Goods and services tax: supplies of things (other than goods or real property) made to non-residents but provided to another entity in Australia

This draft Ruling [A1] is about the operation of subsection 38-190(3) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). That subsection negates, in certain circumstances, the GST-free status that would otherwise apply to a supply covered by table item 2 of subsection 38-190(1) (item 2). Under item 2, supplies of things (other than goods or real property) made to non-residents are GST-free if the requirements of that item are met.

Unless otherwise indicated, all legislative references in this Ruling are to the GST Act and all references to an item number are to a table item of subsection 38-190(1).

From 1 July 2015, the term 'Australia' was replaced in nearly all instances within the GST, luxury car tax and wine equalisation tax legislation with the term 'indirect tax zone'. The scope of the new term, however, remains the same as the now repealed definition of 'Australia' used in those Acts. This change was made for consistency of terminology across the tax legislation, with no change in policy or legal effect. In this Ruling, the 'indirect tax zone' is referred to as 'Australia'.

In explaining the operation of subsection 38-190(3) in this Ruling, we address in particular: • the meaning of 'a supply covered by item 2' • when a supply covered by item 2 is 'under an agreement entered into, whether directly or indirectly, with a non-resident' (see paragraph 38-190(3)(a)) • how to determine whether 'the supply is provided, or the agreement requires it to be provided, to another entity in Australia' (see paragraph 38-190(3)(b)) • when the GST-free status of a supply is not negated by subsection 38-190(3) because the supply is not an input taxed supply and one of the subparagraphs of subsection 38-190(3)(c) applies, and • what apportionment is required if subsection 38-190(3) applies, in part, to a supply covered by item 2.

In this Ruling, we give many examples illustrating the application of subsection 38-190(3) to a range of supplies covered by item 2, including subcontract and global supply arrangements. The examples are not in themselves statements of principles to be applied generally. The examples show how, by examining the facts and circumstances of the supply in question, you can determine whether the supply is provided to another entity in Australia.

[Omitted.]

[Omitted.]

This Ruling does not otherwise address the operation of the provisions of section 38-190. However, as the wording in subsection 38-190(3) is similar to that used in subsection 38-190(4), parts of this Ruling are also relevant to the application of subsection 38-190(4).

This Ruling reflects the law following the amendments made by Tax and Superannuation Laws Amendment (2016 Measures No. 1) Act 2016 . The law changes impact how GST applies to cross-border supplies. Schedule 1 of that Act (about business to consumer supplies) applies from 1 July 2017 and Schedule 2 (generally about business to business supplies) applies from 1 October 2016.

This Ruling is divided into the following sections. Table 1: Sections of this Ruling Provisions Summary Item 2 and subsection 38-190(3) This section provides a general overview of when a supply will be 'a supply covered by item 2', as this is a precondition for the application of subsection 38-190(3) (paragraphs 36 to 40 of this Ruling). Paragraph 38-190(3)(a) This section explains the first condition that must be satisfied for subsection 38-190(3) to apply – the supply must be made under an agreement entered into, whether directly or indirectly, with a non-resident (paragraphs 41 to 48 of this Ruling). This includes an explanation of the meaning of 'non-resident' (paragraphs 46 to 48 of this Ruling). Paragraph 38-190(3)(b) This section explains the second condition that must be satisfied for subsection 38-190(3) to apply – the supply must be provided, or an agreement requires the supply to be provided, to another entity in Australia. This includes explanation of: • the meaning of 'another entity' (paragraphs 54 to 58B of this Ruling) • the meaning of 'provided to another entity' (paragraphs 59 to 63 of this Ruling) • the meaning of 'the agreement requires it [the supply] to be provided to another entity in Australia' (paragraphs 64 to 65 of this Ruling) • how to determine whether the supply is provided to another entity (paragraphs 66 to 82C of this Ruling) • how to determine whether the supply is provided to the other entity in Australia (paragraphs 83 to 121 of this Ruling) • how to determine whether a supply covered by item 2 is provided to an employee, agent or partner in Australia (paragraphs 121A to 129 of this Ruling). Paragraph 38-190(3)(c) This section explains the third condition that must be satisfied for subsection 38-190(3) to apply – for a supply that is not an input taxed supply, none of the subparagraphs in paragraph 38-190(3)(c) should apply. This includes explanation of when a supply: • is an input taxed supply (paragraphs 136G to 136J of this Ruling) • is provided to an entity that would be an Australian-based business recipient of the supply, if the supply had been made to it (paragraphs 136K to 136M of this Ruling) • is provided to an individual as an employee or officer of an entity that would be an Australian-based business recipient of the supply if the supply had been made to it (paragraphs 136N to 136Q of this Ruling) • is provided to an individual, as an employee or officer of the recipient of the supply, and the recipient's acquisition of the thing is solely for a creditable purpose and is not a non-deductible expense (paragraphs 136R to 136X of this Ruling). Apportionment This section explains when apportionment may be necessary because a supply covered by item 2 is only partly GST-free as a result of the application of subsection 38-190(3) (paragraphs 138 to 148 of this Ruling). Subcontract arrangements and global supplies This section explains the application of subsection 38-190(3) to certain complex arrangements involving subcontracted and global supplies (paragraphs 149 to 162A of this Ruling). Examples This section provides many examples illustrating the application of subsection 38-190(3) to a range of supplies covered by item 2 (paragraphs 264 to 787C of this Ruling).

When finalised, this Ruling is proposed to apply both before and after its date of issue subject to the commencement and application of each Act to which it refers. However, this Ruling will not apply to taxpayers to the extent that it conflicts with the terms of a settlement of a dispute agreed to before the date of issue of this Ruling (refer to paragraphs 75 and 76 of Taxation Ruling TR 2006/10 Public Rulings).

[Omitted.]

[Omitted.]

The suite of other GST public rulings which explain the operation of section 38-190 are: • Goods and Services Tax Ruling GSTR 2003/7 Goods and services tax: what do the expressions 'directly connected with goods or real property' and 'a supply of work physically performed on goods' mean for the purposes of subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999? • Goods and Services Tax Ruling GSTR 2003/8 Goods and services tax: supply of rights for use outside Australia – subsection 38-190(1), item 4, paragraph (a) and subsection 38-190(2) • Goods and Services Tax Ruling GSTR 2004/7 Goods and services tax: in the application of items 2 and 3 and paragraph (b) of item 4 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 199 9: when is a 'non-resident' or other 'recipient' of a supply 'not in Australia when the thing supplied is done'? when is 'an entity that is not an Australian resident' 'outside Australia when the thing supplied is done'? • Goods and Services Tax Ruling GSTR 2005/2 Goods and services tax: supplies of goods and services in the repair, renovation, modification or treatment of goods from outside Australia whose destination is outside Australia • Goods and Services Tax Ruling GSTR 2007/2 Goods and services tax: in the application of paragraph (b) of item 3 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 to a supply, when does 'effective use or enjoyment' of the supply 'take place outside Australia'? Note: it is proposed that GSTR 2007/2 be issued as a new ruling, Refer to Draft Goods and Services Tax Ruling GSTR 2007/2DC Goods and services tax: supplies where effective use or enjoyment of the supply take place outside Australia • Goods and Services Tax Determination GSTD 2007/3 Goods and services tax: if a non-resident entity owns residential rental premises in Australia and an Australian accountant makes a supply to that entity consisting of advice about the premises and tax return preparation services, is that supply wholly or partly GST-free if made on or after 1 April 2005?

GSTR 2004/7, which discusses the application of item 2, is of particular importance in relation to this Ruling as subsection 38-190(3) only applies to a supply that is covered by item 2.

Other relevant public rulings include: • Goods and Services Tax Ruling GSTR 2006/9 Goods and services tax: supplies, which examines the meaning of 'supply' and explains how a supply can be 'made' to one entity but 'provided' to another entity • Goods and Services Tax Ruling GSTR 2019/1 Goods and services tax: supply of anything other than goods or real property connected with the indirect tax zone (Australia), which explains when a supply of anything other than goods or real property is connected with Australia. Previous draft ruling [Omitted.] How to read this Ruling [Omitted.]

Under section 9-5 a supply is not a taxable supply to the extent that it is GST-free or input taxed.

A supply is GST-free if it is GST-free under Division 38 or under a provision of another Act. [1]

Subdivision 38-E sets out when exports of goods and other supplies for consumption outside Australia are GST-free.

The relevant section for the purposes of this Ruling is section 38-190.

Subsection 38-190(1) comprises 5 items which set out supplies of things, other than goods or real property, that are GST-free. A supply that is not GST-free under one item in subsection 38-190(1) may be GST-free under one of the other items. If the requirements of one of those items are met, the supply is GST-free, provided subsection 38-190(2), (2A), (3) or (5) [2A] does not negate that GST-free status.

Subsection 38-190(2) provides that a supply covered by any of table items 1 to 5 of subsection 38-190(1) is not GST-free if it is the supply of a right or option to acquire something the supply of which would be connected with Australia and would not be GST-free. [3]

Subsection 38-190(2A) provides that a supply covered by any of table items 2 to 4 of subsection 38-190(1) is not GST-free if the acquisition of the supply relates (whether directly or indirectly, or wholly or partly) to the making of a supply of real property situated in Australia that would be, wholly or partly, input taxed under Subdivision 40-B or 40-C. [3A]

Subsection 38-190(3) states it does not limit subsection 38-190(2) or (2A).

Subsections 38-190(2) and 38-190(2A) may negate the GST-free status of a supply covered by any of items 1 to 5 and items 2 to 4 respectively. However, subsection 38-190(3) only negates the GST-free status of a supply covered by item 2.

Subsection 38-190(2) considers 2 distinct supplies – a supply of a right or option and the supply of something else, the subject of the right or option.

In contrast, subsection 38-190(3) applies where a supply covered by item 2 is made to a non-resident, but that same supply is provided, or is required to be provided, to another entity in Australia.

This Ruling is about the interpretation and application of subsection 38-190(3) to a supply covered by item 2 (and as mentioned at paragraph 6 of this Ruling is of assistance in interpreting and applying subsection 38-190(4)). [3B]

If the GST-free status of a supply covered by item 2 is negated by the application of subsection 38-190(3), that supply may still be GST-free if the requirements of another item in the table are satisfied and subsections 38-190(2) and (2A) do not apply.

If the item 2 supply is not GST-free under another item in the table in subsection 38-190(1), and is not GST-free or input taxed under another provision of the GST Act or another Act, the supply is a taxable supply where all the other conditions for making a taxable supply are met. [4]

Item 2 applies to certain supplies of things, other than goods or real property, made to non-residents who are not in Australia when the thing supplied is done.

The requirement that the non-resident is not in Australia when the thing supplied is done is based on the underlying presumption that if the non-resident recipient (that is, the non-resident entity to which the supply is made) is not in Australia at that time, the supply is for consumption outside Australia and should be GST-free (provided the other requirements of the item are met).

However, if a non-resident enters into an agreement for the supply of a thing, the non-resident is not always the entity to which the supply is provided. If the supply is provided to another entity in Australia, the presumption that the supply is for consumption outside Australia because the non-resident recipient is not in Australia is not sound.

Subsection 38-190(3) addresses this circumstance. If the supply is provided (or is required to be provided) to another entity in Australia, subsection 38-190(3) negates the GST-free status that would otherwise apply under item 2. Although the non-resident recipient of the supply is not in Australia, consumption of the supply is considered to be in Australia because the supply is provided to another entity in Australia.

The following example is provided in the Supplementary Explanatory Memorandum for the Bill [4A] which inserted subsection 38-190(3). A school in Australia provides tuition to overseas students in Australia. However, it bills the overseas parents of the students directly. As the supply is being made to the students in Australia the supply will not be GST-free under item 2 in the table in subsection 38-190(1). (Note: the example refers to the 'supply … being made' to students. To be consistent with the wording used in subsection 38-190(3) the word 'provided' should have been used instead of 'made.')

A supply of a thing (other than goods or real property) made to a non-resident is GST-free under item 2 if the non-resident is not in Australia when the thing supplied is done [5] 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 [6] , or • the non-resident acquires the thing in carrying on the non-resident's enterprise, but is not registered or required to be registered.

However, if the supply covered by item 2 is under an agreement entered into whether directly or indirectly, with a non-resident entity and that supply is provided to another entity in Australia, or the agreement requires that it be so provided, subsection 38-190(3) may negate the GST-free status of that supply (otherwise afforded under item 2).

Subsection 38-190(3), in contrast to item 2, focuses on the entity to which the supply is provided, not the entity (the non-resident) to which the supply is made. If the supply is provided (or is required to be provided) to another entity in Australia, subsection 38-190(3) may negate the GST-free status that would otherwise apply to the supply covered by item 2. Although the non-resident recipient of the supply is not in Australia, consumption of the supply is considered to be in Australia because the supply is provided to an entity in Australia.

Subsection 38-190(3) provides that, without limiting subsection 38-190(2) or (2A), a supply covered by item 2 is not GST-free if: (a) it is a supply under an agreement entered into, whether directly or indirectly, with a non-resident; and (b) the supply is provided, or the agreement requires it to be provided, to another entity in [Australia]; and (c) for a supply other than an input taxed supply – none of the following applies: (i) the other entity would be an Australian-based business recipient of the supply, if the supply had been made to it; (ii) the other entity is an individual who is provided with the supply as an employee or officer of an entity that would be an Australian-based business recipient of the supply, if the supply had been made to it; or (iii) the other entity is an individual who is provided with the supply as an employee or officer of the recipient, and the recipient's acquisition of the thing is solely for a creditable purpose and is not a non-deductible expense.

Subsection 38-190(3) applies to negate the GST-free status of a supply covered by item 2 where all the conditions in paragraphs 38-190(3)(a), (b) and (c) are satisfied.

The first condition that must be satisfied for subsection 38-190(3) to apply is that the supply is made under an agreement entered into, whether directly or indirectly, with a non-resident.

[Omitted.]

The agreement may be either a written, oral or an implied agreement.

The agreement is entered into directly with a non-resident if the parties to the agreement are the non-resident and the supplier.

In the context of subsection 38-190(3), we consider that entering into an agreement indirectly with a non-resident includes the case where another entity such as a nominee or agent or the like enters into the agreement on behalf of the supplier or the non-resident. For example, a supplier may enter into an agreement with an agent, or representative, or associate of the non-resident acting on behalf of the non-resident.

The term 'non-resident' is defined in section 195-1 to mean 'an entity that is not an Australian resident'.

'Australian resident' is defined in section 195-1 to mean 'a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936).

GSTR 2004/7 provides guidance on when an entity will be a non-resident for the purpose of this definition. (See paragraphs 21 to 25 and 117 to 174 of that Ruling.) Residency status is a question of fact and is one of the main criteria that determines an individual's liability to Australian income tax. Taxation Ruling TR 2023/1 Income tax: residency tests for individuals provides guidance on determining residency status under the income tax definition.

The second condition that must be satisfied for subsection 38-190(3) to apply is that the supply is provided, or the agreement requires it to be provided, to another entity in Australia.

'The supply' refers to the supply covered by item 2.

To work out whether a supply covered by item 2 is provided (or is required to be provided) to another entity in Australia, (that is, whether the requirements of paragraph 38-190(3)(b) are satisfied), we follow a two-step approach.

We first work out whether a supply covered by item 2 is provided to another entity, or whether an agreement requires the supply to be provided to another entity. We examine this at paragraphs 54 to 82C of this Ruling.

Secondly, if the supply covered by item 2 is provided to another entity, we determine whether, when the thing supplied is done, that supply is provided to that other entity in Australia. We examine this at paragraphs 83 to 121 of this Ruling.

'Another entity' is an entity other than the non-resident entity to which the supply is made. The term 'entity' is defined in subsection 184-1(1) and includes an individual, company, partnership, corporate limited partnership or trust.

An employee is an individual and therefore an entity as defined. If a supply is made to a non-resident employer and that supply is provided, or required to be provided, to an employee, that supply is provided to another entity. It is inherent in the nature of some supplies, for example, the training or entertainment of employees, or travel by employees, that those supplies can only be provided to the employee.

An agent that is, for example, an individual or company is also an entity as defined. However, the mere fact that the supply is made to an agent acting for a non-resident does not mean that the supply is provided (or is required to be provided) to another entity. It is a matter of determining to which entity the supply is provided. If all the agent does is to arrange on behalf of the non-resident for the supply to be made and provided to the non-resident, the supply is not provided to the agent. [7]

A partner that is, for example, an individual or company is an entity as defined. [8] If a supply is made to a non-resident partnership and the supply is provided, or required to be provided, to a partner, that supply is provided to another entity.

As a consequence of the 'separate entity' status given to a partnership for GST purposes, the GST Act applies to partnership transactions, in particular to dealings between partners and the partnership, in a manner that does not reflect the general law treatment of those transactions. [8A]

Subsection 184-5(1) confirms that supplies and acquisitions that are made by or on behalf of partners in their capacity as partners are treated as supplies and acquisitions by the partnership.

If a supply is made to a non-resident partnership [8B] and the supply is provided, or required to be provided, to a partner, that supply is provided to another entity. The provision of a supply to a partner is discussed further at paragraphs 128 to 129 of this Ruling.

The word 'provided' is used in subsection 38-190(3) to contrast with the term 'made' in item 2. In the context of section 38-190, the contrasting words indicate that if a non-resident contracts for a supply to be provided to another entity, the place of consumption should be determined with regard to the entity to which the supply is provided, not the entity to which the supply is made.

GSTR 2006/9 examines the meaning of 'supply' and explains how a supply can be 'made' to one entity but 'provided' to another entity.

The expression 'provided to another entity' means that in the performance of a service (or in the doing of some thing), the actual flow of that supply is, in whole or part, to an entity that is not the non-resident entity with which the supplier made the agreement for the supply. The contractual flow is to one entity (the non-resident recipient) and the actual flow of the supply is to another entity.

For example, if a supply of entertainment services is made to a non-resident company and in the performance of that service the employees are the entities that are entertained, the actual flow of that service is to another entity, each employee. (See paragraphs 54 to 58B of this Ruling where the meaning of 'another entity' is discussed). The supply is made to the non-resident company (the employer) and provided to another entity (each employee).

We discuss at paragraphs 66 to 82C of this Ruling how to determine whether a supply is provided to another entity.

'The agreement' refers to the agreement entered into with a non-resident, whether directly or indirectly. (See paragraph 39 of this Ruling.)

We consider that an agreement requires that a supply be provided to another entity in Australia if it is an express or implied term of the agreement that the supply is to be provided to another entity in Australia.

Before it can be determined whether a supply is provided (or is required to be provided) to another entity, it is essential that the supply be properly characterised as the supply of a service, right or some other thing. It is only when the supply is properly characterised that it is possible to determine whether that supply is provided to another entity.

In characterising a supply it is necessary to consider all the circumstances of the transaction to ascertain its essential character.

For instance, the Supplementary Explanatory Memorandum provides Example 1.10 (reproduced at paragraph 35E of this Ruling) where a school in Australia provides tuition to overseas students in Australia but bills the parents overseas. Under the agreement between the supplier and the non-resident parents, the parents are supplied with certain rights which contribute to the supply as a whole. However, the essential character of the supply is a supply of services; not of rights. The services comprise the teaching, tutoring, and so on of the children. That service is made to the non-resident parents and provided to the children. (See also Examples 1 to 5C of this Ruling.)

It is also necessary to establish the exact nature of the supply to determine to which entity that service or thing is provided. That is, it is necessary to establish what is really being supplied.

A clear understanding of the exact nature of the supply is essential to determining whether that supply is provided to another entity. It is only by having regard to what is in substance and reality being supplied that it is possible to identify to which entity that supply is provided.

The exact nature of a supply in any given situation depends on the facts and circumstances of the supply and the agreement made between the parties. In this regard, it is necessary to look at the whole arrangement for the supply (including the contractual arrangements) and the way in which the supply is carried out.

If there is no written contract, other documents such as correspondence between the parties may be useful in establishing the nature of the supply.

Thus, the focal point in working out whether a supply is provided to another entity is the facts and circumstances of the doing of the thing supplied. By the supplier examining what it is required to do and in what circumstances, the supplier is able to objectively determine to whom the supply is provided.

In some instances, it is inherent in the nature of the supply that the supply is provided to a particular entity. For example, travel, training or entertainment services are, by their very nature, provided to the individual that travels, or is trained or entertained, respectively.

In the case of delivery or freight services where goods from one entity are addressed for delivery to another entity, we accept that the delivery or freight services are provided to that addressee entity. This does not, however, include the delivery of goods that are generically addressed, for example, to 'The Householder' or are for delivery to the public at large. It also does not include the situation where an entity's own goods are simply freighted or moved from one location to another location. In these cases, the circumstances of the particular supply in question must be considered to determine whether the supply is provided to another entity.

In this Ruling we provide the following examples which illustrate this approach: • Examples 10 and 11 – delivery or freight services provided to an individual • Example 13 – delivery or freight services provided to an entity other than an individual • Example 14 – delivery of goods to, for example, 'The Householder', or the public at large.

In the case of other supplies, for example, supplies that involve the supply of legal, accounting, auditing or advertising services, the question of whether the supply is provided to another entity depends on the facts and circumstances in any given case.

If a supply is the provision of advice or information which involves work to create, develop or produce that advice or information, for example, a legal opinion or an audit report, the supply is the performance of services. [11] Thus, in determining whether a supply is provided to another entity regard is to be had to the performance of the services in creating, developing or producing the opinion or audit report and whether those services are provided to another entity.

For example, consider a supply of tax return preparation services made to a non-resident company. If what is really being supplied are services to complete tax returns for particular employees that meet their personal tax obligations, those services are provided to each employee. If, on the other hand, the tax return services are to complete the non-resident company's tax return, meeting its tax obligations, the tax return preparation services are provided to the non-resident company.

In situations where the contractual flow of a supply is to an entity (other than an individual), and it is necessary to determine whether the actual flow of the supply is to another entity (other than an individual), we consider that a strong indicator that the supply is provided to another entity is that the contracting entity has no further interaction with, or participation in, the provision of the supply beyond contracting and paying for the supply. However, the application of subsection 38-190(3) is still dependent upon on all the facts and circumstances of the supply. (See Example 1 at paragraphs 264 to 275 of this Ruling.)

It is only in limited circumstances that any one fact, or a particular combination of facts, means or indicates that a supply is provided to another entity. Accordingly, we give numerous examples in this Ruling illustrating the application of subsection 38-190(3) in a wide variety of circumstances.

The examples are not in themselves statements of principles to be applied generally. The examples illustrate the scope of subsection 38-190(3) in a given fact situation. In particular, the examples show how, by examining the facts and circumstances of the supply in question, you can determine whether that supply is provided to another entity.

Further explanation about how to characterise and determine the nature of supplies provided to another entity are provided in GSTR 2006/9.

The enquiry for the purposes of subsection 38-190(3) is one of first determining the exact nature of the supply having regard to all the facts and circumstances and then whether that supply, as properly described, is provided to another entity in Australia.

If the nature of a supply covered by item 2 is such that the supply is provided to another entity in Australia, the fact that the results or outcomes of the supply are later used outside Australia does not alter the nature of the supply or the application of subsection 38-190(3) to that supply.

Similarly, if the nature of the supply is such that the supply is only provided to an entity outside Australia, subsection 38-190(3) does not apply. This outcome is not altered even if another entity in Australia benefits from the supply. (See Example 4 at paragraphs 322A to 322H of this Ruling.)

It is only necessary to consider this second step if it is first determined that the supply is provided to another entity.

If the supply is 'provided to another entity' this is not in itself sufficient for paragraph 38-190(3)(b) to be satisfied. The supply must be provided to that other entity in Australia.

It is therefore relevant to determine when provision of the supply occurs and whether that provision is to that other entity in Australia. (See paragraphs 89 to 112 of this Ruling for individuals; and paragraphs 113 to 121 of this Ruling for entities other than individuals.)

A supply is provided as and when the thing supplied is done. This is the relevant time for determining whether a supply is provided to an entity in Australia.

Consistent with the views expressed in GSTR 2004/7 [12] and GSTR 2019/1 [13] as to when the thing supplied is done we consider that: • if the thing provided is a service – the provision of that service occurs during the period of time when the service is performed • if the thing provided is advice or information and the supply involves work to create, develop or produce that information or advice for the other entity – the thing provided is the performance of services. The provision of that thing occurs when the service is performed and includes the period of time during which the advice is prepared, produced or created, as the case may be • if the thing provided is an instantaneous provision of advice or information – the provision of that thing occurs at the time at which the advice or information is instantaneously provided • if the thing provided is the creation, grant, transfer, assignment or surrender of a right – the provision of that thing occurs at the time that the right is created, granted, transferred, assigned or surrendered, and • if the thing provided is the entry into, or release from, an obligation to do anything, or refrain from an act, or to tolerate an act or situation – the provision of that thing occurs at the time at which the obligation is entered into or the release is effected.

In the case of a service performed over time, for example, provision of advice or information created, developed or produced over time, the relevant period for determining whether any part of the supply is provided to another entity in Australia is the period during which the advice or information is created, developed or produced.

Consistent with the approach in GSTR 2004/7, we determine whether an individual is in Australia by reference to his or her physical location. An individual is in Australia when the thing supplied is done if that individual is physically in Australia.

However, while 'in Australia' has the same meaning in item 2 (and paragraph (a) of item 3 and paragraph (b) of item 4) and subsection 38-190(3), the reference to 'in Australia' in subsection 38-190(3) is not simply a presence test.

In item 2 (and paragraph (a) of item 3 and paragraph (b) of item 4) it is necessary to determine whether the entity to which the supply is made is not in Australia when the thing supplied is done. This is a presence test at a particular time. We resolve this issue by answering the question whether a recipient is in Australia in relation to the supply at the relevant time. [14]

However, in subsection 38-190(3), the question at issue is whether there is provision of a supply to another entity in Australia. We resolve this issue not by determining whether that other entity is in Australia in relation to the supply, but by determining whether provision is to that other entity in Australia.

To determine whether there is provision to an individual in Australia, we distinguish between non-resident and resident individuals, according to whether they are physically in or outside Australia when the thing supplied is done.

If a supply is provided (or is required to be provided) to a non-resident individual who is not physically in Australia when the thing supplied is done, the supply is not provided to that individual in Australia. Paragraph 38-190(3)(b) is not satisfied and therefore subsection 38-190(3) does not negate the GST-free status of the supply.

While the services that effect provision of a supply to a non-resident individual might take place in Australia, the supply is not provided to that non-resident individual in Australia if the individual is physically outside Australia when the services are performed. There must be provision to the non-resident individual in Australia for subsection 38-190(3) to apply.

If a supply is provided (or is required to be provided) to a non-resident individual who is physically in Australia when the thing supplied is done and that individual's presence in Australia is integral to, as distinct from being merely coincidental with, the provision of the supply, we consider that the supply is provided to that individual in Australia. The requirement in paragraph 38-190(3)(b) is satisfied.

Conversely, if a non-resident individual's presence in Australia is not integral to the provision of the supply, we consider that the supply is not provided to that individual in Australia. Paragraph 38-190(3)(b) is not satisfied and therefore subsection 38-190(3) does not negate the GST-free status of the supply.

Apportionment may be required if, for part of the time when the thing supplied is done, a non-resident individual is physically in Australia and that individual's presence is integral to the provision of the supply. That part of the supply is taxable as subsection 38-190(3) negates the GST-free status of the supply (assuming that the other requirements of subsection 38-190(3) are satisfied). Apportionment is discussed further at paragraphs 138 to 148.

At paragraphs 107 to 112 of this Ruling, we explain when a non-resident individual's presence in Australia is integral to the provision of the supply.

If a supply is provided (or is required to be provided) to a resident individual who is physically in Australia when the thing supplied is done, the supply is provided to that individual in Australia. The requirement in paragraph 38-190(3)(b) is satisfied.

If a supply is provided (or is required to be provided) to a resident individual who is not physically in Australia when the thing supplied is done and that individual's presence outside Australia is integral to, as distinct from being merely coincidental with, the provision of the supply, we consider that the supply is provided to that individual outside Australia, not in Australia. Paragraph 38-190(3)(b) is not satisfied and therefore subsection 38-190(3) does not negate the GST-free status of the supply.

Conversely, if a resident individual's presence outside Australia is not integral to the provision of the supply, we consider that the supply is provided to that individual in Australia. The requirement in paragraph 38-190(3)(b) is satisfied.

Apportionment may be required if, for part of the time when the thing supplied is done, a resident individual is physically outside Australia and that presence is integral to the provision of the supply. That part of the supply is GST-free as subsection 38-190(3) does not negate the GST-free status of the supply (assuming the other requirements of subsection 38-190(3) are satisfied). Apportionment is discussed further at paragraphs 138 to 148 of this Ruling.

We explain at paragraphs 107 to 112 of this Ruling when a resident individual's presence outside Australia is integral to the provision of the supply.

[Omitted.]

[Omitted.]

Determining whether an individual's presence at a particular location is integral to the provision of the supply requires an examination of the facts and circumstances of the supply. However, some indicators that an individual's presence at a particular location is integral to the provision of the supply, and is not merely coincidental, include: • the need for the supply arises from the individual's presence at that location, or • the presence of the individual at that location is integral to the performance, receipt or delivery of the supply.

Some examples of supplies where the need for the supply arises from an individual's presence at a particular location are as follows: • a supply of immigration advice to a non-resident individual who wants to extend his or her stay in Australia • a supply of customs broker services to a non-resident individual who is in Australia and requires the services of a customs broker to enter goods for home consumption in Australia • a supply of legal services in relation to an offence committed by that individual while at that location, and • a supply of repair services which are provided to an individual at that location to repair a piece of equipment (for example, a laptop) at that location.

Some examples of supplies where the presence of the individual at that location is integral to the performance, receipt or delivery of the supply, are as follows: • supply of training or entertainment – the services are to be received by the individual at that location (see Example 15 (at paragraphs 442 to 449), Example 15A (at paragraphs 450A to 450I) and Example 7 (at paragraphs 358 to 363) of this Ruling) • supply of travel – the travel is to be undertaken by the individual at that location • supply of hairdressing or other similar services applied to the person – the services are to be performed on the individual at that location.

In the following circumstance the individual's presence at a particular location is not integral to the provision of the supply: • A service is provided to an individual who is a non-resident and, during the period when those services are performed, the individual comes to Australia on holiday. While on holiday in Australia the non-resident individual takes the opportunity to visit a supplier to check on the progress of the supply of services. The need for the supply does not arise from the individual's presence in Australia and the individual's presence in Australia is not integral to the performance, receipt or delivery of the supply. (See Example 8 at paragraphs 365 to 370 of this Ruling.) • A service is provided to an individual who is a resident of Australia and, during the period when those services are performed, the individual goes overseas on holiday. While on holiday outside Australia the resident individual checks on the progress of the supply of services. The need for the supply does not arise from the individual's presence outside Australia and the individual's presence outside Australia is not integral to the performance, receipt or delivery of the supply. (See Example 9 at paragraphs 371 to 376 of this Ruling.)

In the case of delivery or freight services which are provided to an individual in the circumstances described at paragraph 75 of this Ruling, we accept those services are provided to that individual in Australia, if the goods are addressed to that individual in Australia. Alternatively, if the goods are addressed to the individual outside Australia, we accept that those services are provided to that individual outside Australia. This outcome is not dependent upon the residency status of the individual to whom the goods are addressed. See Example 10 (at paragraphs 379 to 380) and Example 11 (at paragraphs 391 to 400A) of this Ruling, which illustrate and further explain this approach.

This does not, however, include the delivery of goods that are generically addressed to 'The Householder' or are for delivery to the public at large. (See Example 14 at paragraphs 431 to 435 of this Ruling.) It also does not include the situation where an individual's goods are simply freighted or moved from one location to another location. For example, where the individual is relocating overseas and the individual's household goods are freighted to an address overseas. The circumstances of the particular supply in question must be considered to determine whether the supply is provided to another entity and whether the supply is provided to that other entity in Australia.

Further examples about an individual's presence at a particular location being integral to the provision of a supply are provided at paragraphs 350 to 400A of this Ruling.

Unlike individuals, an entity such as a company, partnership, corporate limited partnership or trust does not have a precise physical location. The entity, through its representatives, may be present in more than one location at the same time, and can be both in and outside Australia at the same time. If a company, partnership, corporate limited partnership or trust does not have a presence in Australia the supply is not provided to that entity in Australia.

A company, corporate limited partnership or trust is in Australia (irrespective of its residency status) if the entity carries on business (or in the case of an entity that does not carry on business, carries on activities) in Australia at or through a fixed and definite place of its own, or through an agent at a fixed and definite place, for a sufficiently substantial period of time. [17]

Additionally, a company or corporate limited partnership is in Australia if it is incorporated or formed in Australia respectively. [18]

A partnership is in Australia if the entity carries on business (or in the case of a partnership that is in receipt of ordinary income or statutory income jointly, other activities which generate that income) in Australia at or through a fixed and definite place of its own, or through an agent at a fixed and definite place, for a sufficiently substantial period of time. [19]

If a company, partnership, corporate limited partnership or trust has a presence in Australia, we consider that a supply is provided to that entity in Australia if the supply is for the purposes of its Australian presence (for example, an Australian branch, representative office or agent if it is a non-resident company or the Australian head office if it is an Australian incorporated company). If the supply is for the purposes of the entity's presence outside Australia (for example, an offshore branch) the supply is not provided to the entity in Australia.

This also means that if a company, partnership, corporate limited partnership or trust is present only in Australia the supply is necessarily provided to that entity in Australia.

In the case of delivery or freight services which are provided to an entity other than an individual in the circumstances described at paragraph 75 of this Ruling, we accept those services are provided to that entity in Australia, if the goods are addressed to that entity in Australia. Alternatively, if the goods are addressed to that entity outside Australia, we accept those services are provided to that entity outside Australia. This outcome is not dependent upon the residency status of the entity to which the goods are addressed. See Example 13 at paragraphs 419 to 430 of this Ruling.

This approach recognises the inherent practical difficulties in otherwise determining whether the supply is provided to another entity in Australia, particularly if the freight or delivery services are the subject of subcontract arrangements.

This approach does not, however, apply to the delivery of goods that are generically addressed to 'The Householder' or are for delivery to the public at large. (See Example 14 at paragraphs 431 to 435 of this Ruling.) It also does not apply to circumstances where an entity's own goods are freighted or moved from one location to another location. The circumstances of the particular supply in question must be considered to determine whether the supply is provided to another entity and whether the supply is provided to that other entity in Australia.

Apportionment may be required if the supply is partly for the purposes of an entity's Australian presence. Apportionment is discussed further at paragraphs 138 to 148 of this Ruling.

Further examples of when a supply is provided to an entity other than an individual are provided at paragraphs 408 to 435 of this Ruling.

Where a supply is made to a non-resident employer with employees in Australia, it may be necessary to first consider whether the employer satisfies the 'not in Australia' requirement in item 2. [20A]

To determine whether a supply is provided to an employee, it is essential to examine the nature of the supply closely. By examining what is really being supplied and how that supply is carried out, it is possible to establish to whom the service or other thing is provided, that is, the employer or another entity, the employee. If the supply is provided to the employee, it is then necessary to consider if the employee's presence at a particular location is integral to the provision of that supply.

For example, a non-resident sole trader engages an Australian accounting firm to prepare Australian tax returns for non-resident employees working in Australia. The service involves the accounting firm meeting with the employees in Australia and preparing their individual tax returns. The tax return services are about the tax obligations of each individual. The tax return preparation services in these circumstances are provided to the individual employee. The employee is in Australia when the service is performed and that employee's presence in Australia is integral to, as distinct from being merely coincidental with, the provision of the supply.

Where an employee is involved with the provision of a supply, the weight to be given to that fact differs according to the circumstances of the supply in question. In the example at paragraph 123 of this Ruling, the fact that the employee has contact with the supplier strongly indicates, in the circumstances of the supply, that the supply is provided to that employee. On the other hand, contact by an employee with a supplier is of little relevance in circumstances where the employee's involvement with the provision of the supply is simply to facilitate the provision of the supply to the non-resident employer. This is the case where, for example, an employee of a non-resident employer interacts with a law firm in circumstances where the firm is providing legal advice concerning a business venture of the non-resident employer.

It is inherent in the nature of some supplies, for example, the training or entertainment of employees, or travel by employees, that those supplies can only be provided to the employee. For example, a supply of training services, the nature of which requires the physical attendance of the individual at that training in Australia, is a supply provided to that individual in Australia. However, while the services that effect provision of a supply to an entity might take place in Australia, that supply may nonetheless be provided to an entity that is not in Australia. For example, the supply of online training provided to non-resident employees in another country (not requiring physical attendance in a classroom in Australia) is not provided to another entity in Australia. The non-resident individuals are not in Australia when the training services are performed.

For examples concerning employees, see paragraphs 442 to 470 of this Ruling. See also paragraphs 136N to 136X of this Ruling for an explanation of subparagraphs 38-190(3)(c)(ii) and (iii) which apply to preserve the GST-free status of certain supplies where the supply is provided to an individual as an employee of the recipient of the supply.

Sometimes a non-resident entity makes an acquisition through a resident agent in Australia. If all the agent does is to arrange, on behalf of the non-resident, for the supply to be made and provided to the non-resident, the supply is not provided to the resident agent in Australia. [21]

For an example concerning agents, see Example 19 at paragraphs 471 to 475 of this Ruling.

As with other situations, the application of subsection 38-190(3) to a supply involving a partner, who is in Australia and a partner of a non-resident partnership, depends on the nature of the supply to determine whether a supply, which is made to the non-resident partnership, is provided to the partner.

When the partner of a non-resident partnership contracts for the supply of a thing in their capacity as partner, the supply is taken to be made to the partnership. However, the supply of a thing can be made to the partnership and provided in whole or in part to that partner or another partner for the purposes of subsection 38-190(3).

If it is determined that the supply is provided to the partner, it is then necessary to determine whether that partner's presence in Australia is integral to the provision of that supply (if the partner is an individual), or the supply is for the purposes of the partner's presence in Australia (if the partner is an entity other than an individual).

For an example concerning partners, see Example 21 at paragraphs 483 to 497 of this Ruling. See also paragraphs 136N to 136X of this Ruling for an explanation of subparagraphs 38-190(3)(c)(ii) and (iii). These subparagraphs preserve the GST-free status of certain supplies provided to an individual as an officer (including a partner of a partnership) of the recipient of the supply. Other aspects of the operation of paragraph 38-190(3)(b) Later use of a supply, outside Australia, that is provided to another entity in Australia [Omitted.]

The third condition that must be satisfied for subsection 38-190(3) to negate the GST-free status of a supply covered by item 2 is outlined in paragraph 38-190(3)(c).

Paragraph 38-190(3)(c) is expressed as follows: (c) For a supply other than an input taxed supply – none of the following applies: (i) the other entity would be an Australian-based business recipient of the supply, if the supply had been made to the other entity; (ii) the other entity is an individual who is provided with the supply as an employee or officer of an entity that would be an Australian-based business recipient of the supply, if the supply had been made to it; or (iii) the other entity is an individual who is provided with the supply as an employee or officer of the recipient and the recipient's acquisition of the thing is solely for a creditable purpose and is not a non-deductible expense.

Paragraph 38-190(3)(c) applies to tax periods commencing from 1 October 2016 [22A] and was introduced to extend the previous application of the GST-free rules, reducing the GST embedded in supplies made to non-residents and the need for non-residents to register for GST to claim input tax credits. [22B]

The effect of paragraph 38-190(3)(c) is to preserve the GST-free status of certain supplies covered by item 2 where paragraphs 38-190(3)(a) and (b) are otherwise satisfied. The GST-free status of a supply covered by item 2 is preserved where: • the supply is not an input taxed supply, and • any of the subparagraphs of paragraph 38-190(3)(c) apply.

Each of the subparagraphs of paragraph 38-190(3)(c) refer to the 'other entity'. The 'other entity' is the entity referred to in paragraph 38-190(3)(b) – the entity in Australia to which the supply is provided, or the agreement requires the supply be provided (the 'providee').

In practical terms, a supplier must determine that the recipient or providee (as relevant), satisfies the requirements in the relevant subparagraph. Although it is expected that in many cases the supplier would obtain the information required to make this determination through negotiating the terms of the supply (for example, in the agreement specifying that particular services be provided to an employee of the recipient or another entity), the supplier may need to obtain additional information to determine that a particular supply is GST-free.

Paragraph 38-190(3)(c) does not need to be considered if the supply would otherwise be an input-taxed supply. [22C]

An input taxed supply that satisfies the conditions in paragraphs 38-190(3)(a) and (b) will not be GST-free under item 2 (even if one of the subparagraphs of paragraph 38-190(3)(c) applies).

Paragraph 2.155 of the Explanatory Memorandum to the Tax and Superannuation Laws Amendment (2016 Measures No. 1) Bill 2016 explains: The amendments do not preserve the GST-free treatment in item 2 for a supply that would, apart from subsection 9-30(3), be an input taxed supply. Where a supply of this kind would otherwise be input taxed, a non-resident recipient of the supply would not acquire a taxable supply, and therefore has no incentive to register for GST to claim ITCs on the supply. Additionally, the supplier of an input taxed supply should not have greater access to ITCs. If these input taxed supplies were GST-free, Division 11 would entitle the supplier to ITCs on any acquisitions required in making that supply.

However, if the GST-free status of a supply covered by table item 2 is negated by the application of subsection 38-190(3), that supply may still be GST-free if the requirements of another table item are satisfied and subsections 38-190(2) and (2A) do not apply.

Subparagraph 38-190(3)(c)(i) preserves the GST-free treatment of a supply covered by item 2 that is provided to another entity in Australia if that other entity would have been an 'Australian-based business recipient' of the supply if the supply had been made to it.

Section 195-1 provides that 'Australian-based business recipient' has the meaning given by subsection 9-26(2). Subsection 9-26(2) provides that an entity is an Australian-based business recipient of a supply made to it if all of the following apply: • the entity is registered for GST • an enterprise of the entity is carried on in Australia [22D] • the entity's acquisition of the thing supplied is not solely of a private or domestic nature. [22E]

In applying subparagraph 38-190(3)(c)(i), it is necessary to consider the above test as though the relevant supply was made directly to the entity in Australia to which it was provided.

Subparagraph 38-190(3)(c)(ii) preserves the GST-free treatment of a supply covered by item 2 that is provided to an individual in Australia where: • the individual is provided with the supply as an employee or officer of an entity, and • that entity would have been an Australian-based business recipient of the supply if the supply had been made to it.

The term 'employee' is not defined and takes its ordinary meaning. [22F] The term 'officer' is defined in section 195-1 as having the meaning given by the Corporations Act 2001. This includes a director or secretary of a corporation and a partner of a partnership. [22G]

An employee or officer of an entity is provided with a supply in their capacity as an employee or officer if the supply was provided to them in the performance of their duties or as part of their remuneration. [22H] See Example 15 (at paragraphs 442 to 449) and Example 15A (at paragraphs 450A to 450I) of this Ruling.

Paragraphs 136K to 136M of this Ruling explain when an entity would have been an Australian-based business recipient of a supply if the supply had been made to it. Subparagraph 38-190(3)(c)(ii) applies in similar circumstances to subparagraph 38-190(3)(c)(i) and ensures that the GST-free status of a supply is also preserved where the thing that is supplied is provided to an employee or officer of an entity, rather than directly to the entity itself.

Subparagraph 38-190(3)(c)(iii) preserves the GST-free treatment of a supply made to a non-resident that is provided to an individual in Australia where: • the individual is provided with the supply as an employee or officer of the non-resident recipient, and • the non-resident recipient's acquisition of the thing is solely for a creditable purpose and is not a non-deductible expense.

Paragraph 136O of this Ruling explains when an individual is an employee or officer of an entity and paragraph 136P of this Ruling when they are provided with a supply in that capacity. It is expected that the terms of the agreement will generally provide sufficient information for a supplier to ascertain whether the providee is an employee or officer of the non-resident and whether they are provided with the supply in that capacity.

Section 11-15 provides that an entity acquires a thing for a creditable purpose to the extent that the entity acquires the thing in carrying on its enterprise (subsection 11-15(1)) but not to the extent that the acquisition relates to making supplies that would be input taxed or the acquisition would be of a private or domestic nature (subsection 11-15(2)). [22I]

'Non-deductible expense' is defined in section 195-1 to have the meaning given by subsections 69-5(3) and (3A). Subsections 69-5(3) and (3A) provide that an acquisition or importation is a 'non-deductible expense' if it is not deductible under Division 8 of the Income Tax Assessment Act 1997 (ITAA 1997) because of certain provisions in either the ITAA 1997 or the ITAA 1936. The exclusion of non-deductible expenses in subparagraph 38-190(3)(c)(iii) ensures that GST-free treatment is not extended to acquisitions of supplies that would otherwise be denied input tax credits by subsection 69-5(1).

Subsection 69-5(3) provides that an acquisition or importation is a non-deductible expense if it is not deductible under Division 8 of the ITAA 1997 because of certain provisions of the income tax law. These provisions are: (a) section 26-5 of the ITAA 1997 (penalties) (b) section 26-30 of the ITAA 1997 (relative's travel expenses) (c) section 26-40 of the ITAA 1997 (maintaining your family) (d) section 26-45 of the ITAA 1997 (recreational club expenses) (e) section 26-50 of the ITAA 1997 (expenses for a leisure facility) (f) Division 32 of the ITAA 1997 (entertainment expenses) (g) Division 34 of the ITAA 1997 (non-compulsory uniforms) (h) section 51AK of the ITAA 1936 (agreements for the provision of non-deductible non-cash business benefits).

Subsection 69-5(3A) further provides that an acquisition or importation is also a non-deductible expense to the extent that it is not deductible under Division 8 of the ITAA 1997 because of one of the following: (a) section 51AEA of the ITAA 1936 (meal entertainment – election to use the fifty-fifty split method) (b) section 51AEB of the ITAA 1936 (meal entertainment – election to use the 12 week register method) (c) section 51AEC of the ITAA 1936 (entertainment facility – election to use the fifty-fifty split method).

Each of the above provisions listed in paragraphs 136V and 136W of this Ruling must be considered on its terms, including any exceptions. For example, while section 32-5 denies deductions for entertainment expenses, section 32-20 provides an exception for expenses incurred in respect of providing entertainment by way of providing a fringe benefit. [22J]

[Omitted.]

As a result of the application of subsection 38-190(3), a supply covered by item 2 may only be partly GST-free. In this circumstance, the consideration for the supply must be apportioned between the GST-free and taxable parts of the supply. [24]

The need to apportion in the context of subsection 38-190(3) can arise because the supply is only provided in part to another entity. For example, a supply may be provided: • in part to the non-resident entity to which the supply is made and in part to another entity in Australia • in part to another entity in Australia and in part to another entity that is not in Australia (see Example 40 at paragraphs 636 to 644 of this Ruling).

Apportionment of a supply as a result of the operation of subsection 38-190(3) may also be required if, for example, a supply is provided to another entity over a period of time and the supply is only provided to that other entity in Australia for part of the time. (See Example 41 at paragraphs 647 to 652 of this Ruling.)

To work out the value of the taxable part of the supply, the consideration is apportioned to each of the parts to find the consideration for the taxable part. The supplier can use any reasonable method that is supportable in the particular circumstances to apportion the consideration. [25]

The supplier should keep records that explain the method used. [26]

Sometimes the same supply of services is provided to a non-resident entity outside Australia and another entity in Australia and it is not possible to identify separate parts of the supply flowing to each entity. [26A] If the supply is covered by item 2, subsection 38-190(3) negates the GST-free status of the supply to the extent that the supply is provided to the other entity in Australia. It is necessary to apportion the consideration for the supply between the GST-free and taxable parts of the supply on a fair and reasonable basis taking into account the particular circumstances of the supply.

Under Division 156 (concerning supplies and acquisitions made on a progressive or periodic basis), if a taxable supply is made for a period or on a progressive basis and the consideration is provided on a periodic or progressive basis, the GST payable is attributed as if each progressive or periodic component of the supply were a separate supply. [27]

If a supply is provided for a period with consideration given on a periodic basis and, for part of the time when the thing supplied is done, the supply is provided to another entity in Australia, it may not be possible for the supplier to identify the taxable part of the supply at the beginning of the period over which the thing is provided. This is because there is no way for the supplier to determine in advance whether, and to what extent, the supply is provided to an entity in Australia during the period over which the supply is provided. However, it is possible for the supplier to identify this in relation to the periodic components of the supply. Accordingly, we accept that this is the basis on which GST payable on the supply (and input tax credits on the creditable acquisition) is attributable to tax periods.

If a supplier, who accounts on a cash basis, makes a supply for a period or on a progressive basis and the consideration is given on a periodic or progressive basis, similar issues may arise to those referred to at paragraph 145 of this Ruling. Example 45 at paragraphs 693 to 707 of this Ruling illustrates how to attribute GST payable in these circumstances.

If a supply is performed over more than one tax period and the GST (if any) on the supply is attributable to a tax period before the completion of the supply (for example, consideration is fully paid in one tax period but the supply is spread across 2 or more later tax periods), the supplier must use a reasonable basis for determining the extent to which the supply is taxable. That is, the supplier must use a reasonable basis to determine the extent to which the supply is provided to another entity in Australia.

If there is a change in circumstance such that the supply is taxable to a greater or lesser extent than determined in an earlier tax period the supplier has an adjustment event. The adjustment may be either an increasing or a decreasing adjustment depending upon whether the corrected GST amount is greater than, or less than, the previously attributed GST amount. [28]

Sometimes a non-resident supplier subcontracts the provision of services to one of its customers in Australia to another supplier located in Australia. There may be various reasons for subcontracting the service. The non-resident supplier may have no physical presence in Australia to undertake the performance of the service or the non-resident supplier may not have the necessary capabilities to perform the service itself.

If the non-resident supplier subcontracts the provision of a particular service to a supplier in Australia, the subcontract arrangement does not alter either the character or nature of the supply made by the non-resident supplier to the Australian customer. In particular, the character of the supply is not transformed from the supply of a service to the supply of a right nor is the nature of the supply altered from the supply of an actual service to that of an arranging service.

We consider that a supply that is an arranging service typically involves the non-resident supplier arranging for the Australian supplier to enter into a contract of supply with the Australian customer for the supply of the required thing. That is, a supply of an arranging service typically involves 2 separate supply contracts – one contract between the customer and the first supplier for the service of arranging for a second supplier to supply a particular service, and a second contract between the customer and the second supplier for the supply of that service or thing. (See Example 46 (at paragraphs 733 to 740) and Example 47 (at paragraphs 742 to 754) of this Ruling.)

[Omitted.] Alternative views [Omitted.]

In many multi-national groups, a range of services are made available to group members through an internal service provider, typically the parent company or a separate dedicated entity. Such services include accounting, auditing, legal, information technology, research and development and financial services. Group members for which these services are performed are sometimes directly charged a fee by the group entity that provides the service or in other cases a cost is allocated. The fee or cost allocation may be separately identified or part of a bundled charge or cost allocation, sometimes incorporated into a management fee.

Sometimes the internal service provider contracts with an external service provider to perform the services for the group. In that case, there is typically a head agreement between the internal service provider and the external provider (the head supplier) and a range of subcontracting agreements to enable the head supplier to fulfil its obligations to provide services to members of the global group.

Where the internal service provider subcontracts the provision of a service to another group member or an external provider, this does not alter the character of the supply. The supply by the internal service provider remains a supply of a service and the nature of that service does not change.

These global supply arrangements can give rise to a number of GST considerations, including whether the supplies are connected with Australia, the application of subsection 38-190(1), and the application of the reverse charge provisions (Division 84).

For the purpose of subsection 38-190(3), it would typically be the actions of the supplier that are to be considered in determining whether a supply is, in fact, provided to another entity. If there is a head agreement between the internal service provider and the external provider (the head supplier) and a range of subcontracting agreements to enable the head supplier to fulfil its obligations to provide services to members of a global group, the actions of the subcontracted supplier are relevant in assessing whether the supply by the head supplier to the internal service provider is provided to another entity (that is, an entity other than the internal service provider) in Australia.

However, subsection 38-190(3) is of limited application to global supply arrangements following the introduction of paragraph 38-190(3)(c) such that it is generally not necessary to determine whether the supply by the head supplier to the internal service provider is provided to another entity in Australia.

Due to the circumstances in which global supplies arise, where the arrangements involve a supply covered by item 2 being provided to a group entity in Australia, that group entity will generally be an entity that would have been an Australian-based business recipient of the supply if the supply had been made to it. Accordingly, paragraph 38-190(3)(c) will generally preserve the GST-free status of such supplies. See Example 48 at paragraphs 756 to 787C of this Ruling. Character and nature of the supply made by the internal service provider [Omitted.] Supplies connected with Australia [Omitted.] Supplies partly connected with Australia [Omitted.] Alternative view [Omitted.] Subsection 38-190(3) [Omitted.] Overseas legislation and case law [Omitted.]

The following flow charts illustrate, in broad terms, the application of item 2 and subsection 38-190(3) to a supply made to a non-resident and provided to another entity in Australia.

Flow chart 1 should be read in conjunction with the relevant paragraphs in this Ruling and GSTR 2004/7.

Flow charts 2, 3, 4, and 5 and 6 should be read in conjunction with the relevant paragraphs in this Ruling.

Flow chart 1 of this Ruling illustrates how to determine whether a supply made to an entity is covered by item 2. Flow chart 1: How to determine whether a supply made to an entity is covered by item 2

Flow chart 2 of this Ruling illustrates how, in the application of subsection 38-190(3), to determine whether a supply is provided to another entity. Flow chart 2: In the application of subsection 38-190(3), how to determine whether a supply is provided to another entity

Flow chart 3 of this Ruling illustrates how, in the application of subsection 38-190(3), to determine whether the supply is provided to another entity, being a non-resident individual, in Australia. Flow chart 3: In the application of subsection 38-190(3), how to determine whether the supply is provided to another entity, being a non-resident individual, in Australia

Flow chart 4 of this Ruling illustrates how, in the application of subsection 38-190(3), to determine whether the supply is provided to another entity, being a resident individual, in Australia. Flow chart 4: In the application of subsection 38-190(3), how to determine whether the supply is provided to that another entity, being a resident individual, in Australia

Flow chart 5 of this Ruling illustrates how, in the application of subsection 38-190(3), to determine whether the supply is provided to another entity, being a company, partnership, corporate limited partnership or trust, in Australia. Flow chart 5: In the application of subsection 38-190(3), how to determine whether the supply is provided to that another entity, being a company, partnership, corporate limited partnership or trust, in Australia

Flow chart 6 of this Ruling illustrates how, in the application of subsection 38-190(3), whether paragraph 38-190(3)(c) is satisfied. Flow chart 6: In the application of subsection 38-190(3), how to determine whether paragraph 38-190(3)(c) is satisfied Explanation (this forms part of the Ruling) The policy behind subsection 38-190(3) [Omitted.] Part I – understanding the preconditions for the application of subsection 38-190(3) to a supply covered by item 2 [Omitted.] The meaning of 'a supply covered by item 2' [Omitted.] The elements of paragraph 38-190(3)(a) The meaning of 'it' [Omitted.] The meaning of 'an agreement entered into, either directly or indirectly, with a non-resident' [Omitted.] The meaning of 'non-resident' [Omitted.] Non-resident individual [Omitted.] Non-resident company [Omitted.] Non-resident partnership (other than a corporate limited partnership) [Omitted.] Non-resident corporate limited partnership [Omitted.] Non-resident trust [Omitted.] The elements of paragraph 38-190(3)(b) The supply [Omitted.] The meaning of 'a supply is provided to another entity' [Omitted.] The meaning of 'another entity' [Omitted.] An employee is another entity [Omitted.] Alternative view [Omitted.] An agent is another entity [Omitted.] A partner is another entity [Omitted.] The meaning of 'a supply is provided to another entity in Australia' [Omitted.] Provision of the supply occurs as and when the thing supplied is done [Omitted.] When provision of the supply is to that other entity in Australia [Omitted.] The meaning of 'the agreement requires it [a supply] to be provided' [Omitted.] The application of subsection 38-190(3) [Omitted.] Part II – determining whether a supply is provided (or is required to be provided) to another entity [Omitted.] Characterisation of the supply covered by item 2 [Omitted.]

US Co, a non-resident parent company, supplies personal use software to consumers world-wide, including in Australia. This software is supplied by the granting of a licence to use the intellectual property.

US Co does not carry on business in Australia either through a place of business of its own or through an agent acting on its behalf.

US Co's contracts with its customers require US Co to provide technical support for the software supplied. As US Co has no presence in other countries, the non-resident company contracts with its global subsidiaries to perform the support services in relation to the software.

Aus Co, a GST registered Australian subsidiary of US Co, provides the required technical support services in relation to software licensed by US Co to consumers in Australia.

The issues considered below are the characterisation of the thing supplied by Aus Co to US Co, and the impact that characterisation has on the GST treatment of the supply.

The facts are illustrated diagrammatically as follows: Diagram 1: Facts of Example 1

Various rights are granted under the contract made between Aus Co and US Co. However, performance of the contract by Aus Co involves providing a service to the consumers in Australia. In this circumstance, we do not consider that the supply by Aus Co to US Co could be characterised as anything other than the supply of a service. The fact that the service is provided to the consumers in Australia by Aus Co and not by US Co does not, in our view, transform the character of the supply made by Aus Co to US Co from a service to a right. Also, the character of the supply by Aus Co to US Co remains the same irrespective of whether the supply by US Co to the Australian consumers is determined to be a composite supply of rights or a mixed supply of rights and services.

The supply by Aus Co is made to a non-resident, US Co, which is not in Australia when the technical support services are performed. The supply satisfies the requirements of item 2 and is, therefore, a supply covered by item 2.

The supply of technical support services by Aus Co to US Co is a supply under an agreement entered into with a non-resident. Paragraph 38-190(3)(a) is therefore satisfied.

Under the agreement with US Co, Aus Co is required to provide technical support services to consumers (in Australia). US Co, the entity to which the supply is made, has no further involvement with the provision of the supply to the Australian consumers, beyond entering into the contract and making payment for the technical support services rendered. This is a strong indicator that the supply is provided to the Australian consumers. The actual flow of the technical support services is to the Australian consumers. The services are not, therefore, provided to US Co.

The Australian consumers are in Australia when the service is performed. The supply of technical support services is for the purposes of their private purposes in Australia. Paragraph 38-190(3)(b) is therefore satisfied.

The supply of technical support services is not an input taxed supply and none of the subparagraphs 38-190(3)(c)(i) to (iii) apply. Paragraph 38-190(3)(c) is therefore satisfied.

Subsection 38-190(3) negates the GST-free status of the supply covered by item 2.

A non-resident United States (US) parent company contracts with an Australian accounting firm for the audit of its GST-registered subsidiary in Australia. The US parent company does not carry on business in Australia either through a place of business of its own or through an agent acting on its behalf. The supply by the Australian accounting firm is properly characterised as the supply of a service.

The Australian accounting firm is engaged by the non-resident US parent company to carry out an audit of the Australian subsidiary. The audit service is about effecting compliance by the Australian subsidiary with its obligations under the corporation's laws in Australia. Under section 301 of the Australian Corporations Act 2001, the Australian subsidiary must have its annual financial report for a financial year audited in accordance with Division 3 of Part 2M.3 of that Act and obtain an auditor's report. The audit service is performed over a period of time culminating in the production of an audit report.

The supply is made to a non-resident, the US parent company, which is not in Australia when the service is performed. The supply satisfies the requirements of item 2 and is, therefore, a supply covered by item 2.

The supply of audit services by the Australian accounting firm is a supply under an agreement entered into with a non-resident. Paragraph 38-190(3)(a) is therefore satisfied.

What is being supplied is an audit service effecting compliance by the Australian subsidiary with its statutory obligations in Australia. The nature of the service is such that the supply of audit services is provided to the Australian subsidiary. The actual flow of the audit service is to another entity, the Australian subsidiary.

Under section 308 of the Corporations Act 2001, an auditor who audits the financial report of a company for a financial year must report to members on whether the auditor is of the opinion that the financial report is in accordance with that Act. An alternative view expressed is that this requirement means that the audit services are provided to the US parent company.

Notwithstanding this requirement, the supply is, in our view, provided to the Australian subsidiary. This additional requirement does not alter the fact that the service is about the Australian subsidiary meeting its obligations under Australian company law. It may be that the requirement under section 308 of the Corporations Act 2001 means that the supply is provided to both the non-resident parent company and the Australian subsidiary. However in that case, subsection 38-190(3) still applies. (For further discussion about apportionment where a supply is provided to more than one entity see paragraphs 138 to 148 of this Ruling.)

The Australian subsidiary is in Australia when the audit service is performed. As the supply of audit services is for the purposes of the Australian subsidiary, the supply is provided to that entity in Australia. Paragraph 38-190(3)(b) is therefore satisfied.

The supply of audit services is not an input taxed supply. The Australian subsidiary, is an entity that is registered for GST, carries on an enterprise in Australia, and does not acquire the services for a private or domestic purpose. Accordingly, the Australian subsidiary would have been an Australian-based business recipient of the supply if the supply had been made to it and subparagraph 38-190(3)(c)(i) applies. Paragraph 38-190(3)(c) is therefore not satisfied.

The Australian accounting firm must be able to ascertain, based on information and evidence available to it, that subparagraph 38-190(3)(c)(i) applies. (See paragraph 136F of this Ruling.)

Subsection 38-190(3) does not negate the GST-free status otherwise applicable to the supply of audit services covered by item 2.

A non-resident US parent company contracts with an Australian accounting firm for the audit of its GST-registered subsidiary in Australia. The audit service is about effecting compliance by the US parent company with US accounting or securities requirements that apply to it. The US parent company does not carry on business in Australia either through a place of business of its own or through an agent acting on its behalf.

The supply is made to a non-resident, the US parent company, which is not in Australia when the service is performed. The supply satisfies the requirements of item 2 and is, therefore, a supply covered by item 2.

The supply of the audit services by the Australian accounting firm to the non-resident US parent company is a supply under an agreement entered into with a non-resident. Paragraph 38-190(3)(a) is therefore satisfied.

What is being supplied is an audit service effecting compliance by the US parent company with its reporting requirements in the US. The nature of the service is such that the supply of audit services is provided to the US parent company. The supply is not provided to another entity. The supply is not provided to the Australian subsidiary. The actual flow of the audit service is to the US parent company, not the Australian subsidiary which is the subject of the audit. Paragraph 38-190(3)(b) is therefore not satisfied.

Subsection 38-190(3) does not negate the GST-free status of the supply. It is not necessary to consider paragraph 38-190(3)(c).

Even if the supply was provided to the Australian subsidiary in Australia, the supply would be GST-free because paragraph 38-190(3)(c) would not be satisfied. The supply of audit services is not an input taxed supply and subparagraph 38-190(3)(c)(i) would apply because the Australian subsidiary would have been an Australian-based business recipient of the supply, if the supply had been made to it. (See Example 2 at paragraphs 288 to 297 of this Ruling.)

[Omitted.]

Angela is a non-resident individual who owns a residential apartment in Queensland which is currently being rented. The apartment is managed by a real estate agent on Angela's behalf. The real estate agent advises Angela that the air-conditioner needs repairing as it has ceased working. Angela authorises the repairs and the agent arranges for a person to carry out the repairs to the air-conditioner. Angela is not physically located in Australia at any time during which the repairs to the air-conditioner are performed. Angela is not registered, or required to be registered, for GST in Australia.

The repair services are contracted for by Angela's agent on her behalf. The supply of the repair services to the rental property are therefore made to Angela, a non-resident who is not in Australia when the repair services are performed. As Angela is not registered, or required to be registered, the supply satisfies the requirements of item 2 and is, therefore, a supply covered by item 2.

The supply of repair services by the repairer is a supply under an agreement entered into indirectly with a non-resident (that is, through Angela's agent in Australia). Paragraph 38-190(3)(a) is therefore satisfied.

What is being supplied is the service of repairing an air-conditioner. The circumstances of the supply are that Angela, as landlord, is maintaining the leased premises and all inclusions such as the air-conditioner in working order as leased by the tenant.

The supply of the repair services is provided, therefore, to Angela. It is not provided to the tenant. While the tenant benefits from the supply of the repair services as she is able to once again use the air-conditioner, this does not alter the nature of the supply and the fact that the supply, as properly described, is not provided to another entity, the tenant. (The supply is also not provided to the agent who merely arranges for the supply to be made to Angela.) Paragraph 38-190(3)(b) is therefore not satisfied.

Subsection 38-190(3) does not negate the GST-free status of the supply of repair services covered by item 2. It is not necessary to consider paragraph of 38-190(3)(c).

It is also necessary to consider subsection 38-190(2A) which could negate the GST-free status of the supply under item 2. This provision applies to a supply covered by item 2 if the acquisition of the supply (in this case the repair services) relates either directly or indirectly to the making of a supply of real property in Australia that would be wholly or partly input taxed under Subdivision 40-B or 40-C.

As the supply of the residential rental property by Angela would be input taxed, and the acquisition of the repair services relates to the making of that supply, the GST-free status of the supply is negated by subsection 38-190(2A) if the supply of the repair services is made on or after 1 April 2005. [67A] If the supply of the repair services is made before 1 April 2005 subsection 38-190(2A) does not apply.

An Australian legal specialist, the sole proprietor of a boutique legal practice in Melbourne specialising in maritime law, is engaged by a non-resident company to speak at an international trade law conference in Sydney. The topic is recent developments in maritime law affecting international trade and in particular, the impact of a recent High Court decision on current industry arrangements. The conference is attended by members of the legal profession, both from Australia and overseas, who are not employees or otherwise associated with the non-resident company. The non-resident company, the conference organiser, does not carry on business in Australia through a place of business of its own or through an agent acting on its behalf.

The supply of speaking services is made by the Australian legal specialist to the non-resident company. The non-resident company is not in Australia when the speaking services are performed. The supply satisfies the requirements of item 2 and is, therefore, a supply covered by item 2.

The supply of speaking services by the Australian legal specialist is a supply under an agreement entered into with a non-resident. Paragraph 38-190(3)(a) is therefore satisfied.

What is supplied is information and knowledge for the professional development of the members of the audience. The supply of speaking services is akin to a supply of training services. In performing the speaking service, the members are updated and trained on recent developments. Therefore, the nature of the supply is such that the speaking services are provided to the members of the legal profession attending the conference, each, another entity, and not to the non-resident company organising the conference.

Each audience member is provided the speaking services for their professional development in Australia. As their presence in Australia is integral to the performance of the supply, the supply is provided to another entity, each member of the audience, in Australia. Paragraph 38-190(3)(b) is therefore satisfied.

The supply of speaking services is not an input taxed supply and subparagraphs 38-190(3)(c)(ii) and (iii) do not apply as the audience members are not employees or officers of the non-resident company.

Subparagraph 38-190(c)(i) may apply to the extent that any of the attendees would be Australian-based business recipients of the supply if the supply had been made directly to them. However, the Australian legal specialist must be able to ascertain, based on information and evidence available to it, the extent to which subparagraph 38-190(3)(c)(i) applies. (See paragraph 136F of this Ruling.)

To the extent subparagraph 38-190(c)(i) does not apply, paragraph 38-190(3)(c) is satisfied and subsection 38-190(3) negates the GST-free status otherwise applicable to the supply of speaking services made by the lawyer and covered by item 2.

A non-resident software company sells just-in-time inventory control software designed for the construction industry. To ensure the success of the release of its new software, the non-resident software company holds seminars in Australia for both current users of earlier versions of the software and potential users of the new software, from the construction industry. The non-resident software company does not carry on business in Australia, either through a place of business of its own or through an agent acting on its behalf.

An Australian software expert enters into an agreement with the non-resident software company to speak at various seminars to be held around Australia.

At the seminars, the software expert promotes the new software. The expert advocates the benefits of its use and highlights the new features for the current users of previous versions to promote and encourage sales of the new version.

The supply of speaking services by the Australian software expert is made to the non-resident software company. As the non-resident software company is not in Australia when the speaking services are performed, the supply of speaking services by the Australian software expert satisfies the requirements of item 2 and is, therefore, a supply covered by item 2.

The supply of speaking services by the Australian software expert to the non-resident software company is a supply under an agreement entered into with a non-resident. Paragraph 38-190(3)(a) is therefore satisfied.

Unlike the previous example, the nature of the service is not the professional development of members of the audience. Rather, the nature of the supply is promoting and marketing a new product, that is, the new software of the non-resident software company, to potential customers, the members of the construction industry attending the conference. While knowledge and information about the software capabilities flow to the audience members, this is only a byproduct of the supply of speaking services and it does not alter the true nature of the service, that is, the promotion and marketing of the new software.

Therefore, the supply is made and provided to the non-resident software company. Paragraph 38-190(3)(b) is not satisfied.

As the supply is not provided to another entity, subsection 38-190(3) does not negate the GST-free status of the supply of speaking services covered by item 2. It is not necessary to consider paragraph of 38-190(3)(c).

Trans-Europe Railways Co is a non-resident company which operates passenger rail in Europe. Trans-Europe engages an Australian company, Aus Bookings Co, to operate a telephone bookings centre in Australia. Aus Bookings Co, operates a successful telephone bookings centre for other foreign transport operators. Customers call Aus Bookings Co to enquire about timetables, make reservations and buy tickets. Aus Bookings Co passes on the relevant information and money to Trans-Europe.

Trans-Europe does not carry on business in Australia either through a place of business of its own or through an agent at a fixed and definite place (including through Aus Bookings Co). [67B]

David, an Australian-resident individual, is arrested and charged with an offence while in New Zealand on holiday. An Australian legal firm is engaged by a non-resident (who is not in Australia at any time) to provide legal services to David. The legal services are provided to David over a period of 4 weeks. During the first week David is in contact with the firm on a regular basis. However, as the matter is largely resolved during this week, there is no contact between the firm and David during the remaining 3 weeks he is in New Zealand. The firm continues to attend to some matters to finalise the issue on David's behalf during these 3 weeks. David continues on with his holiday through New Zealand.

The supply of legal services is made to a non-resident who is not in Australia when the services are performed. The supply satisfies the requirements of item 2 and is, therefore, a supply covered by item 2.

The supply of legal services by the supplier in Australia to the non-resident is a supply under an agreement entered into with a non-resident. Paragraph 38-190(3)(a) is therefore satisfied.

The legal services are required to be provided to David. The supply, although made to a non-resident, is provided to another entity, David.

The services are not provided to David in Australia if David is outside Australia when the thing supplied is done and his presence outside Australia is integral to the provision of the supply. The need for the supply of legal services arises from David's presence outside Australia; his presence outside Australia is not merely coincidental with the provision of the supply.

As David's presence outside Australia is integral to the provision of the legal services, the supply is provided to David outside Australia. Paragraph 38-190(3)(b) is therefore not satisfied.

Subsection 38-190(3) does not negate the GST-free status of the supply covered by item 2. It is not necessary to consider paragraph 38-190(3)(c).

Note: if any legal services in relation to this matter are provided to David after his return to Australia, those services are provided to David in Australia. To that extent, subsection 38-190(3) applies to negate the GST-free status of the supply covered by item 2. Paragraph 38-190(3)(c) is satisfied as the supply of legal support services is not an input taxed supply and none of the subparagraphs 38-190(3)(c)(i) to (iii) apply.

A UK non-resident employer purchases a ticket from a supplier for his employee in Australia to attend an Aussie rules football match in Melbourne. The employee is a non-resident individual who is temporarily in Australia for work purposes.

The non-resident employer does not carry on business in Australia either through a place of business of its own or through an agent acting on its behalf. The non-resident employer does not have pay as you go (PAYG) withholding obligations in Australia or obligations under the Fringe Benefits Tax Assessment Act 1986.

The supply of entertainment services is made to a non-resident, the employer, who is not in Australia when the entertainment services are performed. The supply satisfies the requirements of item 2 and is, therefore, a supply covered by item 2.

The supply of entertainment services by the supplier in Australia to the non-resident employer is a supply under an agreement entered into with a non-resident. Paragraph 38-190(3)(a) is therefore satisfied.

What is being supplied is entertainment and the employee is the entity that attends the football match and who is entertained. The supply although made to the employer is provided to the employee.

The employee attends the football match in Australia and is involved with the supply while in Australia. The employee is the entity that is entertained. Therefore, the supply is provided to another entity, the employee, in Australia. Paragraph 38-190(3)(b) is therefore satisfied.

The supply of entertainment services is not an input taxed supply and none of the subparagraphs of paragraph 38-190(3)(c) apply. Even though the supply is provided to an individual who is an employee of the recipient of the supply, the non-resident recipient's acquisition is a non-deductible entertainment expense. [69A] Accordingly, subparagraph 38-190(3)(c)(iii) does not apply and paragraph 38-190(3)(c) is satisfied.

Subsection 38-190(3) negates the GST-free status of the supply covered by item 2. Note: it is acknowledged that a supplier in these circumstances may not have all the necessary information to determine whether subparagraph 38-190(3)(c)(iii) applies. For example, they may not be aware of the employer and employee relationship between the recipient and the individual to which the supply is provided. They may also not know whether the non-resident recipient's acquisition is a non-deductible expense. If a supplier considers that a supply they make is GST-free because subparagraph 38-190(3)(c)(iii) applies, the supplier must be able to ascertain this based on information and evidence available to it. (See paragraph 136F of this Ruling.)

[Omitted.]

John, who is a non-resident, has personal goods stored in Brisbane at a lock-up storage facility. The agreement for the storage is between John's employer, a non-resident company, and an Australian storage provider. John comes to Australia on holidays and calls in to check the condition and safety of the goods he has stored at the facility.

The supply is made to a non-resident, the employer company, which is not in Australia when the storage services are performed. The supply satisfies the requirements of item 2 and is, therefore, a supply covered by item 2.

The supply of storage services by the Australian storage provider to the non-resident employer company is a supply under an agreement entered into with a non-resident. Paragraph 38-190(3)(a) is therefore satisfied.

What is being supplied is storage of personal goods of an employee. John's goods are stored for him. The nature of the service is such that the supply of storage services is provided to John, another entity.

In the circumstances of this supply, John is merely taking advantage of being in Australia to check on the condition and safety of the goods he has stored at the facility. John's presence is not integral to the provision of the supply; it is merely coincidental. The supply of storage services is therefore not provided to John in Australia. Paragraph 38-190(3)(b) is not satisfied.

Subsection 38-190(3) does not negate the GST-free status of the supply covered by item 2. It is not necessary to consider paragraph 38-190(3)(c).

Peter's relative, a non-resident individual, who is not in Australia when the thing supplied is done, engages an Australian private investigator to provide services to Peter in Australia. Peter, a resident individual, is trying to find a relative who may be either in Australia or outside Australia. Peter is on holidays outside Australia during part of the time when those services are performed. The private investigator provides weekly email updates to Peter on the progress he is making in finding the missing relative.

The supply of investigation services is made to a non-resident individual who is not in Australia when the services are performed. The supply satisfies the requirements of item 2 and is, therefore, a supply covered by item 2.

The supply of investigation services by the supplier in Australia to the non-resident is a supply under an agreement entered into with a non-resident. Paragraph 38-190(3)(a) is therefore satisfied.

The investigation services are required to be provided to Peter. The supply although made to a non-resident is provided to another entity, Peter.

The weekly emails to Peter while he is overseas are merely necessitated by his absence from Australia on holiday. His presence outside Australia is merely coincidental with the provision of the supply. Peter is only being updated on the progress of the supply. Peter's presence outside Australia is not integral to the provision of the supply. The supply is therefore provided to Peter in Australia. Paragraph 38-190(3)(b) is therefore satisfied.

The supply of investigation services is not an input taxed supply and none of subparagraphs 38-190(3)(i) to (iii) apply. Paragraph 38-190(3)(c) is therefore satisfied.

Subsection 38-190(3) therefore negates the GST-free status of the supply covered by item 2.

A GST-registered Australian exporter sells goods to a Japanese customer on delivered duty paid terms. The exporter is obliged, therefore, to deliver the goods to the Japanese customer at the named place of destination, Tokyo. The Japanese customer takes delivery of the goods in Tokyo.

The Australian exporter contracts with an overseas airline, Tokyo Air Freight, to transport the goods from Adelaide to Tokyo. Tokyo Air Freight does not carry on business in Australia either through a place of business of its own or through an agent acting on its behalf. Tokyo Air Freight contracts with an Australian transport supplier, Aus Transport, to undertake the domestic leg of the transport of the goods from Adelaide to Sydney.

Aus Transport supplies Tokyo Air Freight with domestic transport services. Aus Transport moves the goods from Adelaide to Sydney on behalf of Tokyo Air Freight.

Aus Transport arranges with the Australian exporter a suitable time to pick up the goods. The transport service occurs over the time from picking up the goods to delivery in Sydney.

The supply of domestic transport services by Aus Transport to Tokyo Air Freight is a supply made to a non-resident company that is not in Australia when the transport services are performed. The supply of transport services is not a supply of work physically performed on goods. [70] The supply satisfies the requirements of item 2 and is, therefore, a supply covered by item 2.

The supply of domestic transport services by Aus Transport to Tokyo Air Freight is a supply under an agreement entered into with a non-resident. Paragraph 38-190(3)(a) is therefore satisfied.

Under the export sale terms, the Australian exporter is required to provide the Japanese customer with the services of delivering the goods to the customer at the named place of destination. The Australian exporter effects provision of delivery services to the Japanese customer through Tokyo Air Freight. Tokyo Air Freight in turn subcontracts part of the provision of delivery services to the Japanese customer to Aus Transport.

On these facts, the transport services supplied by Aus Transport to Tokyo Air Freight are provided to the Japanese customer. Delivery services are required to be provided to the Japanese customer and those services are provided to the customer under various subcontract arrangements.

However, we recognise that Aus Transport may not be aware of the full circumstances of the supply of transport, as described above, that it makes to Tokyo Air Freight. At a practical level, the transport services supplied by Aus Transport are provided to the addressee, the Japanese customer. Thus, where goods from one entity are addressed for delivery to another entity, we consider that it is reasonable for Aus Transport to conclude that the transport services are provided to the addressee entity. Therefore, the supply of transport services is provided to another entity, the Japanese customer.

If the Japanese customer is not in Australia when the transport services are performed, the supply is not provided to another entity in Australia. Paragraph 38-190(3)(b) is not satisfied.

However, we recognise that Aus Transport is unlikely to know the specific whereabouts of the Japanese customer during the period when the transport services are performed. At a practical level, the goods are addressed to an entity outside Australia and we therefore consider that it is reasonable for Aus Transport to conclude that the transport services are provided to that other entity outside Australia, that is, the supply is not provided to another entity in Australia. (Note: this approach does not rely on the individual's residency status. Therefore, the outcome is the same even if the Japanese customer is a resident of Australia.)

Subsection 38-190(3) does not negate the GST-free status of the supply covered by item 2. [70A] It is not necessary to consider paragraph 38-190(3)(c). Note: even though the supply of transport services (that is, the freight services) made by Tokyo Air Freight to the Australian exporter is partly performed in Australia (under a subcontract arrangement with Aus Transport), the supply is not connected with Australia because of table item 1 of subsection 9-26(1). Tokyo Air Freight is a non-resident, it does not make the supply of freight services through an enterprise it carries on in Australia, and the supply is made to an Australian-based business recipient of the supply.

Booklovers Inc is a non-resident company which does not carry on business in Australia either through a place of business of its own or through an agent acting on its behalf. Booklovers Inc sells books in response to orders placed over the internet. A delivery service is offered by Booklovers for a charge to cover the cost. [71]

Kate, an individual who does not carry on an enterprise and is not registered for GST, orders a book from Booklovers Inc and pays for delivery by Booklovers Inc to her home address in Australia. Booklovers Inc meets this delivery obligation by engaging a subcontractor, Ace Couriers, to deliver the book. Ace Couriers is an Australian-resident company.

The supply of delivery services is made to a non-resident company, Booklovers Inc that is not in Australia when the delivery services are performed. The supply satisfies the requirements of item 2 and is, therefore, a supply covered by item 2.

The supply of delivery services by Ace Couriers to Booklovers Inc is a supply under an agreement entered into with a non-resident. Paragraph 38-190(3)(a) is therefore satisfied.

Booklovers Inc is required to provide Kate with the services of delivering a book to her at a particular place. Booklovers Inc effects provision of delivery services to Kate through Ace Couriers. The nature of the supply is delivery services to Kate as required under the terms of sale.

However, we recognise that Ace Couriers may never be aware of the full circumstances of the supply of delivery services, as described above, that it makes to Booklovers Inc. At a practical level, the delivery services supplied by Ace Couriers are provided to the addressee, Kate. Thus, where goods from one entity are addressed for delivery to another entity, we consider that it is reasonable for Ace Couriers to conclude that the delivery services are provided to another entity, in this case, Kate.

If Kate is in Australia when the delivery services are performed, the supply is provided to Kate in Australia.

However, we recognise that Ace Couriers is unlikely to know the specific whereabouts of Kate during the period when the delivery services are performed. At a practical level, the goods are addressed to Kate in Australia and we therefore consider that it is reasonable for Ace Couriers to conclude that the delivery services are provided to Kate in Australia. The supply therefore is provided to another entity in Australia. (Note: this approach does not rely on the individual's residency status. Therefore, the outcome is the same even if Kate is a non-resident.) Paragraph 38-190(3)(b) is satisfied.

The supply of delivery services is not an input taxed supply and none of subparagraphs 38-190(3)(c)(i) to (iii) apply. Paragraph 38-190(3)(c) is therefore satisfied.

Subsection 38-190(3) negates the GST-free status of the supply covered by item 2.

However, the supply of delivery services by Ace Couriers may be otherwise GST-free under item 5(b) of subsection 38-355(1). In these circumstances, paragraph 38-355(2)(a) is satisfied as the recipient of the supply is Booklovers Inc, a non-resident that is not in Australia when the thing supplied is done. The supply by Ace Couriers will be GST-free from a place outside Australia to the place of consignment in Australia. 'Place of consignment' is defined in section 195-1 and in this case would be Kate's home address in Australia.

A non-resident parent company contracts with a customs specialist for the provision of customs advice in relation to operations in the Asia-Pacific region. The non-resident company does not carry on business in Australia either through a place of business of its own or through an agent acting on its behalf. The customs specialist makes the supply through an enterprise it carries on in Australia.

The non-resident company has a GST-registered Australian subsidiary with a branch in Malaysia. The branch operates an import and export business in Kuala Lumpur. The customs specialist provides advice to the Malaysian branch on aspects of new import restrictions recently introduced in Malaysia.

The supply of advice is made by the customs specialist to the non-resident parent company that is not in Australia when the services are performed. The supply satisfies the requirements of item 2 and is, therefore, a supply covered by item 2.

The supply of advice by the customs specialist to the non-resident parent company is a supply under an agreement entered into with a non-resident. Paragraph 38-190(3)(a) is therefore satisfied.

What is being supplied is advice on import restrictions impacting the Malaysian operations of the Australian subsidiary and that advice is required to be provided to the Malaysian branch of the Australian subsidiary. The supply is provided to another entity, the Australian subsidiary. The actual services flow to the Australian subsidiary.

The Australian subsidiary is in Australia when the services are performed. However, the advice is for the purposes of the Malaysian branch.

The supply is not therefore provided to another entity in Australia. Paragraph 38-190(3)(b) is therefore not satisfied. Subsection 38-190(3) does not negate the GST-free status of the supply covered by item 2. It is not necessary to consider paragraph 38-190(3)(c). Note: even if the supply was provided to the Australian subsidiary in Australia, the supply would be GST-free because paragraph 38-190(3)(c) would not be satisfied. The supply of advice is not an input taxed supply and subparagraph 38-190(3)(c)(i) would apply because the Australian subsidiary would have been an Australian-based business recipient of the supply if the supply had been made to it. (See Example 2 at paragraphs 288 to 297 of this Ruling.)

A non-resident company, UK Co, supplies goods to an Australian-resident company, Oz Co, on delivered duty paid (or unpaid) terms of sale. UK Co is obliged to deliver the goods to Oz Co. UK Co engages a UK resident transport company, UK Trans Co, to undertake the international movement of goods from the UK to Australia. The goods are to be delivered to Oz Co in Adelaide.

Neither UK Co, nor UK Trans Co, carries on business in Australia through a place of business of its own or through an agent acting on its behalf.

Oz Co is registered for GST, carries on an enterprise in Australia and does not acquire the delivery services for a private or domestic purpose.

UK Trans Co subcontracts to an Australian-resident transport company, Aus Transport, the domestic transport of goods from Sydney to Adelaide.

Aus Transport picks up the goods in Sydney and delivers them to Adelaide.

Aus Transport arranges a suitable time with Oz Co to deliver the goods. The transport service occurs over the time from picking up the goods in Sydney, the journey to Adelaide, until they are delivered to Oz Co.

Aus Transport makes a supply of transport services to UK Trans Co that is not in Australia when the services are performed. The supply satisfies the requirements of item 2 and is, therefore, a supply covered by item 2.

The supply of transport services by Aus Transport to UK Trans Co is a supply under an agreement entered into with a non-resident. Paragraph 38-190(3)(a) is therefore satisfied.

Under the export sale terms, UK Co is required to provide Oz Co with the services of delivering the goods to Oz Co in Adelaide. UK Co effects provision of delivery services to Oz Co through UK Trans Co. UK Trans Co in turn subcontracts part of the provision of delivery services to Oz Co to Aus Transport.

On these facts, the supply of domestic transport services by Aus Transport to UK Trans Co is provided to the Australian customer of the UK exporter. Delivery services are required to be provided to the Australian customer and those services are provided to the customer under various subcontract arrangements.

However, we recognise that Aus Transport may not be aware of the full circumstances of the supply of transport, as described above, that it makes to UK Trans Co. At a practical level, the transport services are provided to the addressee, the Australian customer, Oz Co. Thus, where goods from one entity are addressed for delivery to another entity, we consider that it is reasonable for Aus Transport to conclude that the transport services are provided to another entity, in this case Oz Co.

Oz Co is in Australia when the transport services are performed. If the transport services are for the purposes of Oz Co in Australia, the supply of transport services is provided to another entity, Oz Co, in Australia.

However, we recognise that Aus Transport is unlikely to know whether the transport services are for the purposes of Oz Co. At a practical level, the goods are addressed to Oz Co in Australia and we therefore consider that it is reasonable for Aus Transport to conclude that the transport services are provided to Oz Co for its purposes. Therefore, the supply is provided to another entity in Australia. Paragraph 38-190(3)(b) is therefore satisfied. (Note: the outcome is the same even if Oz Co is not a resident of Australia.)

The supply of transport services is not an input taxed supply. Subparagraph 38-190(3)(c)(i) applies because the entity to which the supply has been provided in Australia, Oz Co, would be an Australian-based business recipient of the supply, if the supply had been made directly to it. Paragraph 38-190(3)(c) is therefore not satisfied.

Subsection 38-190(3), therefore, does not negate the GST-free status of the supply covered by item 2. [78A] Note: Aus Transport must be able to ascertain, based on information and evidence available to it that subparagraph 38-190(3)(c)(i) applies. (See paragraph 136F of this Ruling.) Note: even though the supply of transport services (that is, the freight services) made by UK Trans Co to UK Co is partly performed in Australia (under a subcontract arrangement with Aus Transport), the supply is not connected with Australia because of table item 2 of subsection 9-26(1). UK Trans Co is a non-resident, it does not make the supply through an enterprise it carries on in Australia, and the supply is made to a non-resident that acquires the thing supplied solely for the purpose of an enterprise that the recipient carries on outside Australia.

Booklovers Inc (a non-resident company) wants to distribute advertising material in Melbourne and Sydney to the public at large. Booklovers Inc contracts with Ace Couriers to distribute the advertising material on its behalf. Ace Couriers makes the supply through an enterprise it carries on in Australia.

The supply of delivery services is made to a non-resident company that is not in Australia when the delivery services are performed. The supply satisfies the requirements of item 2 and is, therefore, a supply covered by item 2.

The supply of delivery services by Ace Couriers to Booklovers Inc is a supply under an agreement entered into with a non-resident. Paragraph 38-190(3)(a) is therefore satisfied.

The delivery services are not required to be provided to any entity other than Booklovers Inc. The unsolicited delivery of goods to the public at large is not the provision of delivery services to another entity. The supply of delivery services is therefore made and provided to Booklovers Inc. Paragraph 38-190(3)(b) is not satisfied.

Subsection 38-190(3) does not negate the GST-free status of the supply covered by item 2. It is not necessary to consider paragraph 38-190(3)(c).

An Australian-based flight training school enters into an agreement with a non-resident airline company in China to train employee pilots at its flight training school in Australia.

The contractual arrangement is between the non-resident airline company and the flight school. The supply is made to the non-resident airline company which does not carry on business in Australia either through a place of business of its own or through an agent acting on its behalf. The contract between the non-resident airline company and the flight training school stipulates that that the pilots are employees, who are based in China, and they are required to attend the training course in Australia.

The supply of training services is made to a non-resident, the airline company, which is not in Australia when the training services are performed. The supply satisfies the requirements of item 2 and is, therefore, a supply covered by item 2.

The supply of training services by the Australian-based flight training school to the non-resident airline company in China is a supply under an agreement entered into with a non-resident. Paragraph 38-190(3)(a) is therefore satisfied.

What is being supplied is the teaching and tutoring of the employees of the non-resident airline company. It is in the nature of such training services that it is the individuals that are trained, rather than the individuals' employer, and it is therefore the individual who is provided with the training. These services are of a kind that can only be provided to the employee. The flow of the actual services of teaching and tutoring is to the employee pilots and not to the non-resident airline company. The supply is provided to another entity, the employee. [81]

The employee pilots are required to physically attend training in Australia. As their presence in Australia is integral to the performance of the supply, the supply is provided to the employees in Australia.

The supply of pilot training is not an input taxed supply. The pilots are individuals who are employees of the recipient of the supply and who have been provided the supply in the performance of their duties. The acquisition by the non-resident airline company is solely for a creditable purpose and is not a non-deductible expense. Accordingly, subparagraph 38-190(3)(c)(iii) applies and paragraph 38-190(3)(c) is not satisfied.

Subsection 38-190(3) does not negate the GST-free status otherwise applicable to the supply of pilot training covered by item 2. Note: the flight training school must be able to ascertain, based on information and evidence available to it, that subparagraph 38-190(3)(c)(iii) applies. (See paragraph 136F of this Ruling.)

[Omitted.]

The Australian-based flight training school in Example 15 of this Ruling also agrees to train the employee pilots of the non-resident airline's Australian subsidiary. The pilots attend the training in Australia.

The contractual arrangement is between the non-resident airline company and the flight school and it stipulates that the pilots are employees of the Australian subsidiary. The supply is made to the non-resident airline company which does not carry on business in Australia either through a place of business of its own or through an agent acting on its behalf. The employees of the Australian subsidiary are required under the agreement to attend the training course in Australia.

The supply of training services is made to a non-resident, the airline company, which is not in Australia when the training services are performed. [81A] The supply satisfies the requirements of item 2 and is, therefore, a supply covered by item 2.

The supply of training services by the Australian-based flight training school to the non-resident airline company is a supply under an agreement entered into with a non-resident. Paragraph 38-190(3)(a) is therefore satisfied.

What is being supplied is the teaching and tutoring of the employees of the Australian subsidiary. It is in the nature of such training services that it is the individuals that are trained, rather than the individuals' employer, and it is therefore the individuals who are provided with the training. These services are of a kind that can only be provided to the employees. The flow of the actual services of teaching and tutoring is to the employees and not to the non-resident airline company or the Australian subsidiary. The supply is provided to other entities, the employees.

The employee pilots are required to physically attend training in Australia. As their presence in Australia is integral to the performance of the supply, the supply is provided to the employees in Australia.

The supply of pilot training is not an input taxed supply. The pilots are individuals who are employees of the Australian subsidiary and who have been provided the supply in the performance of their duties. The Australian subsidiary is registered for GST, carries on an enterprise in Australia, and does not acquire the services for a private or domestic purpose. Accordingly, the Australian subsidiary would have been an Australian-based business recipient of the supply if the supply had been made to it and subparagraph 38-190(3)(c)(ii) applies. Paragraph 38-190(3)(c) is therefore not satisfied.

The training school must be able to ascertain, based on information and evidence available to it, that subparagraph 38-190(c)(ii) applies. (See paragraph 136F of this Ruling.)

Subsection 38-190(3) does not negate the GST-free status otherwise applicable to the supply of pilot training covered by item 2.

Note: the provision of the supply by the non-resident airline company to its Australian subsidiary results in a separate supply between the non-resident (the recipient of the original supply) and the Australian subsidiary (the recipient of the separate supply). A separate supply of this kind may be reverse charged to the recipient of the separate supply in certain circumstances. [81B]

An Australian-resident accounting firm enters into an arrangement with a non-resident company to complete foreign tax returns for the non-resident company's employees working in Australia on secondment with a client of the non-resident. The non-resident company does not carry on business in Australia either through a place of business of its own or through an agent acting on its behalf. While the employees (who are non-residents for Australian income tax purposes) are in Australia, they meet with the Australian-resident accounting firm in the course of preparing their tax returns. The employees are available to answer questions and provide any further information. The returns are completed and signed by each employee while the employee is in Australia.

The Australian-resident accounting firm confirms, through negotiating the terms of the supply, that the non-resident provides this benefit to its seconded employees as part of their salary package.

The supply is made to a non-resident company that is not in Australia when the tax return services are performed. [81C] The supply satisfies the requirements of item 2 and is, therefore, a supply covered by item 2.

The supply of tax return preparation services by the Australian accounting firm to the non-resident company is a supply under an agreement entered into with a non-resident. Paragraph 38-190(3)(a) is therefore satisfied.

What is being supplied is the service of preparing the foreign tax returns of the employees. The nature of the service is such that the supply of tax return preparation services is provided to each employee, who is another entity.

Each employee is in Australia when the tax return services are performed. On the facts their presence in Australia is integral to the provision of the supply. It is not merely coincidental to the provision of the supply. The supply is therefore provided to each employee in Australia.

If the finalised returns are sent to the non-resident company and on-forwarded to its employees in Australia, this does not alter the nature of the supply and the fact that the supply of tax return preparation services is provided to the employees in Australia.

The supply of tax return preparation services is not an input taxed supply. The services are provided to individuals who are employees of the recipient of the supply and who have been provided the supply as part of their remuneration. The acquisition by the non-resident company is solely for a creditable purpose and is not a non-deductible expense. Accordingly, subparagraph 38-190(3)(c)(iii) applies and paragraph 38-190(3)(c) is not satisfied.

Subsection 38-190(3) does not negate the GST-free status of the supply covered by item 2. Note: the Australian firm must be able to ascertain, based on information and evidence available to it, that subparagraph 38-190(3)(c)(iii) applies. (See paragraph 136F of this Ruling.)

[Omitted.]

A non-resident shipping company contracts with an Australian stevedore company to supply stevedoring services (that is, loading or unloading ships) to it when its ships are at Australian ports. The non-resident shipping company does not carry on business in Australia either through a place of business of its own or through an agent acting on its behalf.

The supply of stevedoring services is made to the non-resident shipping company that is not in Australia when the loading and unloading services are performed. The supply of stevedoring services is not a supply of work physically performed on goods. [82] The supply satisfies the requirements of item 2 and is, therefore, a supply covered by item 2.

The supply of stevedoring services by the Australian stevedore company to the non-resident shipping company is a supply under an agreement entered into with a non-resident. Paragraph 38-190(3)(a) is therefore satisfied.

The Australian stevedore company loads and unloads the ships for the non-resident shipping company at Australian ports. It is the ship of the shipping company that is loaded and unloaded. The involvement of the employees does not alter the nature of the supply which is to load and unload the ships of the non-resident shipping company. The supply of stevedoring services is provided to the non-resident shipping company. The actual flow of stevedoring services is to the shipping company, not the employees of the non-resident shipping company who are present when the ship is loaded and unloaded and may help to facilitate the loading and unloading process. Paragraph 38-190(3)(b) is therefore not satisfied.

Subsection 38-190(3) does not negate the GST-free status of the supply covered by item 2. It is not necessary to consider paragraph 38-190(3)(c).

An Australian solicitor acting as agent for a non-resident individual engages an Australian barrister to supply legal services to the non-resident individual on an immigration matter. The individual is not in Australia when the legal services are performed and the supply is not directly connected with real property situated in Australia.

The supply of legal services by the barrister is made to the non-resident individual (principal) through the solicitor, as agent for the non-resident. The presence in Australia of the solicitor does not mean that the non-resident individual is in Australia for the purposes of item 2. [84] The supply by the barrister to the non-resident individual meets the requirements of item 2.

The supply of legal services by the barrister to the non-resident individual is a supply under an agreement entered into indirectly with a non-resident (that is, through the resident agent). Paragraph 38-190(3)(a) is therefore satisfied.

What is being supplied is advice on immigration matters concerning the non-resident individual. The barrister has been engaged by the Australian solicitor, on behalf of the non-resident individual, to provide advice to the non-resident individual. The legal services are provided to the non-resident, not the agent. The supply by the barrister to the non-resident individual is both made and provided to the non-resident, through the solicitor as agent. The supply by the barrister is neither made nor provided to the solicitor. Paragraph 38-190(3)(b) is therefore not satisfied.

Subsection 38-190(3) does not negate the GST-free status of the supply covered by item 2. It is not necessary to consider paragraph 38-190(3)(c). Note: even if the supply was provided to the Australian solicitor in Australia, the supply will be GST-free if paragraph 38-190(3)(c) is not satisfied. The supply of legal services is not an input taxed supply and subparagraph 38-190(3)(c)(i) will apply if the Australian solicitor would have been an Australian-based business recipient of the supply, if the supply had been made to it.

A partner in a non-resident partnership contracts, on behalf of the partnership, for the supply of 'Managing for today and tomorrow' training to all newly appointed partners. The training course is supplied by a training company through an enterprise it carries on in Australia and is conducted in Australia. The non-resident partnership does not carry on business in Australia either through a place of business of its own or through an agent acting on its behalf.

The training company confirms, through negotiating the terms of the supply, that the participants in the training course are partners of the partnership, which carries on an enterprise outside Australia.

The supply of training services is made to a non-resident partnership that is not in Australia when the training services are performed. The supply satisfies the requirements of item 2 and is, therefore, a supply covered by item 2.

The supply of training services to the non-resident partnership is a supply under an agreement entered into with a non-resident. Paragraph 38-190(3)(a) is therefore satisfied.

The training services are provided to each partner as the partners are the persons that are trained. (See the discussion of flight training services in Example 15 at paragraphs 442 to 449 of this Ruling.)

The partners are required to physically attend training in Australia. As their presence in Australia is integral to the performance of the supply, the supply is provided to another entity, (that is, each partner) in Australia.

The supply of training services is not an input taxed supply. The training services are provided to partners in their capacity as officers of the partnership. [85A] The partnership is the recipient of the supply and its acquisition is solely for a creditable purpose and is not a non-deductible expense. Accordingly, subparagraph 38-190(3)(c)(iii) applies and paragraph 38-190(3)(c) is not satisfied.

Subsection 38-190(3), therefore, does not negate the GST-free status otherwise applicable to the supply of training services covered by item 2. Note: the Australian training company must be able to ascertain, based on information and evidence available to it, that subparagraph 38-190(3)(c)(iii) applies. (See paragraph136F of this Ruling.)

[Omitted.]

[Omitted.]

The partnership carries on business in New Zealand. Central management and control of the partnership is in New Zealand. The partnership is a non-resident partnership for Australian GST purposes. [86] All the activities of the partnership are currently conducted outside Australia.

The partnership is contemplating the acquisition of commercial real property in Australia. The partners request legal advice from an Australian law firm on foreign ownership requirements in Australia.

One of the partners comes to Australia to engage and consult with the Australian law firm about the proposed acquisition. The partner is in Australia when the supply of legal services is performed. As the partner acquires the legal services in his or her capacity as partner, this is an acquisition made by the partnership for Australian GST purposes. [87]

The supply made by the Australian law firm to the non-resident partnership satisfies the requirements of item 2 and is, therefore, a supply covered by item 2.

The supply of legal advice by the Australian law firm to the non-resident partnership is a supply under an agreement entered into with a non-resident. Paragraph 38-190(3)(a) is therefore satisfied.

What is being supplied is advice on foreign ownership requirements impacting on the partnership in relation to a potential property acquisition by the partnership in Australia. The advice is about the affairs of the partnership. The presence of the partner in Australia to consult with the law firm does not alter the nature of the supply. The supply of legal advice is made and provided to the partnership. The supply is not provided to another entity. Paragraph 38-190(3)(b) is therefore not satisfied.

Subsection 38-190(3) does not negate the GST-free status of the supply covered by item 2. It is not necessary to consider paragraph of 38-190(3)(c). Note: even if the supply was provided to the partner in Australia, the supply would be GST-free because paragraph 38-190(3)(c) would not be satisfied. The supply of advice is not an input taxed supply and subparagraph 38-190(3)(c)(iii) applies. (See Example 21 at paragraphs 484 to 489 of this Ruling.)

NZ Co is a non-resident parent company which has a subsidiary company in Australia and a subsidiary company in New Zealand. NZ Co does not carry on business in Australia either through a place of business of its own or through an agent acting on its behalf. The subsidiary entities have no presence outside of New Zealand or Australia respectively. The Australian subsidiary is not registered or required to be registered for GST.

The non-resident parent company engages an Australian management consultant company, AMC, to assist each subsidiary company in restructuring its operations. The restructuring operations are required to be effected by each subsidiary to achieve cost savings and efficiency gains.

The supply of management consultancy services by AMC is made to NZ Co, a non-resident company that is not in Australia when the consultancy services are performed. The supply satisfies the requirements of item 2 and is, therefore, a supply covered by item 2.

The supply of consultancy services by AMC is a supply under an agreement entered into with a non-resident. Paragraph 38-190(3)(a) is therefore satisfied.

The consultancy work is undertaken by the consultant with each of the subsidiaries. The management consultant consults with each subsidiary in turn.

The nature of the service is such that the supply is provided to each subsidiary. The actual flow of the services is to each subsidiary. The supply is, therefore, provided to another entity, each subsidiary, and not the non-resident parent company.

The New Zealand subsidiary is not in Australia and therefore the services are not provided to that subsidiary in Australia. Therefore, to the extent the supply of consultancy services are provided to the New Zealand subsidiary, paragraph 38-190(3)(b) is not satisfied. It is not necessary to consider paragraph 38-190(3)(c).

The Australian subsidiary is in Australia when the services are performed. That part of the supply that is for the purposes of NZ Co's Australian subsidiary is provided to that subsidiary in Australia. The supply is provided to another entity in Australia to the extent that the supply is provided to the Australian subsidiary. Therefore, to the extent the supply of consultancy services are provided to the Australian subsidiary, paragraph 38-190(3)(b) is satisfied and it is necessary to consider paragraph 38-190(3)(c).

The supply of consultancy services is not an input taxed supply and none of subparagraphs 38-190(3)(c)(i) to (iii) apply. As the Australian subsidiary is not registered for GST, it would not have been an Australian-based business recipient of the supply if the supply had been made directly to it. To the extent that the supply is provided to the Australian subsidiary, paragraph 38-190(3)(c) is therefore satisfied.

Therefore, subsection 38-190(3) negates the GST-free status of that part of the supply that is provided to the Australian subsidiary. The consideration for the supply is therefore required to be apportioned between the GST-free part of the supply (that part of the supply which is provided to the New Zealand subsidiary), and the taxable part of the supply (that part of the supply that is provided to the Australian subsidiary).

[Omitted.]

[Omitted.]

Tom, a non-resident individual, holidaying in Australia, falls over while shopping in a store in Australia. While in Australia, Tom seeks legal advice from an Australian legal firm contracted for by his parents in New Zealand. Tom's parents are not in Australia when the legal services are performed. The legal firm, on behalf of Tom, writes to the shopping centre seeking out-of-pocket expenses and an amount for pain and suffering. Tom returns to New Zealand before the claim is settled. Further contact with the legal firm occurs from New Zealand.

The supply of legal services is made to a non-resident, the parents, who are not in Australia when the legal services are performed. The supply satisfies the requirements of item 2 and is, therefore, a supply covered by item 2.

The supply of legal services by the Australian legal firm to Tom's parents is a supply under an agreement entered into with a non-resident. Paragraph 38-190(3)(a) is therefore satisfied.

What is being supplied is a service of seeking, on Tom's behalf, compensation resulting from an accident in Australia. The nature of the service is such that the supply is provided to another entity, Tom.

Tom is a non-resident who is in Australia when part of the services is performed. As the need for the supply arises from Tom's presence in Australia, the supply is provided to Tom while he is in Australia. Once Tom returns to New Zealand, Tom is not in Australia when the services are performed. Paragraph 38-190(3)(b) is satisfied to the extent the supply is provided to Tom while he is in Australia.

The supply of legal services is not an input taxed supply and none of subparagraphs 38-190(3)(c)(i) to (iii) apply. Paragraph 38-190(3)(c) is therefore satisfied.

Subsection 38-190(3) only negates the GST-free status of the supply covered by item 2 in part. The part of the supply that is provided to Tom in Australia is the taxable part of the supply. The part of the supply that is provided to Tom when he is not in Australia is GST-free. The consideration for the supply is therefore required to be apportioned between the GST-free part of the supply and the taxable part of the supply.

William, an English tourist, is injured while on holidays in Australia. While in Australia recovering from his injuries, William's parents, who are non-residents, engaged Simon, a solicitor, to seek compensation on behalf of William.

The case took 3 months to finalise. During the first month (April 2005) while William was in Australia, he met with Simon and discussed his case. Simon also commenced action on behalf of William. William continued his holiday returning home to England at the end of the first month (April 2005). Subsequently, William travelled to Australia to attend a mediation conference on 20 June 2005. William met with Simon prior to and after the conference. The matter was settled as a result of the conference.

Simon's hourly rate is $200 (plus GST (if any)) and he bills clients on a monthly basis for work done during the month. He accounts for GST quarterly and on a cash basis.

Simon receives the following payments for his services to William: Table 2: Facts for Example 45 Payment date Amount Hours billed 15 May 2005 (for services provided in April while William was in Australia) $7,480 (including $680 GST payable) 34 17 June 2005 (for services provided in May while William was not in Australia) $2,600 (no GST payable) 13 20 July 2005 (for services provided in June while William was in Australia for part of the time and outside Australia for part of the time) $2,100 (including $100 GST) 10 (5 hours attributable to the period when William was in Australia)

The supply of legal services is made to non-residents who are not in Australia when the services are performed. The supply satisfies the requirements of item 2 and is, therefore, a supply covered by item 2.

The supply of legal services by Simon to the parents is a supply under an agreement entered into with a non-resident. Paragraph 38-190(3)(a) is therefore satisfied.

What is being supplied is a service of seeking, on behalf of William, compensation. The nature of the service is such that the supply is provided to William (as required).

William is a non-resident who is in Australia when part of the services are performed. As the need for the supply arises from William's presence in Australia, the supply is provided to William in Australia while he is in Australia. Paragraph 38-190(3)(b) is satisfied to the extent the supply is provided to William while he is in Australia.

The supply of legal services is not an input taxed supply and none of subparagraphs 38-190(3)(c)(i) to (iii) apply. Paragraph 38-190(3)(c) is therefore satisfied.

Subsection 38-190(3) negates the GST-status of the supply covered by item 2 to the extent the supply is provided to William while he is in Australia.

As Simon accounts for GST on a cash basis, GST payable on the supply of legal services is attributable to a tax period to the extent that the consideration is received in that tax period. Therefore the consideration received in a quarterly tax period for the supply of the legal services must be apportioned on a reasonable basis to the extent that the supply is provided to William in Australia during that quarterly tax period.

The need for the legal services arises from William's presence in Australia. William is provided with legal services while in Australia in April 2005. The part of the supply performed during this time is therefore the taxable part of the supply. However, the supply is not provided to William in Australia to the extent that William is not physically located in Australia (that is, May 2005). Therefore the supply performed in the quarterly tax period ending 30 June 2005 is partly taxable [104] and partly GST-free.

The circumstances of this supply are such that a time basis is a reasonable basis on which to apportion the consideration, that is, using the hours billed while William is in Australia (34 hours × $200 = $6,800) as a proportion of the total hours billed for that tax period (47 hours × $200 = $9,400) to work out the value of the taxable part of the supply.

The GST attributable to the tax period ended 30 June 2005 is calculated as follows: Value of the taxable part: (34* ÷ 47**) × $9,400*** = $6,800 GST payable: $6,800 × 10% = $680 Consideration payable: $9,400 + $680 = $10,080 * Number of hours billed during the period the supply is provided to William in Australia and to which the consideration received relates ** Total number of hours billed in the period to which the consideration relates *** Consideration (excluding GST) received in the tax period

There is also GST payable on the supply for the quarterly tax period ending 30 September 2005. The consideration received in that tax period includes consideration for services that are performed when William is in Australia and consideration for services performed while William is not in Australia. The supply is taxable to the extent that the supply is provided to William in Australia. To work out the value of the taxable part of the supply, it is necessary to apportion the consideration on a reasonable basis.

William is in Australia attending the mediation conference. William's presence in Australia is integral to the provision of the supply. That part of the supply is provided to William in Australia and is the taxable part of the supply. The circumstances of this supply are such that a time basis is a reasonable basis on which to apportion the consideration that is, using the hours billed while William is in Australia (5 hours × $200 = $1,000) as a proportion of the total hours billed for that tax period (10 hours × $200 = $2,000) to work out the value of the taxable part of the supply.

The GST attributable to the tax period ended 30 September 2005 is calculated as follows: Value of the taxable part: (5* ÷ 10**) × $2,000*** = $1,000 GST payable: $1,000 × 10% = $100 Consideration payable: $2,000 + $100 = $2,100 * Number of hours billed during the period the supply is provided to William in Australia and to which the consideration received relates ** Total number of hours billed in the period to which the consideration relates *** Consideration (excluding GST) received in the tax period

A non-resident company contracts with an Australian accounting firm for the supply of accounting services. The contract stipulates that the accounting services are required to be provided to a GST-registered Australian subsidiary of the non-resident company. The non-resident does not carry on business in Australia either through a place of business of its own or through an agent acting on its behalf. The Australian accounting firm subcontracts with another Australian supplier to provide the accounting services to the Australian subsidiary.

The facts are shown diagrammatically as follows: Diagram 2: Facts for Example 46

The issue considered below is the GST treatment of the accounting services supplied by the Australian accounting firm to the non-resident company.

The supply of accounting services is made by the Australian accounting firm to the non-resident company that is not in Australia when the services are performed. The supply satisfies the requirements of item 2 and is, therefore, a supply covered by item 2.

The supply of accounting services by the Australian accounting firm to the non-resident company is a supply under an agreement entered into with a non-resident. Paragraph 38-190(3)(a) is therefore satisfied.

Under the agreement, the accounting services are required to be provided to another entity, the Australian subsidiary. The fact that the service is provided to the Australian subsidiary by a subcontracted supplier does not, in our view, transform the nature of the supply from a supply of accounting services to the supply of an arranging service. The supply by the Australian accounting firm is made to the non-resident company but is required to be provided to the Australian subsidiary.

The Australian subsidiary is in Australia when the thing supplied is done. As the supply is for the purposes of the Australian subsidiary in Australia, the supply is, therefore, required to be provided to another entity (that is, the Australian subsidiary) in Australia. Paragraph 38-190(3)(b) is therefore satisfied.

The supply of accounting services is not an input taxed supply. The Australian subsidiary is registered for GST, carries on an enterprise in Australia and its acquisition is not of a private or domestic nature. Therefore, the Australian subsidiary would be an Australian-based business recipient of the supply if the supply had been made to it. As subparagraph 38-190(3)(c)(i) applies, paragraph 38-190(3)(c) is not satisfied.

Subsection 38-190(3) does not negate the GST-free status otherwise applicable to the supply of accounting services covered by item 2. Note: the Australian accounting firm must be able to ascertain, based on the information and evidence available to it, that subparagraph 38-190(3)(c)(i) applies. (See paragraph 136F of this Ruling.)

[Omitted.]

An events organiser in Australia enters into a contract with a non-resident parent (an individual) to supply arranging services for the non-resident's son's forthcoming wedding in Australia.

The events organiser has dealt with Aus Design in the past and arranges for contracts to be made between Aus Design and the non-resident parent for the supply of the design services for the wedding invitations. Under this contract, Aus Design is required to provide design services for the wedding invitations to the non-resident's son in Australia. Aus Design liaises with the non-resident's son in Australia in relation to all aspects of the service.

The facts are shown diagrammatically as follows: Diagram 3: Facts for Example 47

The supply made by the events organiser to the non-resident parent is the supply of an arranging service. The events organiser has been engaged to specifically arrange for a supply of services to be made to the non-resident by an appropriate supplier.

The supply of the arranging service by the Australian events organiser is made to a non-resident parent that is not in Australia when the arranging services are performed. The supply is not 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. The supply satisfies the requirements of item 2 and is, therefore, a supply covered by item 2.

The supply of arranging services by the Australian events organiser to the non-resident parent is a supply under an agreement entered into with a non-resident. Paragraph 38-190(3)(a) is therefore satisfied.

What is being supplied is the service of arranging for a supply to be made to the non-resident. The Australian events organiser arranges for Aus Design to make a supply of design services to the non-resident parent. The actual flow of the arranging services is to the non-resident parent. The supply of the arranging service is not provided to another entity. Paragraph 38-190(3)(a) is not satisfied.

Subsection 38-190(3) does not negate the GST-free status of the supply covered by item 2. It is not necessary to consider paragraph 38-190(3)(c).

The supply made by Aus Design to the non-resident parent is the supply of a design service.

The supply of services made by Aus Design are to the non-resident parent who is not in Australia when the design services are performed and the supply is not 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. Therefore, the supply is covered by item 2.

The supply of design services by Aus Design to the non-resident parent is a supply under an agreement entered into with a non-resident. Paragraph 38-190(3)(a) is therefore satisfied.

The design services are required to be provided to the non-resident's son. The supply, although made to a non-resident, is provided to another entity, the son.

The son is a resident individual who is physically in Australian when the services are performed. The supply is provided to the son in Australia. Paragraph 38-190(3)(b) is satisfied.

The supply of design services is not an input taxed supply and none of subparagraphs 38-190(3)(c)(i) to (iii) apply. Paragraph 38-190(3)(c) is therefore satisfied.

Subsection 38-190(3) negates the GST-free status of the supply covered by item 2.

[Omitted.]

A US-resident parent company, US Co, engages a US accounting firm to supply audit services to the world-wide company group. The US accounting firm charges US Co on a monthly basis for services rendered in the immediately preceding month. Neither US Co, nor the US accounting firm, carry on business in Australia through a place of business of its own or through an agent acting on its behalf.

Aus Sub, a GST-registered Australian subsidiary of US Co, requires audit services – in particular a due diligence service for a possible business acquisition. The US accounting firm contracts with an Australian-resident accounting firm for the provision of audit services to Aus Sub.

The facts are illustrated as follows: Diagram 4: Facts for Example 48

US Co is billed by the US accounting firm for the audit services provided to the Australian subsidiary. US Co charges Aus Sub for the cost of the audit.

The US accounting firm is engaged to provide audit services to the world-wide group of US Co. The US accounting firm has affiliates throughout the world with the expertise to carry out country-specific audits. As and when a foreign subsidiary requires audit services, US accounting firm subcontracts the performance of that service to an affiliate in the relevant foreign country.

The character of the supply by US accounting firm to US Co is a service. The US accounting firm is engaged to supply audit services. The exact nature of the supply depends on the facts and circumstances of the particular audit. In this example, a due diligence service is to be carried out for Aus Sub.

The fact that the US accounting firm subcontracts this part of the audit service to another supplier, the Australian accounting firm, does not alter the character and nature of the service supplied by the US accounting firm to US Co. The supply remains the supply of audit services.

The supply by the US accounting firm of audit services to US Co is not connected with Australia, even though it is partly done in Australia, because of item 2 of subsection 9-26(1). The US accounting firm is a non-resident that does not carry on an enterprise in Australia, and the recipient is a non-resident that acquires the thing supplied solely for the purpose of an enterprise that it carries on outside Australia. Alternative view [Omitted.] Item 2 [Omitted.] Subsection 38-190(3) [Omitted.] (i) Provided to another entity [Omitted.] (ii) Provided to that other entity in Australia [Omitted.]

The supply of audit services is made by the Australian accounting firm to the US accounting firm, a non-resident that is not in Australia when the audit is performed and the supply is not 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. The supply satisfies the requirements of the item and is, therefore, a supply covered by item 2.

The supply of audit services by the Australian accounting firm to the US accounting firm is a supply under an agreement entered into with a non-resident. Paragraph 38-190(3)(a) is therefore satisfied.

The contractual flow of audit services is to the US accounting firm. The actual flow is to another entity, Aus Sub. The audit service is required to be provided to Aus Sub. The supply is therefore provided to another entity, Aus Sub.

The Australian subsidiary, Aus Sub, is in Australia when the service is performed. The supply is for the purposes of the Australian subsidiary in Australia. The supply by the Australian accounting firm to the US accounting firm is made to the US accounting firm but provided to Aus Sub in Australia. Paragraph 38-190(3)(b) is therefore satisfied.

The supply of audit services is not an input taxed supply. The supply is provided to the Aus Sub, an entity that is registered for GST, carries on an enterprise in Australia, and does not acquire the services for a private or domestic purpose. Accordingly, Aus Sub would have been an Australian-based business recipient of the supply if the supply had been made to it and subparagraph 38-190(3)(c)(i) applies. Paragraph 38-190(3)(c) is therefore not satisfied.

Subsection 38-190(3) does not negate the GST-free status of the supply of audit services by the Australian accounting firm to the US accounting firm and covered by item 2. Note: the Australian accounting firm must be able to ascertain, based on the information and evidence available to it, that subparagraph 38-190(3)(c)(i) applies. (See paragraph136F of this Ruling.)

US Co charges Aus Sub for the cost of the audit service by making a cost allocation to Aus Sub. The cost allocation covers the audit service and associated administrative and management costs.

US Co provides audit services (through subcontract arrangements) to Aus Sub to meet an identified need of Aus Sub. The service is the audit of a business that Aus Sub is acquiring pending a satisfactory due diligence report. US Co supplies audit services to Aus Sub.

If the nature of the audit service is such that only a registered auditor can perform those services, US Co is not a registered auditor and is, therefore, incapable of supplying audit services to Aus Sub. The nature of the supply that US Co makes to its Australian subsidiary is not that of audit services but of management services. US Co performs these services outside of Australia and the supply of the services is, therefore, not connected with Australia.

We do not agree with this view. This situation is in our view no different to that of an overseas supplier that subcontracts provision of a supply to a customer in Australia, to a second supplier in Australia because the overseas supplier, while carrying on a business of providing services of the requisite kind, does not have the resources or presence in Australia to provide that service in Australia. In both cases, the nature of the supply by the overseas supplier to the Australian customer remains the same. Subcontracting, for whatever reason, does not, in our view, alter the character or nature of the identified supply.

[Omitted.]

The supply of audit services by US Co to Aus Sub is performed in Australia, albeit by subcontractors, but is not connected with Australia because of subsection 9-26(1). The supplier, US Co, is a non-resident that does not carry on an enterprise in Australia, and the recipient, Aus Sub, is an Australian-based business recipient of the supply.

Therefore, it is not necessary to consider whether the supply of audit services by the US Co to Aus Sub is a supply covered by item 2 or whether subsection 38-190(3) applies.

Aus Sub will need to consider the reverse charge in Division 84 if it does not acquire the audit services solely for a creditable purpose.

[Omitted.] Example 49 – global supply of taxation services [Omitted.] Division 84 [Omitted.] Global accounting services [Omitted.] Example 50 – global supply of general accounting services [Omitted.] Global IT services [Omitted.] Example 51 – global data processing and IT services [Omitted.] PART IX – overseas legislation and case law [Omitted.] Similar provisions in other jurisdictions New Zealand [Omitted.] Canada [Omitted.] Consideration of four United Kingdom VAT cases involving 'tripartite arrangements' [Omitted.] British Airways plc v. Customs and Excise Commissioners [Omitted.] Customs and Excise Commissioners v. Redrow Group plc. [Omitted.] WHA Limited and Viscount Reinsurance Company Limited v. Customs and Excise Commissioners [Omitted.] Customs and Excise Commissioners v. Plantiflor Ltd [Omitted.]

[Omitted.]

This Ruling has been updated to: • reflect the law following the amendments made by the Tax and Superannuation Amendment (2016 Measures No. 1) Act 2016 (in particular, the introduction of paragraph 38-190(3)(c)) • modernise and simplify the Ruling by deleting duplicated content in the Explanation section and Examples.

When originally published, this Ruling provided many examples (51 in total) illustrating the application of subsection 38-190(3) to a range of supplies covered by item 2. With the introduction of paragraph 38-190(3)(c), we consider that many of these examples are no longer required and make the Ruling unnecessarily lengthy.

Following consultation on this draft update, we plan to withdraw the existing GSTR 2005/6 and issue this update as a new Ruling. [133]

Given the volume of the changes, we consider that finalising this update as a new Ruling will provide a clearer and more accessible final Ruling. However, we have made the draft update available with major changes marked-up to provide transparency over the changes. [134]

You are invited to comment on this draft update. Please forward your comments to the contact officer by the due date.

In particular, we invite your comments on our proposal to: • delete the following examples from the existing Ruling – 4, 5, 16, 20, 23, 27, 28, 29, 30, 31, 32, 33, 35, 36, 39, 42, 43, 44, 49, 50 and 51 • reposition the following examples with other examples that illustrate how to determine whether a supply is provided to another entity (based on the nature of the supply): – Example 24 is now Example 4 – Example 25 is now Example 4A – Example 26 is now Example 5 – Example 34 is now Example 5A – Example 37 is now Example 5B – Example 38 is now Example 5C • withdraw GSTR 2005/6 and issue a new Ruling per this draft Ruling.

We also seek insight into the information and evidence you currently rely on to determine whether paragraph 38-190(3)(c) is satisfied. For example, how do you determine whether a supply you make is provided to an individual in their capacity as an employee or officer for the purpose of determining whether subparagraphs 38-190(3)(c)(ii) or (iii) apply?

A compendium of comments is prepared when finalising this Ruling and an edited version (names and identifying information removed) is published to the Legal database on ato.gov.au. Please advise if you do not want your comments included in the edited version of the compendium. Due date: 9 May 2025 Contact officer details have been removed as the comments period has ended.