1 Is GST payable by you under section 9-40 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) on the supply of your expert opinion to Company X?
1 No.
You are registered for GST and based in Australia. Company X is a non-resident company which operates in an overseas country. Company X provides services by answering complex economic, regulatory, and financial questions for corporations, law firms, and governments around the world. Company X does not have employees in Australia. Company X has a subsidiary incorporated and operating in another overseas country, called Company Y. Company Y has a branch office in Australia that is registered for GST. Company X has been contracted by Company A, an Australian law firm, to provide an expert opinion on an economic matter for an Australian court case. Company X's overseas office entered into the contract with Company A.
You entered into a contract with Company X on (date) under which your employee, Person 1, is performing a service in Australia of providing an expert opinion on an economic matter relating to that court case. Prior to that date, Person 1 was performing this service (relating to the same court case) as an employee of Company Y. The task of Person 1 providing an expert opinion is ongoing. Together with Company Y and Company X employees, Person 1 will be liaising with Company A and the barristers. An individual in the overseas country that Company X operates in will write up and sign off a report setting out the expert opinion that Person 1 provides to Company X's overseas office. Person 1 will not write up the report themselves. Person 1 will attend court, but only as an observer. Person 1 will not provide an expert opinion at the court. Your contract with Company X provides that it has sub-contracted you to support its litigation consulting services to Company A. The contract also provides that you will provide the services of your employee, Person 1 on an as-needed basis.
There is no clause in your contract with Company X which requires you to provide your services to any other entity in Australia.
A New Tax System (Goods and Services Tax) Act 1999 section 9-5 A New Tax System (Goods and Services Tax) Act 1999 section 9-40 A New Tax System (Goods and Services Tax) Act 1999 section 38-190
Summary GST in not payable by you for your supply of expert opinion to Company X as the supply is GST-free under item 2 in the table in subsection 38-190(1) of the GST Act (item 2), which deals with exported services. Detailed reasoning GST is payable by an entity on taxable supplies that it makes. You make a taxable supply if you meet the requirements of section 9-5 of the GST Act, which states: You make a taxable supply if (a) the supply is made 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 the indirect tax zone (which includes Australia), 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. (*Denotes a term defined in section 195-1 of the GST Act)
You meet the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act. That is, you are making your supply of providing advice in the form of an expert opinion, for consideration and in the course or furtherance of an enterprise that you carry on. Your supply is connected with Australia as you make the supply through the enterprise you carry on in Australia. Furthermore, you are registered for GST. Therefore, the supply of the advice is a taxable supply unless it is GST-free or input taxed. There are no provisions of the GST Act under which your supply of the advice is input taxed. Therefore, what remains to be determined is whether you are making a GST-free supply. Item 2 provides that a supply is GST-free if: • it is a supply of something other than goods or real property; and • the supply is made to a non-resident who is not in Australia.
However, a supply is not GST-free under item 2 if the supply is a supply of work physically performed on goods in Australia when the work is done or a supply that is directly connected with real property situated in Australia unless the non-resident recipient is not registered or required to be registered for GST and the non-resident acquires the thing supplied in carry on its enterprise. Subsection 38-190(3) of the GST Act provides that a supply is not GST-free under item 2 if the supply is made under a contract entered into with a non-resident but the supply is provided, or required to be provided to another entity in Australia. There are three exceptions to this rule. One exception is where the supply is provided to an entity that would have been an Australian based business recipient if the supply had been made to it (provided that the supply is not input taxed). Subsection 38-190(3) of the GST Act states: Without limiting subsection (2) or (2A), a supply covered by item 2 in that table 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 the indirect tax zone; 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 9-26(2) of the GST Act defines 'Australian based business recipient'. It states: An entity is an Australian-based business recipient of a supply made to the entity if: (a) the entity is *registered; and (b) an enterprise of the entity is *carried on in the indirect tax zone; and
(c) the entity's acquisition of the thing supplied is not solely of a private or domestic nature. (Registered means registered for GST) You are supplying advice to a non-resident entity. The advice is not goods or real property. Whether the non-resident recipient of your supply is in Australia for the purposes of item 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 1999: • 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'? provides guidance in determining whether a non-resident recipient of a supply is not in Australia when the thing supplied is done. Paragraph 31 of GSTR 2004/7 states: 31. The requirement that the non-resident in item 2, or the recipient in item 3, is not in Australia when the thing supplied is done is a requirement, in our view, that the non-resident or recipient is
not in Australia in relation to the supply when the thing supplied is done. Paragraph 37 of GSTR 2004/7 states: 37. A non-resident company is in Australia if that company carries on business (or in the case of a company that does not carry on business, carries on its activities) in Australia: (a) at or through a fixed and definite place of its own for a sufficiently substantial period of time; or (b) through an agent at a fixed and definite place for a sufficiently substantial period of time. Paragraph 41 of GSTR 2004/7 states: 41. A non-resident company is in Australia in relation to the supply if the supply is solely or partly for the purposes of the Australian presence, for example, its Australian branch. If the supply is not for the purposes of the Australian presence but that Australian presence is involved in the supply, the company is in Australia in relation to the supply, except where the only involvement is minor. We consider that Company X is not in Australia in relation to your supply of advice to it as:
• the supply you make to it is not for the purposes of any presence that it has in Australia; it is for the purposes of their overseas presence given that the purpose of your supply is to assist its overseas office fulfil its contract to provide an expert opinion to Company A; and • Company X does not have any employees in Australia that would have been involved, or you would have interaction with, in relation to your supply. Work on goods situated in Australia etc Your supply is not a supply of work physically performed on goods situated in Australia and is not a supply directly connected with real property situated in Australia. Whether you are providing your supply to a third party in Australia Example 29 in Goods and Services Tax Ruling GSTR 2005/6 Goods and Services Tax: the scope of subsection 38-190(3) and its application to supplies of things (other than goods or real property) made to a non-residents that are GST-free under item 2 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999
provides an example of advisory services supplied by an Australian company to an overseas. company. The example considers whether the supply is provided to a third party in Australia. It states: Example 29 - supply of legal services made and provided to a non-resident company 550. An Australian law firm contracts with a non-resident company, US Co, to supply legal services. US Co has an Australian subsidiary. However, US Co does not carry on business in Australia either through a place of business of its own or through its subsidiary, or any other agent acting on its behalf. The Australian law firm has agreed to provide US Co with advice on legal issues associated with the dismissal of the Chief Executive Officer (CEO) of its Australian subsidiary. US Co is assessing the impact this matter will likely have on its Australian operations. The Australian law firm deals only with personnel of US Co and has no interaction of any kind with any personnel from the Australian subsidiary in relation to the advice. The advice is prepared and once finalised sent to US Co. Item 2 551.
The supply of legal services by the Australian law firm is made to a non-resident company that is 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. Subsection 38-190(3) 552. The supply of legal services made by the Australian law firm to US Co is a supply under an agreement entered into with a non-resident. Paragraph 38-190(3)(a) is therefore satisfied. Provided to another entity 553. What is being supplied is advice on matters associated with the dismissal of the CEO of the Australian subsidiary, relevant to the deliberations of US Co. The Australian law firm has no dealings with the Australian subsidiary. The nature of the advice is such that the supply of legal advice is made and provided to US Co. The supply is not provided to another entity. 554. Subsection 38-190(3) does not negate the GST-free status of the supply covered by item 2. You will supply advice under a contract you have entered into with a non-resident company, Company X.
An individual in the overseas country will write up a report setting out the expert opinion that Person 1 provides to Company X's overseas office. Person 1 will not write up the report themselves. Person 1 will also attend court, but only as an observer. Person 1 will not provide an expert opinion at the court. We consider that under the contract, you will provide advice to Company X, as the services will comprise of assisting Company X with writing up an expert opinion report. As in the scenario in example 29 in GSTR 2005/6, you are making a supply in the form of advice to a non-resident who is not in Australia (the overseas customer) and you are providing this advice only to the non-resident and not to another entity in Australia. Although you are also interacting with entities located in Australia in connection with the court case, you are not providing your supply to any of those entities. Additionally, you are not required to provide your supply to an entity other than the non-resident recipient of your supply. Hence, subsection 38-190(3) of the GST Act does not operate to exclude your supply of advice in this case from being GST-free.
The exclusions at subsections 38-190(2) and 38-190(2A) of the GST Act are not relevant to your case. Therefore, you are making a GST-free supply of advice under item 2. Hence, GST is not payable on your supply of advice to Company X.