GST and sale of a right to a non-resident

Is the entity, a music publisher, making a GST-free supply under item 4 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies, to an overseas advertising agency, a right to use its music tracks in an overseas advertisement?

Yes, the entity is making a GST-free supply under item 4 in the table in subsection 38-190(1) of the GST Act when it supplies, to an overseas advertising agency, a right to use its music tracks in an overseas advertisement.

The entity is a music publisher. The entity enters into a contract with an overseas advertising agency to supply a right to use its music tracks in an overseas advertisement.

The right is exercised overseas.

The entity is registered for goods and services tax (GST).

Subsection 38-190(1) of the GST Act specifies the circumstances where the supply of things other than goods or real property, for consumption outside Australia is GST-free. Rights to the use of music tracks are neither goods nor real property. As such, the supply of a right to use the music tracks is appropriately considered under subsection 38-190(1) of the GST Act.

Item 4 in the table in subsection 38-190(1) of the GST Act (Item 4) is of particular relevance to this case. Item 4 provides that a supply is GST-free if it is a supply that is made in relation to rights if: • the rights are for use outside Australia; or • the supply is to an entity that is not an Australian resident and is outside Australia when the thing supplied is done.

The entity enters into a contract with an overseas advertising agency to supply a right to use its music tracks in an overseas advertisement. The right is exercised overseas. As such, the rights are for use outside Australia and the supply satisfies the requirements of Item 4.

Furthermore, the supply is not excluded from being GST-free under subsection 38-190(2) of the GST Act as it is not a supply of a right to acquire something the supply of which would be connected with Australia and would not be GST-free.

Therefore, the entity is making a GST-free supply under Item 4 when it supplies, to an overseas advertising agency, a right to use its music tracks in an overseas advertisement.