Edited version of private ruling

Authorisation Number: 1011638591251

This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fac sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.

Ruling

Subject: GST and supplies connected with Australia

Question 1

Are we required to register for an ABN?

Summary

Yes, you are entitled to an ABN.

Detailed reasoning

You are entitled to have an ABN if you are carrying on an enterprise in Australia and you satisfy the requirements for ABN registration as per subsection 8(1) of the A New Tax System (Australian Business Number) Act 1999 (ABN Act):

*You are entitled to have an Australian Business Number (*ABN) if:

· you are *carrying on an *enterprise in *Australia; or

· in the course or furtherance of carrying on an enterprise, you make *supplies that are *connected with Australia.

(* denotes a term defined in section 195-1 of the GST Act)

'You' is defined in section 41 of the ABN Act, applies to entities in general, unless its application is expressly limited.

Entity is defined in subsection 184-1 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), and includes a corporation sole.

According to the facts provided by you, you are considered to be an entity as you conduct your enterprise as a proprietary limited corporation.

Enterprise is defined in Section 9-20 of (GST Act) as an activity or series of activities done in the form of a business or trade.

Paragraph 174 of Miscellaneous Taxation Ruling MT 2006/1 provides the definition of a business and includes any profession, trade, employment, vocation or calling but does not include occupation as an employee.

Paragraph 155 of MT 2006/1 provides that an entity carrying on more than one enterprise is only entitled to one ABN. It is the entity and not the enterprise that is entitled to an ABN.

You have advised that you provide the following as part of your business:

· software licence;

· maintenance support; and

· mail integration service.

You do not carry on an enterprise in Australia because you have advised that you do not have a business located or established in Australia. Your business is located overseas, and you do not have agents in Australia.

As provided for in the facts of this case you have advised the following:

Your software licence agreement is signed in Australia by your client and sent overseas for your signature. Paragraph 76 of GSTR 2000/31 provides:

If, for example, a right is granted under an agreement to another to use certain intellectual property, the granting of that right to another is done where the agreement is made…

We consider that the agreement was finalised overseas and thus the supply of this licence is not connected with Australia;

Maintenance support is provided to your clients through phone calls and web support. Paragraph 71 of GSTR 2000/31 provides:

If a supply is the provision of advice or information and the supply involves work to created, develop or produce that information or advice for the recipient, the supply is one of the performance of services. The advice or information is done where it is prepared, produced, or created, as case may be. The supply of that advice or information is connected with Australia if the advice or information is prepared, created or produced in Australia.

We consider that the provision of your maintenance support whereby you provide telephony and web support from overseas is not connected with Australia.

Mail integration service is a service that is done mainly from overseas.

As stated in paragraph 71 of GSTR 2000/31, the supply of advice or information is connected with Australia if the advice or information is prepared, created or produced in Australia.

We consider this service to be provided overseas and therefore not connected with Australia.

Therefore, in relation to your software licence, maintenance and support and mail integration service, the supply of these items are not connected with Australia, and thus, you do not satisfy the first condition under section 8-1(1)(a) of the ABN Act.

However, you have advised us that, where further assistance is required, you will provide a consultant to your Australian customer where that consultant will be physically in Australia to perform those services as per your maintenance and support agreement.

Therefore, under section 8-(1)(b) of the ABN Act where, in the course of or carrying on an enterprise, you make supplies that are connected with Australia, then you are entitled to an ABN.

Section 41 of the ABN Act provides that the term 'connected with Australia', in relation to a supply, has the meaning given by section 195-1 of the GST Act.

In your case the supply you make is a supply of a licence to use software that you provide. A 'supply' is defined in section 9-10 of the GST Act and includes a supply of amongst other things, a supply of goods, services, a provision of advice or information, a creation, grant, transfer assignment or surrender of any right.

The supply of software licences falls within the definition of supply provided by section 9-10 of the GST Act.

Section 195-1 of the GST Act refers to section 9-25 of the GST Act for the meaning of 'connected with Australia' in relation to a supply.

Paragraph 9-25(5) of the GST Act states that a supply of anything other than goods or real property is connected with Australia if:

· the thing is done in Australia; or

· the supplier makes the supply through an *enterprise that the supplier *carries on in Australia; or

· all of the following apply:

· neither paragraph (a) nor (b) applies in respect of the thing;

· the thing is a right or option to acquire another thing;

· the supply of the other thing would be connected with Australia.

In your case your consultant provides a service to an Australian client and this service is physically done in Australia.

Given that your supplies are connected with Australia, then you are entitled to apply for an ABN.

For further details on the ABN, please refer to a fact sheet titled ABN - a great start to business .You can access and download it from our website at www.ato.gov.au

Question 2

Are we required to register for GST?

Summary

If your GST turnover meets the registration turnover threshold then you must register for GST. However if your GST turnover is below the registration turnover threshold you may choose to register for GST.

Detailed reasoning

GST registration

The requirements to register for GST are determined in section 23-5 of the GST Act which provides that you are required to be registered if:

(a) you are carrying on an enterprise; and

(b) your GST turnover meets the registration turnover threshold.

Section 23-15 of the GST Act provides that the registration turnover threshold is $75,000 ($150,000 if they are a non-profit body).

Therefore, you must register for GST if your GST turnover is at or above the registration threshold for all supplies connected with Australia. However, if you carry on an enterprise with a GST turnover below the relevant threshold you may choose to register for GST.

In ATO Fact sheet: GST Overview, it provides the following regarding GST turnover:

GST turnover for GST registration requirements

You may be required to work out your GST turnover to determine if you meet or exceed the registration turnover threshold.

Your GST turnover meets or exceeds your registration turnover threshold if either:

· your current GST turnover is $75,000 or more (excluding GST), or $150,000 for no-profit entities, and the Commissioner is not satisfied that your projected GST turnover is below $75,000 or $150,000 (excluding GST)

· your projected GST turnover is $75,000 ($150,000 for non-profit entities) or more (excluding GST).

Your 'current GST turnover' is the value of all supplies that you make, or are likely to make in the current month, plus all the supplies that you have made in the previous 11 months.

Your 'projected GST turnover' is the value of all supplies that you make, or are likely to make in the current month, plus all the supplies that you are likely to make in the next 11 months.

The following supplies are excluded from the calculation of current GST turnover and projected GST turnover:

· supplies that are input taxed

· supplies that are not for consideration

· supplies not made in connection with an enterprise that you carry on

· supplies that are not connected with Australia

· supplies that are connected with Australia because all of the following apply:

o the thing is neither done in Australia nor done through an enterprise or a permanent establishment that you carried on in Australia

o the thing is a right or option to acquire another thing

o the supply of the other thing would be connected with Australia

· supplies (other than those mentioned above) of a right or option to use commercial accommodation in Australia where the supplies are not made in Australia and are made through an enterprise that the supplier does not carry on in Australia

· supplies made from one member of a GST group to another member of that GST group.

For more information on GST turnover, refer to the Goods and Services Tax Ruling GSTR 2001/7 Goods and services tax: meaning of GST turnover, including the effect of section 188-25 on projected GST turnover.

As discussed above, in relation to your software licence, maintenance & support and mail integration service, these supplies are not connected with Australia and would not be included in your calculation of GST turnover (as highlighted in the above dot point in our ATO fact sheet).

However, where your consultant provides a service to an Australian client and this service is physically done in Australia, then the supply of this service is connected with Australia and your calculation of GST turnover would include the value of that supply made.

As provided in the above ATO fact sheet, if your GST turnover is at or above the registration threshold for all supplies connected with Australia, you must register for GST. However, if you carry on an enterprise with a GST turnover below the relevant threshold you may choose to register for GST.

If you decide to register for GST you will have to include GST on your invoice and you will be entitled to claim input tax credits for GST which has been paid for supplies acquired for use in your business. If you decide not to register for GST you do not have to include GST on your invoice and you will not be entitled to claim any input tax credits.

Question 3

What rate do we apply for GST purposes?

Summary

If you register for GST then the amount of GST on a taxable supply is 10% of the value of the taxable supply.

Detailed reasoning

Section 9-40 of the GST Act provides:

You must pay the GST payable on any *taxable supply that you make.

Section 9-70 of the GST Act states:

The amount of GST on a *taxable supply is 10% of the *value of the taxable supply.

The calculation of the value of *a taxable supply can be found in section 9-75 of the GST Act.

The ATO fact sheet: GST Overview, the calculation of GST is outlined as follows:

Calculating GST payable

GST is payable if you make a taxable supply. GST is calculated as 10% of the value of the supply. The value of a taxable supply is the GST-exclusive consideration payable for the supply.

For example, if the value of the supply is $70 the GST payable is 10% x $70 = $7.

The price (the GST-inclusive consideration payable for the supply) is therefore $77.

If the price for the supply is $77 you can work out the GST component of the price as follows: $77 ÷ 11 = $7.

Question 4

Is a reimbursement of employee's expenses and the charge of your daily fee subject to GST?

Summary

A reimbursement of your employee's expenses by your client and a daily fee charged to your client is considered to be part of the consideration for a supply you make.

Whether you are required to charge GST on this supply will depend on if you are required to register or be registered for GST.

Detailed reasoning

Supply is defined under section 9-10 of the GST Act and includes an entry into, or release from, an obligation to do anything or tolerate an act or situation.

You have advised that you supply a consultant to provide services to your Australian client when physical presence is required to assist your client.

You have also advised that when this situation arises you request your client to reimburse you for the consultant's air tickets, accommodation and daily allowance, plus you charge a daily fee for this consultant's service.

This reimbursement and the daily fee forms part of the consideration for a supply you make.

The provision of a consultant to perform services in Australia for your Australian client is an obligation to supply a service as per your maintenance and support agreement with the Australian client. Therefore, you are making a supply to your Australian client under section 9-10 of the GST Act.

The next step is to determine the GST status of the supply.

Taxable supply

GST is payable on a taxable supply. When a supply is a taxable supply under the GST Act, GST will be payable by the supplier.

To be a taxable supply, the supply must meet all the conditions in section 9-5 of the GST Act.

This section provides that 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 Australia; and

· you are registered or are required to be registered.

However, the supply is not a taxable supply to the extent that is GST-free or input taxed.

From the facts provided by you, you satisfy paragraphs (a) to (c) of section 9-5 of the GST Act:

· you make a supply of maintenance support under your SM agreement with the Australian client. The Australian client is required to reimburse you for your consultant fees/expenses. Therefore, reimbursements received by you from your Australian client is consideration for services rendered; and

· the supply of services is made in the course or furtherance of the enterprise you carry on; and

· the supply is connected with Australia because the service is physically done in Australia.

Registered or required to be registered

As explained earlier in Question 2, you must register for GST if your GST turnover meets the registration turnover threshold ($75,000 ($150,000 if they are a non-profit body)). However if your GST turnover is below the registration turnover threshold you may choose to register for GST.

If you do register for GST, then the supply of consultant services that are physically done in Australia you make will fall within the definition of a taxable supply under section 9-5 of the GST Act.

Therefore you must charge GST on those supplies that are connected with Australia, such as, the costs of providing a consultant (ie., consideration paid for services rendered) to your Australian client will be subject to GST.

If your GST turnover is below the registration turnover threshold and you choose not to register then the supply of consultant services to your Australian client, where the services are physically done in Australia, is not a taxable supply. In this instance, no GST is charged on those supplies that are connected with Australia.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).