GST and supplies used or enjoyed outside of Australia

Is the entity, a consultancy organisation, making a GST-free supply under item 3 of subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it is contracted by an Australian resident company to provide consultancy services to another entity outside of Australia?

Yes, the entity is making a GST-free supply under item 3 of subsection 38-190(1) of the GST Act, when it is contracted by an Australian resident company to provide consultancy services to another entity outside of Australia.

The entity is a consultancy organisation. The entity is contracted by an Australian resident company to provide consultancy services to another entity outside of Australia. The consultancy services are to be performed overseas.

The contract between the entity and the Australian resident company states: 'Consultants are being contracted to provide a service to another entity outside of Australia, to the benefit of that entity, which is realised entirely overseas.'

Under section 38-190 of the GST Act, certain supplies of things other than goods or real property, for consumption outside of Australia, are GST-free.

Of most relevance to this case is item 3 of subsection 38-190(1) of the GST Act (Item 3), which deals with supplies that are used or enjoyed outside of Australia. Item 3 provides that a supply will be GST-free where: • it is made to a recipient who is not in Australia when the thing supplied is done; and • it is effectively used or enjoyed outside of Australia; and • it is neither a supply of work physically performed on goods situated in Australia when the thing supplied is done nor a supply directly connected with real property situated in Australia.

Subsection 38-190(4) of the GST Act further provides that for the purposes of Item 3, a supply is considered to be made to a recipient who is not in Australia if: • it is a supply under an agreement entered into, whether directly or indirectly, with an Australian resident; and • the supply is provided, or the agreement requires it to be provided, to another entity outside Australia.

In this case, because the entity has entered into an agreement with an Australian resident company to provide consultancy services to another entity outside of Australia, the supply will come within scope of subsection 38-190(4) of the GST Act. As such, the supply is also considered to have been made to a recipient who is not in Australia when the thing supplied is done.

Furthermore, as the supply of consultancy services is effectively used or enjoyed outside of Australia; and is neither a supply of work physically performed on goods situated in Australia when the thing supplied is done nor a supply directly connected with real property situated in Australia; the supply will be GST-free under item 3 of section 38-190 of the GST Act.