GST and living away from home allowance paid to a contractor
ATO ID 2002/300
FOI status: may be released
Status of this decision: Decision Current
ATO Interpretative Decision
CAUTION: This record of an ATO decision may not include a complete statement of all facts in summarising the application of the relevant provision of the law to complex circumstances. If you rely on this decision and your circumstances are materially the same as those described, and the decision is subsequently found to be incorrect, penalties will not be attracted on the missing tax. However, interest could be payable in any event depending on the circumstances of the case. If the relevant provisions, being those in force at the date of decision, have been amended or rewritten, it will be necessary to have regard to the amended or rewritten law. You may wish to obtain further advice from the ATO or from a professional adviser.Goods and services tax
GST and living away from home allowance paid to a contractor
Issue
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)?
Decision
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.
Facts
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).
Reasons for Decision
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).]
Date of decision: 12 November 2001
Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
section 9-5
subsection 9-15(1)
paragraph 9-20(2)(a)
Keywords
Goods & services tax
GST supplies & acquisitions
GST consideration
Taxable supply
Date of publication: 28 March 2002
ISSN: 1445-2782
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