Edited version of your private ruling

Authorisation Number: 1012427877272

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Ruling

Subject: GST and supplies connected with Australia

Questions

1. Are you carrying on an enterprise as defined in section 9-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) where you carry on activities related to the convention which will be held in Australia?

2. Are the activities you carried on in respect of the Australian convention connected with Australia under section 9-25 of the GST Act?

3. Where the activities you carried on in respect of the Australian convention are partly connected with Australia, can the part that is connected with Australia be treated as not connected with Australia under subsection 96-5(4) of the GST Act?

Answers

1. Yes, you are carrying on an enterprise as defined in section 9-20 of the GST Act where you carry on activities related to the convention which will be held in Australia.

2. The activities you carried on in respect of the convention are incidental to the supply of convention. The supply of the convention will be connected with Australia as the convention will be done in Australia.

3. Since the activities you carried on form part of the supply of the convention as discussed in question 2, subsection 96-5(4) of the GST Act is not applicable in regard to these activities.

Relevant facts

You are a non-resident entity established overseas and you have an Australian business number (ABN) and are registered for GST. Your activities are to support clubs in the effort to fulfil the clubs' mission.

You have a branch in Australia. The Australian branch collects membership dues on your behalf and handles any queries in relation to those coming from the club members based in Australia and overseas.

The Australian branch does not have a separate ABN. Their accounting data is input and consolidated in the central accounting system based overseas but they are able to extract information for GST reporting.

You are planning to hold a convention in Australia. The convention is a closed meeting and is opened to club members and their invited guests.

You have an overseas team who are responsible for the management of the convention to be held in Australia. The overseas staff manages all planning from overseas when coordinating with Australian and international vendors to plan a successful convention. Your overseas staff will make multiple site visits to review the planning of the convention meeting with vendors, venue staff and city officials.

Your Australian branch's staff is rarely involved in any aspects of the convention planning. However, due to their particular skills, they may be assigned a supporting role for the Australian club members during the conventions..

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 9-20

A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-5(c)

A New Tax System (Goods and Services Tax) Act 1999 subsection 9-25(5)

A New Tax System (Goods and Services Tax) Act 1999 subsection 96-5(4)

Reasons for decisions

Question 1

The definition of an 'enterprise' in subsection 9-20(1) of the GST Act includes (amongst other things) an activity or series of activities done in a certain manner or by certain entities. The activities covered include those done in the form of a business.

Subsection 9-20(1) of the GST Act does not specifically state that the enterprise by the entity has to be carried on in Australia.

The meaning of 'enterprise' is considered in Miscellaneous Taxation Ruling MT 2006/1: the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian Business Number, and Goods and Services Tax Determination GSTD 2006/6: does MT2006/1 have equal application to the meaning of 'entity' and 'enterprise' for the purposes of the GST Act? The principles outlined in the ruling and determination have been applied in your circumstances.

Paragraphs 10 and 11 of GSTD 2006/6 state:

An Activity or series of activities

10. Essentially, this is any act or series of acts that an entity does. The meaning of the term 'activity or series of activities' can range from a single act or undertaking to groups of related activities, to the entire operations of the entity.

In the form of a business

11. An enterprise includes an activity or series of activities, done in the form of a business. The phrase 'in the form of a business' is broad and has as its foundation the longstanding concept of a business. The wider phrase has not been considered by Australian courts. The definition clearly includes a business and the use of the phrase 'in the form of' indicates a wider meaning than the word 'business' on its own. This occurs in the case of non-profit entities. In such instances we consider that not all or the main features of a business such as a capacity to earn and distribute profits need to be present before an activity has the form of a business.

From the information received, you are a non-resident entity established overseas. Your activities are to support Clubs in the effort to fulfil the clubs' mission. You are planning to hold a convention in Australia. The convention is being arranged by your overseas staff and most of the work is performed overseas.

After considering all the information received, we consider that you are carrying on an enterprise as defined in subsection 9-20(1) of the GST Act as the preparation and holding the conference are activities done as part of your business activity.

To summarise, you are carrying on an enterprise for Australian GST purposes when you carry on activities related to the convention you will hold in Australia.

Additional information

For GST purposes where a parent entity operates a number of branches and is registered for GST, the parent entity is liable for GST for any taxable supplies made by the parent entity and the branches. Similarly, the parent entity is entitled for GST credits for any creditable acquisitions it and the branches have made.

However, if the branch separately registered as a GST branch under Division 54 of the GST Act, the GST registered branch and not the parent entity is accountable for their taxable supplies and GST refunds.

You have an ABN and are registered for GST because of the activities that your Australian branch is carrying on in Australia. As you are the parent entity, you will use your ABN for any activities that you carry on in relation to the convention in Australia.

Question 2

Section 9-5 of the GST Act provides that an entity makes a taxable supply if:

(a) the supply is made for consideration; and

(b) the supply is made in the course or furtherance of an enterprise that the entity carries on; and

(c) the supply is connected with Australia; and

(d) the entity is registered or required to be registered for GST.

A supply is not a taxable supply if it is GST-free or input taxed.

For the purpose of paragraph 9-5(c) of the GST Act, section 9-25 of the GST Act provides when a supply is connected with Australia.

Subsection 9-25(5) of the GST Act states:

'A supply of anything other than goods or *real property is connected with Australia if:

(a) the thing is done in Australia; or

(b) the supplier makes the supply through an *enterprise that the supplier *carries on in Australia; or

(c) all of the following apply;

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

(ii) the thing is a right or option to acquire another thing;

(iii) the supply of the other thing would be connected with Australia.

A supply may be characterised as consisting of one or more things or parts which include something that is integral, ancillary or incidental to a dominant part. According to paragraph 59 of Goods and Services Tax Ruling GSTR 2001/8, indicators that a part of a supply is integral, ancillary or incidental include where:

· you would reasonably conclude that it is a means of better enjoying the dominant thing supplied, rather than constituting for customers an aim in itself; or

· it represents a marginal proportion of the total value of the package compared to the dominant part; or

· it is necessary or contributes to the supply as a whole, but cannot be identified as the dominant part of the supply; or

· it contributes to the proper performance of the contract to supply the dominant part.

Based on the information provided, what is being supplied is the convention and the activities done (whether in Australia or overseas) in organising it are integral, ancillary or incidental to that supply. In particular, the activities done by you in organising the convention are not supplies that are separate from the supply of the convention. The activities are carried out by you in order to hold a convention for which the attendees will provide consideration. Therefore, if the supply of the convention is connected with Australia, the activities done (or supplies made) in organising it are connected with Australia.

As the convention is held in Australia, the thing supplied is done is Australia; and is connected with Australia under paragraph 9-25(5)(a) of the GST Act. Accordingly, the activities done by you in organising the convention (in particular, planning the meal events and pre-convention activities) are connected with Australia.

It is no longer necessary to consider paragraph 9-25(5)(b) of the GST Act, as the supply of the convention (and the activities done in organising it) is connected with Australia under paragraph

9-25(5)(a) of the GST Act.

Additional information

From the information received, the consideration for the supply of the convention is made up of registration fees for attending the convention, booth rental, ticketed events (luncheons), publications sales and financial incentives.

Supply of booth rental

'Real property' is defined in section 195-1 of the GST Act to include:

(a) Any interest in or right over land;

(b) A personal right to call for or be granted any interest in or right over land; or

(c) A licence to occupy land or any other contractual right exercisable over or in relation to land.

In respect of 'any other contractual right exercisable over or in relation to land' in paragraph (c), we consider that this phrase is to be read narrowly having regard to the preceding words 'a licence to occupy land' (and also having regard to the scope of paragraphs (a) and (b)). To give these words a wide meaning unqualified by the expression 'a licence to occupy land' would result in any contractual right in connection with land being real property for the purposes of the GST Act. We consider, therefore, that the phrase is not intended to cover any contractual right exercisable over land but is limited to contractual rights that do not create an estate or interest in land but are recognised at law as exercisable over land.

The meaning of 'a licence to occupy land' has been the subject of extensive litigation in the UK. Where on the facts of a particular case, it is established that the essential character of a supply of this kind is the supply of a licence to occupy land, the supply is a supply of real property.

Examples of a licence to occupy land are:

§ Hire of a room for a function or payment for a stall at a market or for space at a trade exhibition (paragraph 107 to 108 of Goods and Services Tax Ruling GSTR 2003/7)

The UK VAT cases of Swindon Masonic Association Ltd (1978) 1 BVC 1091 (hire of certain rooms for exclusive use); Tameside Metropolitan Borough Council (1979) 1 BVC 1103 (rent of stalls in a market place) and Miller Freeman World-wide plc (No.2) [1998] BVC 2197 (supply of a right to occupy a stand at an exhibition) are instances where, having regard to all the facts and circumstances, the essential character of the supply was determined to be the granting of a licence to occupy land.

§ A supply of hotel accommodation (paragraph 94 of GSTR 20003/7)

The essence of a supply of hotel accommodation is the right to occupy a specified room for a particular period. This is not a tenancy (and the grant of an interest in land) but a personal right given under the arrangements. A person who takes a room at a hotel is conferred with a licence to enter the land of another and occupy it for a particular purpose.

For more information on 'supply of real property' please refer to GSTR 2003/7 which is available at www.ato.gov.au

In regard to the supply of booth rental you consider that this supply is not a supply of real property because there is no interest in land when it is provided to the sponsors.

We disagree with your view because sponsors may not be allocated a right or entitlement to the property but they are conferred with a space, they are conferred with a licence to enter the property where the convention is held and occupy the space on that property for a particular purpose. In this instance, the customer is provided with a personal right to access the property under the arrangement that would otherwise be a trespass. The licence to occupy the space at the convention is a supply of real property (this view is consistent with the supply of hotel accommodation and hire of a space at a trade exhibition as explained in GSTR 2003/7).

Question 3

Division 96 of the GST Act treats a supply that is partly connected with Australia as separate supplies, so that only the part of a supply that is connected with Australia is included in the GST system.

Subsections 96-5(1), 96-5(2) and 96-5(3) of the GST Act provide that if, because a supply (the actual supply) is a supply of more than one of these kinds:

· supply of goods

· supply of real property

· a telecommunication supply

· a supply of anything, other than goods or real property, that is not a telecommunication supply;

only part of the actual supply is connected with Australia; then the actual supply is to be treated as if it were separate supplies in the following way:

· the part of the actual supply that is connected with Australia is to be treated as if it were a separate supply that is connected with Australia; and

· the part of the actual supply that is not connected with Australia is to be treated as if it were a separate supply that is connected with Australia.

Subsection 96-5(4) of the GST Act states:

'However, if one of the kinds of supply that forms part of the actual supply may reasonably be regarded as incidental to:

(a) the other kind of supply that forms part of the actual supply; or

(b) one (but not both) of the other kinds of supply that form part of the actual supply;

and its value (if it were as separate *taxable supply) would not exceed $50,000, it is treated as part of that other kind of supply.

As discussed in the response to Question 2, the supply of the convention together with the activities done (supplies made) in organising it is connected with Australia. The supply is not partly connected with Australia. As such, subsections 96-5(1), 96-5(2) and 96-5(3) of the GST Act do not apply.

Furthermore, the activities done by you form part of the actual supply (the supply of the convention) and not of the other supplies that form part of the actual supply. Therefore, subsection 96-5(4) of the GST Act has no application.

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