Edited version of private ruling

Authorisation Number: 1011766114982

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Ruling

Subject: GST and the supply of a right to a GST-free education course

Question 1:

Is the supply that you make to your clients a GST-free supply of a right to receive a GST-free education course?

Answer:

Yes.

Question 2:

Is your supply of marketing and teaching services to a particular organisation a taxable supply when there is no separately identifiable consideration provided by the particular organisation for these services?

Answer: No.

Relevant facts and circumstances

Your ruling is based on the following facts.

· You are a sole trader and licensee of a particular organisation.

· You are registered for the GST.

· When a licensee is signed up by the particular organisation, the agreement grants the licensee the right and authority to market, promote, sell, deliver, facilitate and service the courses which are accredited to the particular organisation. The agreement has developed over a period of thirty years and does not factor in taxation considerations.

· The licensee makes an upfront payment which covers the initial supply of various training materials and services which enables the licensee to commence operation. GST is charged on all components of this supply except for the GST-free supply of training provided by the particular organisation [as a Registered Training Organisation (RTO)] to the licensee. Where GST is charged, the licensee is entitled to input tax credits.

· The licensee markets particular organisations' courses to various entities (usually bodies corporate or government entities) who will enrol, through the licensee, any number of their staff as appropriate to attend various courses.

· The enrolment process is conducted on-line, usually by the licensee, but sometimes by the client. It involves logging into the particular organisations' website and inputting the details of each participant into their database.

· When a course is confirmed, participants will be advised of the course dates, location, etc, and an invoice is issued to the client in the name of the licensee. The invoice is for the supply of a right to receive the course which is supplied by the particular organisation.

· Depending on how and where the courses are being run, licensees or the particular organisation may contract with facilitators, coaches, etc for the provision of services relating to the supply of the courses. Invoices for these services will be inclusive of GST where the supplier is registered for GST.

· For each course conducted, the particular organisation charges the licensee a set percentage (say 35%) of the amount invoiced by the licensee. This 35% is GST-inclusive and represents the supply by the particular organisation of the rights under the license. There may be additional charges for any further supplies made by the particular organisation to the licensee in relation to the supply of the course, for example, handouts, venues, facilitators, etc. The balance of the moneys paid by the clients to the licensee represents the profit on the licensee's supply.

· Regardless of the level of marketing undertaken by the licensee to sign up clients, there is no consideration received from the particular organisation for this activity. It is considered to be part of the business activities of the licensee.

· If the licensee participates actively in the provision of the courses to the clients (for example, facilitation, coaching and so on), there is no consideration received from the particular organisation for this activity.

· Whilst there are supplies made by the licensee to the particular organisation, such as marketing and teaching services, there is no separately identifiable consideration for such supplies.

Reasons for decision

Question1

Summary

The supply that you make to your clients is a GST-free supply of a right to receive a GST-free education course.

Detailed Reasoning

Paragraph 9-30(1)(b) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that a supply of a right to receive a supply that is GST-free under Division 38 of the GST Act is also a GST-free supply. There is no requirement that the right and the actual supply are made by the same entity.

Subsection 38-85 of the GST Act states that a supply of an education course is a GST-free supply. The supply of the courses to the clients is a GST-free supply of a tertiary course. Therefore, when you supply the clients with the right to receive the supply of the course, the supply is GST-free under paragraph 9-30(1)(b) of the GST Act.

Question2

Summary

Your supply of marketing and teaching services to the particular organisation is not a taxable supply when there is no separately identifiable consideration provided by the particular organisation for these services.

Detailed Reasoning

Section 9-5 of the GST Act provides that an entity is making a taxable supply where:

· the entity makes the supply for consideration

· the supply is made in the course or furtherance of an enterprise carried on by the entity

· the supply is connected with Australia

· the entity is registered or required to be registered for GST, and

· the supply is neither GST-free nor input taxed.

As you do not receive any separately identifiable consideration for the supply of marketing and teaching services, one of the four positive limbs above has not been satisfied and the supply of such services to the particular organisation is not a taxable supply.

If you provide any services to the particular organisation or other licensees for consideration, such supplies are taxable supplies and subject to GST.

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