GST for agents
Another tricky issue that comes up time and time again. Does the agent collect and return the GST on the invoices of their clients? Note that we are primarily talking about booking agents, but it can apply to other kinds of business relationships as well.
A common scenario is when you have an artist (the principal), a booking agent (the agent), and a promoter (the client). The agent secures a show for the artist with the promoter. Now what?
A basic approach is as follows:
An invoice is issued by the artist. GST will be charged if the artist is GST registered. It is not uncommon for the agent to create this invoice on behalf of the artist.
The promoter pays the invoice. It is not uncommon for the agent to collect the money and hold it on trust for the artist.
The agent issues an invoice to the artist for their commission. GST will be charged if the agent is GST registered.
The artist pays the invoice. It is not uncommon for this payment to come direct from the money the agent is holding in their trust account on behalf of the artist, assuming they have the artist’s permission to do this.
If the agent is holding any remaining monies on behalf of the artist in trust they are sent on to the artist in line with the relevant laws*.
BAS and tax reporting? The agent will only return their commission. The artist will return the total fee paid by the promoter as income and the agent commission as an expense.
*Entertainment Industry Act 2013 states that monies must be disbursed from the trust account within 14 days of receipt otherwise the agent may be liable for up to $10,000 in penalties. See here.
The above arrangement makes good, practical sense. The agent collects money for the artist and then passes it on. They charge the artist for their service. Each party puts their actual income in their own BAS. Simple. There are some good examples from the ATO available here. All of which result in the same BAS treatment as outlined above.
Just to further complicate matters, an artist can enter into a written agreement called a ‘principal-intermediary taxable supply arrangement’ in which case the agent returns the entire artist fee as income, then the payment to the artist as an expense. This blog post does not consider that type of arrangement and it's not something we would generally recommend because if the agent is showing the entire artist fee as income and the artist payment as an expense they are potentially exposing themselves unnecessarily to payroll tax, superannuation guarantee obligations, and more.
If you have any questions regarding GST and agency please contact your accountant. This area of GST law can be a little tricky and the above does not constitute advice.
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