Edited version of private advice

Authorisation Number: 1012663997055

Ruling

Subject: goods and services tax (GST) and assisting with the preparation of a report

Question

Is GST payable on your supply of the service of contributing to a report prepared by Company X for a company based overseas (Company Y)?

Answer

Yes.

Relevant facts and circumstances

You are registered for GST.

You are based in Australia.

You have an overarching agreement with a company based in Australia, Company X.

An employee of yours has contributed to a report prepared by Company X for a company based overseas, Company Y.

Your employee travelled to the overseas country in which Company Y is based for a small number of days to assist with the report.

Company X invoiced Company Y for the work provided.

You invoiced Company X for a component of the revenue.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 subsection 7-1(1)

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

A New Tax System (Goods and Services Tax) Act 1999 section 9-40

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

Reasons for decision

Summary

Your supply is not GST-free under section 38-190 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) because consumption of your supply took place in Australia.

Detailed reasoning

GST is payable by you on your taxable supplies.

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 meet the requirements of paragraph 9-5(a) to 9-5(d) of the GST Act. This is because:

• you supplied a service for consideration

• you supplied the service in the course of furtherance of an enterprise that you carry on

• your supply of the service was connected with Australia (as you made the supply through an enterprise that you carry on in Australia), and

• you are registered for GST.

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

Therefore, what remains to be determined is whether you made a GST-free supply.

Item 3

A supply of something, other than goods or real property, is GST-free under item 3 in the table in subsection 38-190(1) of the GST Act (item 3) if it is a supply:

(a) that is made to recipient who is not in Australia

when the thing supplied is done; and

(b) the effective use or enjoyment of which takes

place outside Australia;

other than a supply of work physically performed on goods situated in Australia when the thing supplied is done, or a supply directly connected with real property situated in Australia.

Subsection 38-190(4) of the GST Act provides that a supply is taken, for the purposes of item 3, to be a supply made to a recipient who is not in Australia if:

(a) it is a supply under an agreement with an Australian resident, and

(b) the supply is provided to another entity outside Australia.

Paragraphs 64 and 65 of Goods and Services Tax Ruling GSTR 2004/7 explain when a company is in Australia for the purposes of item 3. They state:

64. A company is in Australia if it is incorporated in Australia. If the company is not incorporated in Australia, the company is in Australia (irrespective of the residency status of that company) if the company carries on business (or in the case of a company that does not carry on business, carries on its activities) in Australia:

(a) at or through a fixed and definite place of its own for a sufficiently substantial period of time; or

(b) through an agent at a fixed and definite place for a sufficiently substantial period of time.

65. A company is in Australia in relation to the supply if the supply is solely or partly for the purposes of the Australian presence, for example, its Australian branch, representative office or agent if it is a non-resident company or the Australian head office if it is an Australian incorporated company. If the supply is not for the purposes of the Australian presence but that Australian presence is involved in the supply, the company is in Australia in relation to the supply, except where the only involvement is minor.

Paragraphs 57 and 58 of GSTR 2004/7 discuss the concept of 'provided to another entity'. They state:

57. Subsection 38-190(4), by means of the expression 'provided to another entity', seeks to identify the entity to which the item 3 supply actually flows.

58. For example, if a supply of a service is made to an Australian resident recipient who is in Australia in relation to the service and that service is rendered to or received by another entity at the time it is performed, the supply is provided to that other entity. If that other entity is outside Australia, subsection 38-190(4) treats the supply as being made to a recipient who is not in Australia. For a further example refer to Example 1 at paragraph 196 of the Explanation section of the Ruling.

Paragraph 45 of GSTR 2007/2 discusses how to determine whether a supply is used or enjoyed outside Australia. It states:

45. In our view, a supply is for consumption, and thus used or enjoyed, outside Australia if there is provision of the supply to the providee entity outside Australia.

Thing supplied is not goods or real property

You supplied to Company X the service of contributing to a report Company X prepared for its customer. A service is not goods or real property. Therefore, it is appropriate to consider item 3 as you supplied something other than goods or real property.

Recipient in Australia

Company X is based in Australia. The supply you made was for the purposes of its Australian presence. Therefore, the recipient of your supply was in Australia in relation to your supply. The recipient was in Australia in relation to your supply when you performed the services.

Subsection 38-190(4)

You supplied your service under an agreement you had with an Australian resident.

You rendered your service to Company X as your service consisted of contributing to a report that it prepared for its customer. You were not sub-contracted to prepare the entire report and give the report to Company X's customer. The entity to which your supply actually flowed was Company X despite the fact that its customer indirectly benefited from the service you supplied to Company X. Therefore, you provided your supply to the recipient of that supply. Hence, you did not provide your supply to 'another entity outside Australia'. Therefore you are not treated as having made your supply to an entity that was not in Australia by virtue of subsection 38-190(4) of the GST Act.

Because you did not provide your supply to an entity that was outside Australia, effective use and enjoyment of your supply did not take place outside of Australia.

Your supply was not a supply of work physically performed on goods situated in Australia when the thing supplied is done, or a supply directly connected with real property situated in Australia.

Conclusion

You did not make a GST-free supply under item 3 because:

• the recipient of your supply was in Australia in relation to your supply when you performed the services and you are not treated as having made a supply to a recipient who was not in Australia when the service was performed by virtue of subsection 38-190(4) of the GST Act, and

• effective use and enjoyment of your supply did not take place outside Australia.

There are no provisions of the GST Act under which your supply is GST-free.

As you meet all of the requirements of section 9-5 of the GST Act, you made a taxable supply to Company X. Hence, GST is payable on that supply.

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