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Edited version of private ruling
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Ruling
Subject: GST and education course
Question
Is the supply of the foundation year program, conducted by Entity A and Entity B, a GST-free supply of an education course under section 38-85 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer: Yes
The supply of the foundation year program, conducted by Entity A and Entity B is a GST-free supply of an education course under section 38-85 of the GST Act.
Relevant facts
Entity A entered into an administration and services agreement to conduct the foundation year program on behalf of university.
The agreement requires that Entity A administer the foundation year program in a good, competent and professional manner, including to be the provider for the foundation year program for, and on behalf of, the university and involves but is not limited to:
· setting, marking, and assessing standards and tests;
· providing good quality premises, facilities equipment, and staff for teaching the program;
· setting curricula for all courses in the program;
· teaching the program.
Further, Entity A is required to provide necessary administrative services, promote and seek enrolments, manage the marketing, promotion and recruitment of students to the foundation year program, and to employ staff to teaching the foundation year program.
Entity A is also required to provide staff to act on the Board of Studies established to maintain credibility for the program in the form of a quality control function.
Entity A conducted the program for a number of years.
Recently, a new suite of contracts were entered into by the university and Entity B. These are substantially in the same form as the original suite of agreements, with the exception that the new administration and services agreement is between Entity B and the university, with Entity B conducting the foundation year program in place of Entity A. The new agreements are effective from the expiration of the agreements with Entity A.
The foundation year program offered by the university is a preparation program which allows a student that completes the foundation year program and is assessed as having met the required levels of academic skill, a guaranteed entry into the university's undergraduate courses.
At the time of entering into the contract, Entity A was registered as a secondary school under Part 7 of the Education Act 1990 (NSW) and accredited under Part 8 of that Act, and has maintained that registration/accreditation since that time.
Entity B has been registered as a 'higher education institution' pursuant to the Higher Education Act 2001 (NSW).
Each of Entity A, Entity B and the university are registered under the Education Services for Overseas Students Act 2000 and each has been issued with a CRICOS provider code pursuant to that legislation.
Since 2000, the foundation year program has operated under the CRICOS code of the university.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 Section 9-5
A New Tax System (Goods and Services Tax) Act 1999 Section 38-85
A New Tax System (Goods and Services Tax) Act 1999 Section 195-1
Reasons for decision
Section 38-85 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that a supply of an education course is GST-free.
The definition of an education course includes, among other things, a secondary course.
'Secondary course' is defined in section 195-1 of the GST Act to mean:
(a) a course of study or instruction that is a secondary course determined by the Education Minister under subsection 5D(1) of the Student Assistance Act 1973 (SAA 1973) for the purposes of that Act, or
(b) any other course of study or instruction that he Education Minister has determined is a secondary course for the purposes of this Act.
The Education Minister has made Student Assistance (Education Institutions and Courses) Determination 2009/2 (the Determination) for the purposes of subsections 3(1) and 5D(1) of the SAA 1973.
The Determination provides that a preparatory course conducted by a secondary school, registered training organisation, higher education institution or special school is a secondary course.
A preparatory course is defined in the Determination to mean:
(a) an accredited vocational education and training course that provides remedial education or involves preparatory activities to enable participation in subsequent education or social settings, and is of a type that aims to achieve basic skills and standards or to prepare students for further education, or
(b) a course offered by a higher education institution that is designed to assist people to gain entry to higher education level courses (including enabling and bridging courses).
Paragraph 5 of the Determination provides that the following are to be regarded as 'higher education institution' for the purposes of SAA 1973:
(a) an institution that is established by a law of the Commonwealth, a State or a Territory as a higher education institution
(b) an institution registered by the relevant State or Territory higher education recognition authority as a higher education institution.
Paragraph 6 of the Determination provides that the following are to be regarded as secondary schools' for the purposes of SAA 1973:
(a) an institution located in Australia that is a government school
(b) an institution located in Australia that is recognised as a secondary school under the law of a State or Territory in which the school is located.
The foundation year program offered by the university provides guaranteed entry into the university's undergraduate courses on agreed conditions for successful students.
The foundation year program offered by the university is a preparation program which allows a student that completes the foundation year program and is assessed as having met the required levels of academic skill, a guaranteed entry into the university's undergraduate courses.
As the foundation year program, a program offered by the university, a higher education institution, is designed to assist students gain entry to higher education level courses at the university, the foundation year program is a preparatory course.
However, the foundation year program is conducted by Entity A and Entity B on behalf of the university.
Entity A, a secondary school, has conducted the foundation year program for a number of years. As the foundation year program is a preparatory course that is conducted by a secondary school, it is a secondary course. Therefore, the supply of the foundation year program, conducted by Entity A is a GST-free supply of an education course under section 38-85 of the GST Act.
Entity B, a higher education institution, has conducted the foundation program since the expiration of Entity A's contract. As the foundation year program is a preparatory course that is conducted by a higher education institution, it is a secondary course. Therefore, the supply of the foundation year program, conducted by Entity B is a GST-free supply of an education course under section 38-85 of the GST Act.
Goods and Services Tax Ruling GSTR 2000/30, which is available from our website www.ato.gov.au, discusses supplies that are GST-free for pre-school, primary and secondary courses. GSTR 2000/30 advises that any fee that you charge for tuition, facilities and other curriculum-related activities associated with such as course is not subject to GST.
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