Issue
Is the entity, a supplier of services, making a GST-free supply under item 1 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 services for the construction of plant on an oil rig in the Joint Petroleum Development Area?
Decision
Yes, the entity is making a GST-free supply under item 1 in the table in subsection 38-190(1) of the GST Act when it supplies services for the construction of plant on an oil rig in the Joint Petroleum Development Area.
Facts
The entity is a supplier of services. The entity supplies services for the construction of plant on an oil rig in the Joint Petroleum Development Area.
The Joint Petroleum Development Area is a specified area in the Timor Sea. Australia and East Timor signed a treaty, in relation to the Joint Petroleum Development Area, to jointly control, manage and facilitate the exploration, development and exploitation of the petroleum resources of the specified area.
The entity is registered for goods and services tax (GST).
Reasons for Decision
Under section 38-190 of the GST Act, certain supplies, other than goods or real property for consumption outside of Australia, are GST-free. As the entity's supply of services is not a supply of goods or real property, its GST status is appropriately considered under section 38-190 of the GST Act.
Item 1 in the table in subsection 38-190(1) of the GST Act (Item 1) provides that a supply is GST-free where the supply is directly connected with goods or real property situated outside Australia.
As the entity supplies services for the construction of plant on an oil rig in the Joint Petroleum Development Area, its supply is directly connected with real property. Therefore, where the oil rig in the Joint Petroleum Development Area is situated outside of Australia, the supply satisfies the requirements of Item 1.
'Australia', as defined in section 195-1 of the GST Act, does not include any external territory, but includes an installation that is deemed by section 5C of the Customs Act 1901 to be part of Australia.
Subsection 5C(1) of the Customs Act provides the following installations are deemed to be part of Australia, where: • a resources installation is attached to the Australian seabed, or • a sea installation is installed in an adjacent area or a coastal area.
'Australian seabed' specifically excludes the Joint Petroleum Development Area under subsection 4(1) of the Customs Act. As such, the oil rig in the Joint Petroleum Development Area is not a resources installation that is attached to the Australian seabed.
'Adjacent area' is defined under subsection 4(1) of the Customs Act to mean an area described in schedule 2 of the Petroleum (Submerged Lands) Act 1967 (Petroleum Act) . The Joint Petroleum Development Area is not included as being an adjacent area defined in schedule 2 of the Petroleum Act.
'Coastal area' is defined under subsection 4(1) of the Customs Act to mean the area comprising the waters of the territorial sea of Australia and the sea on the landward side of the territorial sea of Australia and not within the limits of a State or an internal Territory. The Joint Petroleum Development Area is not within the area defined to be a coastal area. As such, the oil rig in the Joint Petroleum Development Area is not a sea installation that is installed in an adjacent area or a coastal area.
Therefore, for the purposes of the Customs Act, the oil rig in the Joint Petroleum Development Area is not deemed to be part of Australia. Consequently, the oil rig in the Joint Petroleum Development Area is not part of Australia as defined under section 195-1 of the GST Act.
As such, where the entity supplies services for the construction of plant on the oil rig in the Joint Petroleum Development Area, its supply of services is directly connected with real property situated outside of Australia. Therefore, the entity is making a GST-free supply under Item 1 when it supplies services for the construction of plant on an oil rig in the Joint Petroleum Development Area.