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The supply of services of apprentices or trainees by a Group Training Company to host employers under a Group Training Scheme is typically a taxable supply.

A Group Training Scheme means an industrial organisation or body corporate that is approved to employ apprentices and trainees but uses the facilities of its members or other employers to train those apprentices or trainees.

In relation to a typical Group Training Scheme, a Group Training Company ("Group Training Company"): • employs apprentices and trainees, placing them into group training schemes for the duration of their apprenticeship or traineeship; • coordinates the training and industry placements of the apprentices and trainees and is responsible for the administration and compliance aspects of the employment; • is the legal employer of the apprentices and trainees; • places apprentices or trainees with a host employer where they receive on the job training which is complemented by formal training provided by registered training organisations etc; and • invoices the Host Employer for the time the apprentices or trainees are placed with its business. The fee to the Host Employer is based on: basic wage, Superannuation Guarantee Charge, Work Cover, administrative fee less any government incentives.

Under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 ('GST Act') an entity makes a taxable supply if: • the entity makes the supply for consideration; and • the supply is made in the course or furtherance of an enterprise the entity carries on; and • the supply is connected with Australia; and • the entity is registered, or required to be registered.

In the typical situation the supply of the services of apprentices or trainees by the Group Training Company to the Host Employer is a taxable supply as the conditions of section 9-5 are satisfied: • A supply of services/labour in the form of apprentices or trainees, is made by the Group Training Company to the Host Employer; • Consideration is made by the Host Employer for the supply; • Supply of apprentices or trainees is made in the course of the Group Training Company's enterprise; • Supply is connected with Australia; and • The Group Training Company is registered, or required to be registered.

Pursuant to subsection 7-1(1) of the GST Act, GST is payable on the taxable supply between the Group Training Company and the Host Employer. Under subsection 7-1(2) the Host Employer is entitled to input tax credits for the GST included in the fee for the supply of apprentices or trainees where the other conditions for a creditable acquisition are met.

Wages and salaries of employees are excluded from the definition of enterprise under the GST Act and are therefore not subject to GST. In the above situation the entity paying wages and salaries is the Group Training Company and these payments will be subject to withholding payments under the Pay As You Go (PAYG) System.