GST and the supply of a security and safety assessment of goods to be transported overseas

Is the entity, an international freight carrier, making a GST-free supply under item 5 in the table in section 38-355 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it provides a security and safety assessment of goods together with the transport of those goods overseas?

Yes, the entity is making a GST-free supply under item 5 in the table in section 38-355 of the GST Act when it provides a security and safety assessment of goods together with the transport of those goods overseas.

The entity is an international freight carrier. The entity provides a security and safety assessment of goods together with the transport of those goods overseas. The entity charges the owner of the goods a fee for the security and safety assessment service and a separate fee for the transport of the goods overseas.

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

Item 5 in the table in section 38-355 of the GST Act (Item 5) specifies the circumstances where the supply of international transport of goods is GST-free. Paragraph (a) of Item 5 provides that the supply of international transport of goods from their place of export in Australia to a destination outside of Australia is GST-free.

'International transport' in relation to the export of goods, is defined in section 195-1 of the GST Act to mean 'the transport of goods from their place of export in Australia to a destination outside of Australia (including loading and handling within Australia that is part of that transport)'.

The entity is supplying the transport of goods from Australia to a destination overseas. This is a supply of 'international transport' as defined in section 195-1 of the GST Act. The supply of the overseas transport satisfies the requirements in paragraph (a) of Item 5, and is therefore GST-free.

The entity is also supplying a security and safety assessment of the goods to the same client. The word 'handling' (as per the definition of 'international transport in section 195-1 of the GST Act) is defined in The Macquarie Dictionary (1997) as '...3. the process of packing, moving, carrying or transporting something.' It is considered that the security and safety assessment provided by the entity amounts to 'handling' of the goods as per the definition in The Macquarie Dictionary (1997) because it is part of the process of transporting the goods overseas.

However, the 'handling' of goods only amounts to 'international transport' of those goods under section 195-1 of the GST Act, if it is supplied as part of the transport of the goods. As the entity supplies the handling together with the international transport of the goods, the handling is considered to be part of that supply of transport and is also GST-free under paragraph (a) of Item 5.

Accordingly, the entity is making a GST-free supply under Item 5 when it provides a security and safety assessment of goods and then transports those same goods overseas. [Note: A supply of loading and handling in Australia is only considered to be a supply of 'international transport' as defined in section 195-1 of the GST Act, if it is part of that transport. Therefore, where an entity provides a security and safety assessment of goods in Australia, but does not provide the overseas transport of those goods, the supply of the security and safety assessment is not a GST-free supply under Item 5 because it is not part of the transport.]