Edited version of your private ruling

Authorisation Number: 1012447838413

Ruling

Subject: GST and services supplied overseas

Question 1

Is the supply made by S under its contract (Contract) with F a GST-free supply?

Answer

Yes.

Relevant facts and circumstances

S was contracted by F for a contract to be fulfilled overseas. The director of S was sent to the overseas site over a X month period. Generally they spent 1 - 2 months on site and then came back to Australia for 7 - 10 days before returning overseas. F was contracted by an international company to install fixtures as part of the construction overseas.

S was contracted to perform what was effectively a supervisory role/project management roles on behalf of F for the installation of the fixtures. The duties of S and its director were as follows:

· responsibility for the overall control and day to day management of the staff on the site;

· planning and co-ordination of all labour and equipment resources required;

· working closely with the staff supervisor to achieve the satisfactory completion of the works in a safe and timely manner;

· monitoring and controlling the use of safety procedures;

· negotiating with other contractors for smooth interface between site activities;

· management of staff welfare; and

· planning and review of production goals

In respect of the planning and review of production goals, this can be further defined:

· contract management;

· liaison with site engineers and supervisors regarding co-ordination issues; and

· responsibility for progress in accordance with programs.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 38-190

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

Reasons for decision

Summary

S' supply to F is GST-free pursuant to item 1 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

Detailed reasoning

GST is payable by you where you make a taxable supply.

You make a taxable supply where you satisfy the requirements of section 9-5 of the GST Act, which states:

You make a taxable supply if:

(a) you make the supply for *consideration; and

(b) the supply is made in the course or furtherance of an *enterprise that

you *carry on; and

(c) the supply is *connected with Australia; and

(d) you are *registered, or *required to be registered.

However, the supply is not a *taxable supply to the extent that it is *GST-free

or *input taxed.

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

You will make a supply of various services to F onsite overseas. This supply will satisfy the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act. This is because:

· you will make this supply for consideration

· you will make this supply in the course or furtherance of an enterprise that you carry on

· this supply will be connected with Australia, and

· you are registered for GST.

There are no provisions in the GST Act under which your supply of this service is input taxed.

Therefore, what remains to be determined is whether your supply of this service will be GST-free.

GST-free supplies connected with real property outside Australia

A supply of something other than goods or real property is GST-free under item 1 in the table in subsection 38-190(1) of the GST Act (Item 1) where the supply is directly connected with goods or real property situated outside Australia.

Thus we have to determine whether your supply is directly connected with goods or real property overseas. The Goods and Services Tax Ruling GSTR 2003/7 offers guidance on what the expression 'directly connected with goods or real property' means. At paragraph 131 GSTR 2003/7 notes:

131. In summary, for the purposes of subsection 38-190(1), we consider that the expression 'directly connected with' contemplates a very close link or association between the supply and the goods or the real property

Firstly, we consider that the goods or real property in question must be particular goods or real property to have the direct connection required. In your situation, there is particular real property, being the plant construction site.

Secondly, we consider that your supply will be directly connected with goods or real property where the direct object of your supply is the goods or real property in the sense that:

· the supply changes or affects the goods or real property in a physical way;

· there is a physical interaction with the goods or real property but without changing the goods or real property;

· the supply establishes the quantity, size, other physical attributes or the value of the goods or real property;

· the supply affects (or its purpose is to affect) or protects the nature or value (including indemnity against loss) of the goods or real property; or

· the supply affects, or is proposed to affect, the ownership of the goods or real property including any interest in, or right in or over goods or real property.

It may be argued that your supply is one step removed from being directly connected with real property overseas, as your supply might be considered as simply the oversight and coordination of the actual transformational supply made by others. However, the example given in paragraphs 48 and 49 of GSTR 2003/7 are analogous of your role:

48. For example, a supply of architectural services to design a building for a particular site may be perceived as one step removed from the transaction that has direct effect upon the real property - namely the construction of a building. On this view, the architectural services only make way for the supply of building services that is directly connected with real property and the supply of the architectural services is not directly connected with real property.

49. However, the direct object of the supply is the real property in the sense that it affects, or has the purpose of affecting, the nature of the real property. There is a very close connection between the supply and the real property. The supply of architectural services is, therefore, directly connected with real property.

It is considered therefore that your supply to F under the Contract meets the requirements of Item 1 as it is a supply of something other than goods or real property for consumption outside Australia and the supply is directly connected with real property situated outside Australia.

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