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Is the entity, an Australian resident taxidermist, making a GST-free supply under Division 38 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it performs taxidermy services on an animal in Australia and then sends that animal overseas to its non-resident owner?

No, the entity is not making a GST-free supply under Division 38 of the GST Act when it performs taxidermy services on an animal in Australia and then sends that animal overseas to its non-resident owner.

The entity is making a taxable supply under section 9-5 of the GST Act.

The entity is an Australian resident taxidermist. The entity is contracted by a non-resident individual to preserve and mount a game animal for display. The game animal was hunted in Australia by the non-resident. The game animal remains the property of the non-resident at all times.

The non-resident is not in Australia when the entity carries out the taxidermy. On completion of the taxidermy, the entity sends the preserved and mounted animal overseas to the non-resident.

The non-resident does not acquire the entity's services in carrying on its enterprise.

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

Division 38 of the GST Act sets out the supplies that are GST-free. Under section 38-185 of the GST Act, the export of goods, in certain circumstances, is GST-free. Under section 38-190 of the GST Act, certain supplies of things other than goods or real property, for consumption outside of Australia, are also GST-free. In order to determine whether a supply is GST-free under either of these sections, the characteristics of the supply must be examined.

The entity's contract with the non-resident is to supply it with taxidermy services, that is, the preservation and mounting of the game animal for display. The entity is not supplying the game animal itself. The game animal remains the property of the non-resident at all times. Therefore, the supply made by the entity cannot be characterised as the export of goods. The entity is making a supply of services. As such, section 38-185 of the GST Act does not apply to the entity's supply. Section 38-190 of the GST Act is the relevant provision.

Of relevance are item 2 in the table in subsection 38-190(1) of the GST Act (Item 2) and item 3 in the table in subsection 38-190(1) of the GST Act (Item 3).

Item 2 provides that a supply is GST-free where it is made to a non-resident who is not in Australia when the thing supplied is done, and a) the supply is neither 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 acquires the thing in carrying on the non-resident's enterprise, but is not registered or required to be registered.

The non-resident is not in Australia when the entity carries out the taxidermy work. The supply of taxidermy work is the supply of a service that involves work physically performed on an animal. The animal is in Australia when the work is done. As such, the entity's supply is a 'supply of work physically performed on goods situated in Australia'. Therefore, paragraph (a) in Item 2 is not satisfied.

Paragraph (b) in Item 2 requires that the non-resident acquires the thing in carrying on its enterprise, but is not registered or required to be registered. The non-resident does not acquire the entity's services in carrying on its enterprise. As such, paragraph (b) in Item 2 is not satisfied.

As neither paragraph (a) nor paragraph (b) in Item 2 are satisfied, the taxidermy service supplied by the entity is not GST-free under this item.

Item 3 provides that a supply of a thing other than goods or real property is GST-free if it is a supply: a) that is made to a recipient who is not in Australia when the thing supplied is done; and b) the effective use or enjoyment of which takes place outside Australia;

other than a supply of work physically performed on goods situated in Australia when the thing supplied is done, or a supply directly connected with real property situated in Australia.

As stated above, the entity's supply of the taxidermy work is a 'supply of work physically performed on goods situated in Australia'. As such, Item 3 is not satisfied. Therefore, the supply of the taxidermy service is not GST-free under section 38-190 of the GST Act.

The entity is registered for GST and the supply 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 making a taxable supply under section 9-5 of the GST Act when it performs taxidermy services on an animal in Australia and then sends that animal overseas to its non-resident owner.