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Edited version of private ruling
Authorisation Number: 1011721303725
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Ruling
Subject: GST and input tax credits
Issue 1
Question 1
Is an Australian entity (you) entitled to an input tax credit under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), for supplies of training services acquired by you in carrying on your enterprise?
Advice/Answers
Yes, you are entitled to an input tax credit under section 11-20 of the GST Act if the supply of training services acquired by you is from a GST registered trainer.
You will not be entitled to an input tax credit for a supply of training services acquired from a trainer that is not registered for GST.
Issue 2
Question 1
Do the general anti-avoidance provisions in Division 165 of the GST Act apply to the arrangement?
Advice/Answers
No. It is considered that this particular scheme/arrangement with its unique set of facts and evidence does not attract the application of Division 165 of the GST Act.
Relevant facts
You are an Australian entity and are registered for the goods and services tax (GST).
You have supplied a copy of the terms and conditions. You are considering changing the existing rules and considering acquiring the training services from trainers that are registered for GST as well as trainers that are not registered for GST. You sought this private ruling to achieve certainty of the GST treatment if you make payments to suppliers who are registered for GST and to confirm that you will be entitled to the input tax credit in respect of the payments. You also requested confirmation that Division 165 of the GST Act will not apply to the proposed changes to the terms and conditions.
Reasons for decision
Issue 1
Under section 11-20 of the GST Act, an entity is entitled to an input tax credit for any creditable acquisition that it makes.
Under section 11-5 of the GST Act you make a creditable acquisition if:
· you acquire anything solely or partly for a creditable purpose; and
· the supply of the thing to you is a taxable supply; and
· you provide or are liable to provide consideration for the supply; and
· you are registered or required to be registered.
Under subsection 11-15(1) of the GST Act you acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise.
However, under subsection 11-15(2) of the GST Act, you do not acquire the thing for a creditable purpose to the extent that:
· the acquisition relates to making supplies that would be input taxed (for example, financial supplies, supplies of residential premises); or
· the acquisition is of a private or domestic nature.
From the information received, when you acquire the training services from the trainers, paragraphs (a), (c) and (d) of section 11-5 of the GST Act are satisfied as:
· you acquire the supplies for a creditable purpose since you acquire the supplies while carrying on your enterprise;
· you provide consideration for the supplies; and
· you are registered for GST.
The next step is to determine whether these supplies to you are taxable supplies. Where the supplies are taxable supplies, paragraph (b) in section 11-5 of the GST Act will be satisfied and the acquisitions will be creditable acquisitions under section 11-5 of the GST Act.
Taxable supply
To be a taxable supply under the GST Act, the supply must meet the conditions in section 9-5 of the GST Act. However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.
Acquisition of training services from a trainer that is registered for GST in Australia
The supplies of training services from the GST registered trainers (suppliers) will satisfy paragraphs (a) to (d) of section 9-5 of the GST Act as:
(a) the supplies are made for consideration;
(b) the supplies are made in the course of an enterprise that the suppliers are carrying on;
(c) the supplies are connected with Australia as the suppliers are carrying on their enterprise in Australia; and
(d) the suppliers are registered for GST.
There is no provision under the GST Act that makes the training services supplied to an Australian entity GST-free or input taxed. Accordingly the supply of training services by a GST registered trainer is a taxable supply under section 9-5 of the GST Act and paragraph (b) in section 11-5 of the GST Act is satisfied.
Your acquisition of the training services from a GST registered trainer is therefore a creditable acquisition under section 11-5 of the GST Act as all the requirements in that section are satisfied.
Acquisition of training services from a trainer that is not registered for GST in Australia
The supplies of training services from trainers that are not registered for GST will satisfy paragraphs (a) to (c) of section 9-5 of the GST Act as:
(a) the supplies are made for consideration;
(b) the supplies are made in the course of an enterprise that the trainers are carrying on;
(c) the supplies are connected with Australia as the trainers are carrying on their enterprise in Australia;
However paragraph (d) will not be satisfied as these trainers are not registered for GST.
Accordingly the supply is not a taxable supply under section 9-5 of the GST Act as all of the paragraphs under section 9-5 of the GST Act are not satisfied.
As the supply of training services by the trainers that are not registered for GST are not a taxable supply, paragraph (b) in section 11-5 of the GST Act is not satisfied.
Accordingly, your acquisition of training services from a trainer that is not registered for GST will not be a creditable acquisition under section 11-5 of the GST Act as all the requirements in that section are not satisfied.
Issue 2
You have requested that the Commissioner consider whether Division 165 of the GST Act (anti-avoidance provisions) applies to the arrangement described in your private ruling request and accompanying documentation. Division 165 must be considered on a case by case basis to determine whether it would be concluded that the dominant purpose or principal effect of the scheme would be to get a GST benefit. This requires an objective assessment of the scheme against the twelve matters set out in subsection 165-15(1) of the GST Act.
It is considered that this particular scheme/arrangement with its unique set of facts and evidence is not sufficiently artificial or contrived to attract the application of Division 165 of the GST Act.
Other Information
All publications mentioned in this ruling are available on our website at www.ato.gov.au
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