediaries are treated as suppliers or acquirers

(1) An entity (the principal) may, in writing enter into an arrangement with another entity (the intermediary) under which:

(a) the intermediary will, on the principal's behalf, do any or all of the following:

(i) make supplies to third parties;

(ii) facilitate supplies to third parties (including by issuing *invoices relating to, or receiving *consideration for, such supplies);

(iii) make acquisitions from third parties;

(iv) facilitate acquisitions from third parties (including by providing consideration for such acquisitions); and

(b) the kinds of supplies or acquisitions, or the kinds of supplies or acquisitions, to which the arrangement applies are specified; and

(c) for the purposes of the GST law:

(i) the intermediary will be treated as making the supplies to the third parties or acquisitions from the third parties or both; and

(ii) the principal will be treated as making corresponding supplies to the intermediary or corresponding acquisitions from the intermediary or both; and

(d) in the case of supplies to third parties;

(i) the intermediary will issue to the third parties, in the intermediary's own name, all the *tax invoices and *adjustment notes relating to those supplies; and

(ii) the principal will not issue to third parties any tax invoices and adjustment notes relating to those supplies; and

(e) the arrangement ceases to have effect if the principal or the intermediary or both of them cease to be *registered.

(1) For the purposes of subsection (1), an entity can be an intermediary whether or not the entity is the agent of the principal.

Default Coordination Agreement (agreement)

The agreement states:

The Distributor appoints the Retailer as its agent for GST purposes in order to bill and collect any distributor charges due from customers to the Distributor under the relevant connection contracts for those customers.

Scope of agency

To the extent that the retailer, in issuing bills to customers, acts as the distributor's agent for GST purposes:

(a) the retailer must take all reasonable steps to ensure that the acts done on behalf of the distributor comply with the distributor's obligations to customers under the GST law and in particular, that any bill issued to a customer is issued in the form and manner required by the GST law for a tax invoice or as applicable, an adjustment note;

(b) the retailer is entitled to assume that any amount stipulated in the distributor's statement of charges in respect of a customer is the full amount chargeable by the distributor (including any amount which the distributor includes in its charges to cover GST obligations); and

(c) the distributor must do all acts and execute all documents which are reasonably necessary to be done in order to permit the retailer to comply with its obligations and the retailer must inform the distributor of its requirement for such acts and documents.

Therefore, we accept that where you and X enter into an agreement complying with subdivision 153-B of the GST Act in good faith, then the provisions of that subdivision will be satisfied.

Decision 2

You informed that at the beginning of each month, you send by email a statement of charges to X for the distribution services supplied to common customers based on the meters read during the previous month. It is the only document you provide to X for the distribution services supplied to the common customers.

You want to know whether this statement satisfies the requirements of a tax invoice under section 29-70 of the GST Act.

Section 29-70 of the GST Act states the following:

29-70 Tax Invoices

(1)

A tax invoice is a document that complies with the following requirements:

(a) it is issued by the supplier of the supply or supplies to which the document relates, unless it is a *recipient created tax invoice (in which case it is issued by the *recipient);

(b) it is in the *approved form;

(c) it contains enough information to enable the following to be clearly ascertained:

(i) the supplier's identity and the supplier's *ABN;

(ii) if the total *price of the supply or supplies is at least $1,000 or such higher amount as the regulations specify, or if the document was issued by the recipient - the recipient's identity or recipient's ABN;

(iii) what is supplied, including the quantity (if applicable) and the price of what is supplied;

(iv) the extent to which each supply to which the document relates is a *taxable supply;

(v) the date the document is issued;

(vi) the amount of GST (if any) payable in relation to each supply to which the document relates;

(vii) if the document was issued by the recipient and GST is payable in relation to any supply - that the GST is payable by the supplier;

(viii) such other matters as the regulations specify;

(d) it can be clearly ascertained from the document that the document was intended to be a tax invoice or, if it was issued by the recipient, a recipient created tax invoice.

(1A)

A document issued by an entity to another entity may be treated by the other entity as a *tax invoice for the purposes of this Act if:

(a) it would comply with the requirements for a tax invoice but for the fact that it does not contain certain information; and

(b) all of that information can be clearly ascertained from other documents given by the entity to the other entity.

(1B)

However, the Commissioner may treat as a *tax invoice a particular document that would not, apart from this subsection, be a tax invoice.

(2)

The supplier of a *taxable supply must, within 28 days after the *recipient of the supply requests it, give to the recipient a *tax invoice for the supply, unless it is a *recipient created tax invoice.

(3)

A recipient created tax invoice is a *tax invoice belonging to a class of tax invoices that the Commissioner has determined in writing may be issued by the *recipient of a *taxable supply.

Statement

We consider that, if you and X enter into a subdivision 153-B arrangement, the following attributes of the statement will satisfy the requirements for a tax invoice from you to X.

· It relates to the deemed supplies made by you to X as your intermediary. Therefore, paragraph 29-70(1)(a) of the GST Act will be satisfied;

· Each customer line represents an identifier for a customer connection point. The transaction lines below it represent supplies made to the relevant customer. Each customer line contains your name and ABN. Therefore, subparagraph 29-70(1)(c)(i) of the GST Act will be satisfied.

· Each customer line contains the name and ABN of X regardless of the value of the supply. Therefore, subparagraph 29-70(1)(c)(ii) of the GST Act will be satisfied.

· Under each customer line, there are multiple transaction lines. Each transaction line represents Network Use of System Charges (NUoS). For each charge, the number of units, rate, GST exclusive value and GST are quoted. Therefore, subparagraph 29-70(1)(c)(iii) of the GST Act will be satisfied.

· Every customer line contains a tax charge indicator field, containing either a yes or no. Therefore, subparagraph 29-70(1)(c)(iv) of the GST Act will be satisfied.

· Every customer line contains a field 'date statement issued'. Therefore, subparagraph 29-70(1)(c)(v) of the GST Act will be satisfied.

· Every customer line contains a total of the GST exclusive value, GST amount and GST inclusive amount. In addition, every transaction line that relates to each customer line contains a breakdown of the GST exclusive value, GST and the GST inclusive value for each individual supply. Therefore, subparagraph 29-70(1)(c)(vi) of the GST Act will be satisfied.

Tax Invoice

Originally, the statement was not intended to be a tax invoice. If the parties enter into a subdivision 153-B arrangement, you intend to continue to issue this statement to X every month in the same format. You intend it to be your tax invoice. However, the document will not contain the wording 'tax invoice'.

Your statement contains the wording 'statement' for each customer line instead of 'tax invoice'. Paragraph 29-70(1)(d) of the GST Act provides that it should be clearly ascertained from the document that the document was intended to be a tax invoice. It is necessary to consider whether the wording 'statement' could satisfy the requirements of paragraph 29-70(1)(d) of the GST Act.

We consider that, even though your statement does not contain the words 'tax invoice', from the contents of the statement, it can clearly be ascertained that the statement will be intended to be a tax invoice.

Other documents

Under subsection 29-70(1A) of the GST Act, a recipient of a tax invoice could refer to other documents provided by the supplier to find out the missing information on the tax invoice. We consider that the statement contains all the information for X to ascertain their entitlement to input tax credits on the deemed acquisition. Similarly, the statement contains all the information necessary for you to discharge your GST liability on the deemed supply of distribution services to X.

In addition, a document you provided contains explanations for all the fields in the statement. In case of any doubts, they could always refer to the document for clarifications.

Considering the above facts, if the parties enter into a subdivision 153-B arrangement, we consider that your statement combined with a document you provided will be sufficient to satisfy the tax invoice requirements.

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