ATO Interpretative Decision
ATO ID 2003/1059
Goods and Services Tax
GST and supplies of consultancy services to non-residentsFOI status: may be released
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This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is the entity, an Australian consultancy organisation, making a GST-free supply under item 2 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies consultancy services to a non-resident company?
Decision
Yes, the entity is making a GST-free supply under item 2 in the table in subsection 38-190(1) of the GST Act when it supplies consultancy services to a non-resident company.
Facts
The entity is an Australian resident consultancy organisation. The entity supplies consultancy services to a non-resident company. The entity is registered for goods and services tax (GST).
The non-resident company is not in Australia when the consultancy services are performed. It does not have a representative in Australia in relation to the supply when the consultancy services are performed.
The consultancy services do not relate to goods or real property situated in Australia.
The non-resident company acquires the consultancy services in carrying on its enterprise. It is not registered for GST and is not required to be registered for GST.
There is no third party in Australia involved in the supply and the consultancy services are provided to the non-resident company.
Reasons for Decision
Under section 38-190 of the GST Act, certain supplies of things other than goods or real property for consumption outside Australia are GST-free. As the supply of consultancy services is not a supply of goods or real property, its GST status is appropriately considered under section 38-190 of the GST Act.
Item 2 in the table in subsection 38-190(1) of the GST Act (Item 2) provides that a supply that is made to a non-resident who is not in Australia when the thing supplied is done, is GST-free where:
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- 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, or
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- the non-resident acquires the thing in carrying on the non-resident's enterprise, but is not registered or required to be registered for GST.
The non-resident company is not in Australia when the consultancy services are performed and the precondition that the recipient of the supply is not in Australia is satisfied.
Therefore, if either of the remaining requirements in Item 2 are satisfied the entity's supply will be GST-free. The consultancy services do not relate to goods or real property situated in Australia. In addition, the non-resident company acquires the consultancy services in carrying on its enterprise and it is neither registered nor required to be registered for GST. Therefore, the entity's supply of consultancy services to the non-resident company meets both of the requirements in Item 2 (although it only needs to satisfy one of them to be GST-free).
However, subsection 38-190(3) of the GST Act provides that a supply covered by Item 2 is not GST-free if:
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- it is a supply under an agreement entered into, whether directly or indirectly, with a non-resident, and
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- the supply is provided, or the agreement requires it to be provided, to another entity in Australia.
There is no third party in Australia involved in the supply and the consultancy services are provided to the non-resident company. As such, the entity is not providing its supply of consultancy services to an entity in Australia and subsection 38-190(3) of the GST Act does not exclude the entity's supply from being GST-free under Item 2.
Accordingly, the entity is making a GST-free supply under Item 2 when it supplies consultancy services to the non-resident company.
Date of decision: 10 January 2002
Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
section 38-190
subsection 38-190(1) table item 2
subsection 38-190(3)
Keywords
Goods and services tax
GST free
GST international services
Consumption outside Australia
ISSN: 1445-2782
| Date: | Version: | |
| You are here | 10 January 2002 | Original statement |
| 19 August 2005 | Archived |