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Authorisation Number: 1051280183738
Date of advice: 7 September 2017
Subject: GST and making a supply to a non-resident
Is the supply of services to a non-resident entity GST-free under section 38-190 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), where the non-resident entity engages another resident entity to coordinate the timing of our services?
Relevant facts and circumstances
You provide a service to a non-resident for goods that are in Australia. You do not perform any activity that changes or affects the goods in a physical way. Your service only changes the location of the goods.
You are proposing to enter into contracts with non-resident companies to provide your services to their goods in Australian that are owned by non-residents. These companies do not have an office or permanent establishment in Australia.
However, the non-resident companies engage another resident to coordinate the timing of services in that they provide the updates on arrival times, etc to you.
Relevant legislative provisions
Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999
Section 38-190 of the A New Tax System (Goods and Services Tax) Act 1999
Reasons for decision
An entity makes a taxable supply if all the conditions in section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) are met.
Section 9-5 of the GST Act provides::
You make a taxable supply if:
● you make the supply for consideration; and
● the supply is made in the course or furtherance of an enterprise that you carry on; and
● the supply is connected with the indirect tax zone (Australia); and
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.
In this situation, where you make the supply for consideration, in the course of your enterprise, the supply will be connected with Australia; and you are registered for GST. As such your supply of services to a non-resident would be a taxable supply unless it is GST-free or input taxed. There are no provisions that would result in the supply being input taxed, however, consideration needs to be given to whether it is GST-free under section 38-190 of the GST Act.
Of particular relevance is subsection 38-190(1) of the GST Act. This section provides that a supply of a thing, other than goods or real property, is GST-free if the supply satisfies the requirements in one of the items in the table in
According to item 2 in the table in subsection 38-190(1) of the GST Act (item 2) provides that a supply made to a non-resident is GST-free if the non-resident is not in Australia when the thing supplied is done and either of the following applies:
● 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
● the non-resident acquires the thing in carrying on the non-resident's enterprise, but is not registered or required to be registered.
Non-resident is not in Australia
Goods and Services Tax Ruling GSTR 2004/7 gives guidance on determining if a non-resident is in Australia for the purpose of subsection 38-190(1) of the GST Act.
According to paragraph 241 of GSTR 2004/7, a non-resident company is in Australia for the purpose of item 2 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:
● at or through a fixed and definite place of its own for a sufficiently substantial period of time; or
● through an agent at a fixed and definite place for a sufficiently substantial period of time.
You advised that the non-resident entities you are wanting to contract with do not have offices or a permanent establishment in Australia and therefore, are not in Australia.
Supply is neither a supply of work physically performed on goods in Australia nor a supply directly connected with real property in Australia
A supply is a supply of work physically performed on goods where something is done deliberately to the goods to change them or otherwise affect them in some physical way.
A supply is directly connected with real property if there is a very close link or association between the supply and a particular real property.
This is neither a supply of work physically performed on goods situated in Australia nor a supply connected with real property in Australia as your service is involved with the provision of line launch for ships. Therefore, the condition in the first dot point is met and Item 2 is satisfied.
Therefore, the supply is GST-free under subsection 38-190(1) of the GST Act unless the supply is excluded from being GST-free by subsection 38-190(3) of the GST Act.
Supply provided to another entity in Australia
Subsection 38-190(3) of the GST Act provides that a supply covered by item 2 is not GST-free if:
● it is a supply under an agreement entered into, whether directly or indirectly, with a non-resident; and
● the supply is provided, or the agreement requires it to be provided, to another entity in Australia; and
● for a supply other than an input tax supply – none of the following applies:
○ the other entity would be an Australian-based business recipient of the supply, if the supply had been made to it;
○ the other entity is an individual who is provided with the supply as an Australian-based business recipient of the supply, if the supply had been made to it; or
○ 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.
In your circumstance, you provide your services to another entity in Australia, this entity will not be an Australian based business nor an employee of an Australian based business, as such, your supply will not be excluded by subsection 38-190(3) of the GST Act and will be GST-free under subsection 38-190(1).