GST and staff seconded to overseas parent entity

Is the entity, a business operator, making a GST-free supply under item 2 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it seconds its staff to work for its parent company overseas?

Yes, the entity is making a GST-free supply under item 2 in the table in subsection 38-190(1) of the GST Act when it seconds its staff to work for its parent company overseas.

The entity is a business operator. The entity seconds its staff to work for its parent company overseas for short periods. The entity claims the costs associated with the employee working for the parent company, including salary, airfare, meals and bus expenses, from the parent company. Neither the parent company nor its representative are in Australia when the supply is made.

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. The entity's supply of staff is neither a supply of goods or real property. As such, the GST status of the supply of the staff is appropriately considered under subsection 38-190(1) of the GST Act.

Item 2 in the table in subsection 38-190(1) of the GST Act (Item 2) provides that a supply is GST-free if it is a supply that is made to a non-resident who is not in Australia when the thing supplied is done, and: • 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 • the non-resident acquires the thing in carrying on the non-resident's enterprise, but is not registered or required to be registered.

The entity seconds its staff to work for its parent company. Neither the parent company nor a representative of the parent company are in Australia when the supply is made. In addition, the supply of staff is not a supply of work physically performed on goods situated in Australia nor is it a supply directly connected with real property situated in Australia. As such, the supply satisfies the requirements of Item 2.

However, the scope of Item 2 is limited by subsection 38-190(3) of the GST Act. Subsection 38-190(3) of the GST Act provides that, without limiting subsection 38-190(2) of the GST, a supply covered by Item 2 is not GST-free if: • it is a supply under an agreement entered into, whether directly or indirectly, with a non-resident; and • the supply is provided, or the agreement required it to be provided, to another entity in Australia.

The entity's supply is not a supply that is provided, or is agreed to be provided, to another entity in Australia. The staff are provided to the parent company overseas. As such, the supply is not excluded from being GST-free by subsection 38-190(3) of the GST Act.

Therefore, the entity is making a GST-free supply under Item 2 when it seconds staff to work for its parent company overseas.