1. Is Entity A required to be registered for the goods and services tax (GST) pursuant to section 23-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? 2. If answer is YES to question 1 above, is GST payable by Entity A on its supply of the activities to be conducted outside Australia?
1. Yes. 2. No.
Entity A is an Australian entity, carries on business in Australia, has an Australian Business Number (ABN) but is not currently registered for the goods and services tax (GST). Entity A is in the business of organising and providing specified educational activities to the specified participants. Entity A is not a registered training organisation (RTO). The participants pay Entity A for its supply of the education activities to them when they purchase tickets to attend the training events organised by Entity A. To date, the only activity that Entity A has undertaken is Event 1. Entity A organised Event 1 that was delivered recently to participants in a country outside Australia. Most participants were Australian residents who travelled overseas to Event 1 for the training; there were also non-resident participants from other countries. The training event (including trainers, venue hire, associated activities, etc) was organised from Australia. The training was delivered by specialised consultants who work in the specified relevant professional field from Australasia. There is no formal agreement in place between Entity A and the trainers/speakers.
To deliver the topics for the training, the trainers must be specialised consultants in the particular field in Australasia, or equivalent in another country. They must have a special interest in the topic and have showcased evidence in the academic context. All trainers/speakers volunteer to participate to provide their services (time and expertise) free of charge. The trainers travelled from Australia to the Event 1 overseas to deliver the training. The trainers self-fund their accommodation and flight tickets. It is a prerequisite that all participants are professionals who are working in the specific field. The participants pay for their own travel, accommodation, and other incidentals, to attend the training event overseas. All costs to the participants may be reimbursed by their relevant employers. Participants need to purchase tickets to pay for and attend the training event. The tickets to Event 1 training held overseas were sold in Australia. The ticket price included attendance (amongst other things) for one participant. The turnover from Event 1 was less than $75,000. The turnover for the relevant financial year is expected to be below $75,000.
Entity A proposes to organise a future event (Event 2) to be delivered in a country overseas to both Australian residents and non-residents. The participants to Event 2 will be Australian residents and non-residents. The tickets for Event 2 will be sold in Australia in the next twelve months or so. Entity A anticipates that the sales turnover from tickets sold for Event 2 is expected to reach above $75,000. The training session (including trainers, venue hire, associated activities, etc) would be organised from Australia, with volunteer trainers travelling to the specified overseas country to deliver the training. All training will be delivered in the specified overseas country. No training will be delivered in Australia.
A New Tax System (Goods and Services Tax) Act 1999 Subsection 7-1(1) A New Tax System (Goods and Services Tax) Act 1999 Section 9-5 A New Tax System (Goods and Services Tax) Act 1999 Section 9-20 A New Tax System (Goods and Services Tax) Act 1999 Section 9-25 A New Tax System (Goods and Services Tax) Act 1999 Subsection 9-25(5) A New Tax System (Goods and Services Tax) Act 1999 Paragraph 9-25(5)(b) A New Tax System (Goods and Services Tax) Act 1999 Section 9-40 A New Tax System (Goods and Services Tax) Act 1999 Section 23-5 A New Tax System (Goods and Services Tax) Act 1999 Section 23-10 A New Tax System (Goods and Services Tax) Act 1999 Section 25-1 A New Tax System (Goods and Services Tax) Act 1999 Division 38 A New Tax System (Goods and Services Tax) Act 1999 Section 38-190 A New Tax Sy
Detailed reasoning In this reasoning, unless otherwise stated, • all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) • all legislative terms of the GST Act marked with an asterisk are defined in section 195-1 of the GST Act • where the term 'Australia' is used, it is referring to the 'indirect tax zone' as defined in subsection 195-1 Subsection 7-1(1) provides that GST is payable on taxable supplies and section 9-40 provides that an entity must pay the GST payable on any taxable supply that it makes. Where a supply is GST-free or input taxed, no GST is payable. GST registration Section 23-5 provides that an entity is required to be registered for GST if: (a) the entity is carrying on an enterprise, and (b) the entity's GST turnover meets the registration turnover threshold. Section 23-10 provides that an entity may choose to register for GST if it is carrying on an enterprise, whether or not its GST turnover is at, above or below the registration turnover threshold. Enterprise
The term 'carrying on an enterprise' is defined in the GST Act and includes doing anything in the course of the commencement or termination of the enterprise. Section 9-20 defines 'enterprise' to include, amongst other things, an activity or series of activities done in the form of a business or in the form of an adventure or concern in the nature of trade. In this case, Entity A carries on an enterprise. Entity A must register for GST if its GST turnover meets the registration turnover threshold. Turnover The applicable registration turnover threshold in this case is $75,000. You have a GST turnover that meets the registration turnover threshold if (a) your current GST turnover is at or above $75,000 and the Commissioner is not satisfied that your projected GST turnover is below $75,000; or (b) your projected GST turnover is at or above $75,000. Section 188-15 defines 'current GST turnover'. Your 'current GST turnover' at a time during a particular month is the sum of the values of all the supplies that you have made or are likely to make during that month and the preceding 11 months.
Section 188-20 defines 'projected GST turnover'. Your 'projected GST turnover' at a time during a particular month is the sum of the values of all the supplies that you have made or are likely to make during that month and the next 11 months. Current GST turnover and projected GST turnover are the sum of the respective values (excluding GST) of the supplies for the 12 months. Goods and Services Tax Ruling GSTR 2001/7 explains the meaning of GST turnover, including the effect of section 188-25 of the GST Act on the calculation of projected GST turnover. GSTR 2001/7 is available on our website at www.ato.gov.au. GSTR 2001/7 provides the following at paragraph 19, regarding requirements for the calculation of turnover and monitoring changes to the turnover.
19. Although your current GST turnover and your projected GST turnover may be capable of being determined on every day during a month, there is no requirement for continuous recalculation. However, under the GST Act there are obligations if you meet or exceed a particular threshold and there is an opportunity for you to make certain elections if you do not exceed a particular threshold. Therefore, you should be aware of the relevant thresholds likely to affect you and consider whether your turnover may be sufficiently close to the relevant thresholds to make a review prudent. For example, Entity A conducts an enterprise with a GST turnover of $70,000 and is not registered for GST. Because Entity A is aware that a $5,000 increase in its GST turnover will result in the $75,000 registration turnover threshold being met, it should monitor changes in its turnover. Entity B by contrast, is registered for GST, conducts an enterprise with a GST turnover of $600,000 and accounts on a cash basis. The nearest relevant threshold is the cash accounting turnover threshold ($2,000,000). Entity B may decide to review its current GST turnover and projected GST turnover on an annual basis whilst being aware that a significant change in turnover may require a further review.
In calculating your GST turnover under Division 188 of the GST Act, certain supplies are excluded. The sales turnover from tickets sold for Event 2 is not excluded from the calculation of the GST turnover and should be included in the calculation. As the proceeds from the sale will exceed $75,000, Entity A's turnover will meet the GST registration turnover threshold, and Entity A will be required to be registered for GST at the time of sale. Section 25-1 provides that you must make your application to be registered for GST within 21 days after becoming required to be registered. Taxable supply An entity makes a taxable supply if it meets the requirements of section 9-5, which states: You make a taxable supply if: (a) you make the supply for consideration; and (b) the supply is made in the course or furtherance of an enterprise that you carry on; and (c) the supply is connected with indirect tax zone; and (d) You are registered or required to be registered. However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.
All of the above requirements of a taxable supply under section 9-5 must be met at the time of sale for the sale to be a taxable supply. The supply of the specified educational activities by Entity A satisfies the requirements of paragraphs 9-5(a) and 9-5(b) as the supply is for consideration (the ticket price) and is made in the course or furtherance of an enterprise that Entity A carries on. Entity A is currently not registered for GST. However, it would be required to be registered when it sells the tickets for Event 2 (as determined previously), and paragraph 9-5(d) will be satisfied. What remains to be considered is whether the supply will be connected with the indirect tax zone (Australia), as required under paragraph 9-5(c) of the GST Act. A supply that is not connected with the indirect tax zone is not a taxable supply under section 9-5 of the GST Act. Connected with the indirect tax zone Section 9-25 establishes when a supply is 'connected with the indirect tax zone'. Relevantly, subsection 9-25(5) provides that a supply of anything other than goods or real property (such as a supply of services) is connected with the indirect tax zone if:
(a) the thing is done in the indirect tax zone; or (b) the supplier makes the supply through an enterprise that the supplier carries on in the indirect tax zone; or (c) all of the following apply: (i) neither paragraph (a) nor (b) applies in respect of the thing; (ii) the thing is a right or option to acquire another thing; (iii) the supply of the other thing would be connected with the indirect tax zone; or (d) the recipient of the supply is an Australian consumer. 'Indirect tax zone' is defined in section 195-1 of the GST Act as follows: indirect tax zone means Australia (within the meaning of the ITAA 1997), but does not include any of the following: (a) the external Territories; (b) an offshore area for the purpose of the Offshore Petroleum and Greenhouse Gas Storage Act 2006; ... other than an installation (within the meaning of the Customs Act 1901) that is deemed by section 5C of the Customs Act 1901 to be part of Australia and that is located in an offshore area. Supplies made to the participants overseas
On the facts, Entity A carries on an enterprise in the indirect tax zone. When Event 2 is conducted overseas, Entity A makes the supply through its enterprise. Therefore, when Event 2 is conducted overseas, the supply made by Entity A will be connected with the indirect tax zone under paragraph 9-25(5)(b) of the GST Act and paragraph 9-5(c) will be satisfied. Consequently, all the requirements of paragraphs 9-5(a) to 9-5(d) will be met and the supply will be a taxable supply unless it is GST-free or input taxed. The supply of Event 2 by Entity A is not input taxed. Therefore, what remains to be considered is whether the supply of Event 2 is GST-free. A supply is GST-free if it is GST-free under Division 38 or under a provision of another Act. The supply of a right to receive a GST-free supply is also GST-free under paragraph 9-30(1)(b) of the GST Act. GST-free supply Section 38-190 of the GST Act sets out the circumstances in which certain supplies of things other than goods or real property, for consumption outside of Australia are GST-free. As Entity A makes a supply of services, section 38-190 is relevant for consideration.
The table in subsection 38-190(1) comprises five items which set out supplies of things other than goods or real property that are GST-free. If the requirements of one of those items are met the supply is GST-free, provided that subsections 38-190(2), (2A) or (3) do not negate that GST-free status. Under subsection 38-190(2) of the GST Act, a supply covered by any of items 1 to 5 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 the indirect tax zone and would not be GST-free. A supply to which subsection 38-190(2) of the GST Act applies, is not GST-free even if one of the items 1 to 5 in the table in subsection 38-190(1) of the GST Act would otherwise apply. A supply that is not GST-free under one of the items in subsection 38-190(1) may be GST-free under one of the other items.
Of relevance are items 2 and 3 in the table in subsection 38-190(1) of the GST Act. Item 2 applies to supplies made to non-resident entities. Item 3 applies to supplies made to entities irrespective of their residency status. As Item 3 applies to supplies made to all entities, including non-residents, supplies made to non-residents may be considered under item 2 or item 3. Item 2 Item 2 in the table in subsection 38-190(1) of the GST Act (Item 2) provides that a supply of a thing, other than goods or real property, made to a non-resident is GST-free if the non-resident is not in the indirect tax zone when the thing supplied is done and: (a) the supply is neither a supply of work physically performed on goods situated in the indirect tax zone when the work is done nor a supply directly connected with real property situated in the indirect tax zone, or (b) the non-resident acquires the thing in carrying on the non-resident's enterprise but is not registered or required to be registered. Item 2 applies to a supply of a thing, other than a supply of goods or real property, which is made to a non-resident. A supply is made to a non-resident
for the purposes of Item 2 if the supply is made to an entity that is a person who is not a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936). A non-resident is an 'entity that is not an Australian resident'. The requirement that the non-resident in Item 2 is not in the indirect tax zone when the thing supplied is done is a requirement, in our view, that the non-resident is not in the indirect tax zone in relation to the supply when the thing supplied is done. We determine whether the not in the indirect tax zone requirement is satisfied by determining whether the non-resident entity is in Australia in relation to the supply. If the non-resident is in Australia in relation to the supply, the entity does not satisfy the not in Australia requirement. On the facts, supplies made by Entity A to the non-residents in an overseas country are supplies that are made to a non-resident who is not in the indirect tax zone when the thing supplied is done. Therefore, supplies made to non-resident participants in a country outside Australia will satisfy the requirements of Item 2 of subsection 38-190(1) and will be GST-free under Item 2. Item 3
Item 3 in the table of subsection 38-190(1) of the GST Act (Item 3) provides that a supply of things other than goods or real property is GST-free if: (a) the supply is made to a recipient who is not in the indirect tax zone when the thing supplied is done; and (b) the effective use or enjoyment of the supply takes place outside the indirect tax zone; other than a supply of work physically performed on goods situated in Australia when the thing supplied is done, or a supply directly connected with real property situated in Australia. The term 'recipient' in relation to a supply in defined in section 195-1 and means the entity to which the supply is made. However, subsection 38-190(4) provides that, for the purposes of item 3, a supply is considered to be made to a recipient who is not in the indirect tax zone if: (a) it is a supply under an agreement entered into, whether directly or indirectly, with an Australian resident; and (b) the supply is provided, or the agreement requires it to be provided, to another entity outside the indirect tax zone.
Paragraph (a) of Item 3 requires that the supply is made to a recipient who is 'not in the indirect tax zone' when the thing supplied is done. Although the recipient must not be in the indirect tax zone, it is not a requirement of Item 3 that the recipient be a non-resident. Item 3 applies to supplies made to entities irrespective of their residency status. Goods and Services Tax Ruling GSTR 2004/7 states (at paragraph 181) that this requirement is in effect a proxy test for determining where the supply to that recipient is consumed. The presumption is that if the recipient of the supply is 'not in the indirect tax zone' when the thing supplied is done, the supply of that thing is for consumption outside the indirect tax zone and is GST-free, provided the other requirements of Item 3 are met. Further, we consider that the requirement that the recipient of a supply in Item 3 is 'not in the indirect tax zone' when the thing supplied is done, requires that the recipient is 'not in the indirect tax zone' when the thing supplied is done.
We determine whether the not in the indirect tax zone requirement is satisfied by determining whether the recipient is in Australia in relation to the supply. If the entity is in Australia in relation to the supply, the entity does not satisfy the not in Australia requirement. The place of effective use or enjoyment of a supply Guidelines on the circumstances in which 'effective use or enjoyment' of a supply takes place outside Australia are set out in Goods and Services Tax Ruling GSTR 2007/2. A supply is provided to an individual at a particular location if the individual's presence at that location is integral to, as distinct from being merely coincidental with, the provision of the supply. Paragraphs 107-108 of GSTR 2007/2 state: 107. 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. 108. If the need for a supply to be provided to an individual arises from the individual's presence at a particular location, we consider that the supply is provided to the individual at that location. Paragraph 112 of GSTR 2007/2 further states: 112. A further indicator that an individual's presence at a particular location is integral to, and is not merely coincidental with, the provision of the supply is that the individual's presence at a location is integral to the performance, receipt or delivery of the supply. Some examples of such supplies are as follows: • supply of training or entertainment - the services are to be received by the individual at that location... Paragraph 281 of GSTR 2007/2 states:
281. If a resident 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. As the supply is provided to the individual outside Australia, effective use or enjoyment of the supply takes place outside Australia. Paragraph (b) of item 3 is satisfied. The supply is GST-free under item 3 if the other requirements of item 3 are satisfied. (See Flowchart 2, page 34 of the Ruling section.) In this case, the presence of the participants overseas is integral to these participants receiving the supplies of the specified services overseas. Therefore, the effective use and enjoyment of the supply of the specified services overseas takes place outside Australia.
From the facts given, the supply of the specified services which Entity A provides to residents of Australia and residents of various other countries is delivered overseas, outside the indirect tax zone. We consider that where the services are supplied to the participants overseas, the effective use and enjoyment of the supply takes place outside the indirect tax zone. The supply is effectively used or enjoyed outside the indirect tax zone and is not a supply of work physically performed on goods situated in the indirect tax zone nor directly connected with real property situated in the indirect tax zone. The exclusions under subsections 38-190(2), (2A) are not relevant. Therefore, supplies of the specified services by Entity A to the participants outside the indirect tax zone will satisfy the requirements of Item 3 of subsection 38-190(1) and will be GST-free under Item 3. Conclusion Entity A will be required to register for the GST pursuant to section 23-5 of the GST Act.
The supply of the specified services to all the participants (Australian residents and non-residents) by Entity A in an overseas country, the effective use or enjoyment of which takes place outside the indirect tax zone, will be GST-free under Item 3 in the table in subsection 38-190(1). The supply of the specified services by Entity A in a country outside Australia to the non-resident participants who are in an overseas country and not in the indirect tax zone when the thing supplied is done, will also be covered under Item 2 in the table in subsection 38-190(1). The supply to the non-resident participants will be GST-free under Item 2 or Item 3. Where a supply is GST-free, no GST is payable on the supply. Therefore, GST is not payable by Entity A on its supply of the specified activities/Event 2 to be delivered outside the indirect tax zone as the supply will be a GST-free supply under section 38-190 of the GST Act.