ATO Interpretative Decision

ATO ID 2005/247

Goods and Services Tax

• This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is the entity, an accounting firm, making a GST-free supply under section 38-190 of the A New Tax System (Goods and Services Tax) 1999 (GST Act) when, on or after 1 April 2005, it supplies accounting services to the non-resident owner of an Australian residential rental property and these services consist of:

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general management of the non-resident's bank account to ensure adequate funds are available to meet mortgage repayments

•

analysis of rent statements and updating the non-resident's accounting records

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occasional liaison with the property managers (real estate agents), and

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preparing and lodging the non-resident's income tax returns (which include other Australian sourced income apart from the rental property)?

Decision

No, the entity is not making a GST-free supply under section 38-190 of the GST Act when, on or after 1 April 2005, it supplies accounting services to the non-resident. The entity is making a taxable supply under section 9-5 of the GST Act.

Facts

The entity is an accounting firm. The entity supplies accounting services for a professional fee to a non-resident client on or after 1 April 2005. These services consist of:

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general management of the non-resident's bank account to ensure adequate funds are available to meet mortgage repayments

•

analysis of rent statements and updating the non-resident's accounting records

•

occasional liaison with the property managers (real estate agents), and

•

preparing and lodging the non-resident's income tax returns (which include other Australian sourced income apart from the rental property).

The non-resident client is an individual that owns Australian rental properties. These properties are rented out by the non-resident client as residential premises. The non-resident's supply of the residential premises is input taxed under Subdivision 40-B of the GST Act.

The non-resident is not in Australia at the time of the supply. The non-resident acquires the services in the course of its enterprise and is not registered or required to be registered for goods and services tax (GST). The entity's supply to the non-resident client meets the requirements of item 2 in the table in subsection 38-190(1) of the GST Act.

The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act.

Reasons for Decision

Section 38-190 of the GST Act specifies the circumstances where the supplies of things, other than goods or real property, for consumption outside Australia are GST-free. Items 1 to 5 in the table in subsection 38-190(1) of the GST Act set out the requirements for a supply to be GST-free. The entity's supply of accounting services to the non-resident meets the requirements of item 2 in the table in subsection 38-190(1) of the GST Act.

Subsection 38-190(2A) of the GST Act provides that a supply made on or after 1 April 2005 that is covered by any of items 2 to 4 in the table in subsection 38-190(1) of the GST Act is not GST-free if:

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the acquisition of the supply relates (whether directly or indirectly, or wholly or partly) to making a supply of real property situated in Australia, and

•

the supply of real property would be, wholly or partly, input taxed under Subdivisions 40-B or 40-C of the GST Act.

The entity's supply of accounting services consists of services that relate to the renting out of real property in Australia by the non-resident. The accounting services are also acquired to assist with the financial management of renting out the property, together with preparing income tax returns that include assessable income derived and deductions claimed in respect of the property.

Further, the non-resident's supply of the rental properties is an input taxed supply of residential premises under Subdivision 40-B of the GST Act. Therefore, the entity's supply of accounting services is not GST-free under section 38-190 of the GST Act, due to the operation of subsection 38-190(2A) of the GST Act.

The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. The supply is neither GST-free under any other provision in Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under of section 9-5 of the GST Act when, on or after 1 April 2005, it supplies its accounting services to the non-resident.

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 9-5
   Division 38
   section 38-190
   subsection 38-190(1)
   subsection 38-190(1) table item 1
   subsection 38-190(1) table item 2
   subsection 38-190(1) table item 3
   subsection 38-190(1) table item 4
   subsection 38-190(1) table item 5
   subsection 38-190(2A)
   Division 40
   Subdivision 40-B
   Subdivision 40-C

Related Public Rulings (including Determinations)
GSTR 2003/7
GSTR 2004/7

Keywords
Goods and services tax
GST international services
Connected with Australia
Consumption outside Australia
Supplies used or enjoyed outside Australia
GST property & construction
GST residential rents
Taxable supply
Input taxed supplies

Business Line:  GST

Date of publication:  2 September 2005

ISSN: 1445-2782