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  • GST for driving schools and driving instructors

    If registered or required to be registered for GST, driving schools and instructors are liable to pay GST on the full fee charged for their services. This includes for:

    • driving schools - the full fee charged to a learner driver for a driving lesson
    • driving instructors - the fee charged to a driving school for the service of delivering a driving lesson.

    Driving schools and driving instructors with a GST turnover, or projected GST turnover, which meets or exceeds the GST registration turnover threshold of $75,000 must be registered for GST.

    Driving schools and driving instructors with a GST turnover that does not meet the GST registration turnover threshold can still choose to register for GST.

    Example 1: Driving instructor registered for GST

    Handbrake Driving School (Handbrake) is registered for GST.

    Katie, a driving instructor, provides driving lessons to learner drivers on behalf of Handbrake. Katie is an independent contractor, not an employee of Handbrake, and is registered for GST. Katie provides a service to Handbrake of delivering each driving lesson to the learner driver.

    Handbrake receives $66 per lesson from learner drivers, and pays Katie $44 for her service of delivering the lesson to the learner driver.

    Each driving lesson provided by Handbrake is a taxable supply and Handbrake is required to pay GST on the $66 payments it receives. Handbrake includes $6 GST in its activity statement.

    Katie's service to Handbrake is a taxable supply and she is required to pay GST on the payments she receives. She provides Handbrake with a tax invoice for $44 and includes $4 GST in her activity statement.

    Handbrake is entitled to claim GST credits in its activity statement for its GST-inclusive business expenses, including a GST credit of $4 for each payment made to Katie.

    Katie is also entitled to claim GST credits for her GST-inclusive business expenses, for example, the petrol she uses in her car to provide lessons on behalf of Handbrake.

    End of example

     

    Example 2: Driving instructor not registered or required to be registered for GST

    Handbrake also engages Joe, a driving instructor, to provide driving lessons to learner drivers on behalf of Handbrake. Joe is an independent contractor, not an employee of Handbrake. Joe provides a service to Handbrake of delivering each driving lesson to the learner driver.

    Joe's GST turnover from his work as a driving instructor is $45,000 for the year to date and is likely to be less than $60,000 next year. He has no other enterprises through which he receives income.

    As Joe's turnover is under the GST threshold of $75,000, he is not required to be registered for GST, and he has chosen not to register for GST.

    Handbrake receives $66 per lesson from learner drivers and pays Joe $44 for his service of delivering the lesson to the learner driver.

    Joe does not account for any GST on the $44 received from Handbrake and he is not required to lodge activity statements because he is not registered or required to be registered for GST.

    For each lesson, Handbrake is required to pay GST on the $66 received, and includes $6 GST in its activity statement, but is not entitled to a GST credit in respect of the $44 paid to Joe for the service of delivering the lesson because Joe's service to Handbrake is not a taxable supply.

    End of example

    See also:

    Heavy vehicle driving schools

    Heavy vehicle driving lessons provided to learner drivers by a registered training organisation (RTO), or its authorised agent or representative, are GST-free if they satisfy the requirements for the supply of an ‘education course’ under the GST law.

    Types of ‘education courses’ include:

    • a professional or trade course
    • a tertiary course
    • an adult and community education course.

    When a heavy vehicle driving instructor provides heavy vehicle driving lessons to a learner driver on behalf of a driving school, the instructor’s supply to the driving school is not GST-free.

    The services provided by the instructor to the driving school are subject to GST if the instructor is an independent contractor and registered for GST or required to be registered for GST.

    Example 3: Heavy Vehicle driving instructor registered for GST

    Handbrake Heavy Vehicle Driving School (Heavy Handbrake) is registered for GST.

    The driving lessons provided by Heavy Handbrake satisfy the requirements of a GST-free education course.

    Rod, a heavy vehicle driving instructor, provides driving lessons to learner drivers on behalf of Heavy Handbrake. Rod is an independent contractor, not an employee of Heavy Handbrake, and is registered for GST. Rod provides a service to Heavy Handbrake of delivering each driving lesson to the learner driver.

    Heavy Handbrake receives $110 per lesson from learner drivers and pays Rod $66 for his service of delivering the lesson to the learner driver.

    Each driving lesson provided by Heavy Handbrake is GST-free. Heavy Handbrake is not required to pay GST on the payments it receives and does not have to include GST in its activity statements.

    Rod’s service to Heavy Handbrake is a taxable supply and he is required to pay GST on the payment he receives. He provides Heavy Handbrake with a tax invoice for $66 and includes $6 GST in his activity statement.

    While Heavy Handbrake is not required to pay GST on the payments it receives, it is entitled to claim GST credits in its activity statement for its GST-inclusive business expenses, including a GST credit of $6 for each payment made to Rod.

    End of example

    See also:

      Last modified: 31 May 2018QC 55805