Disclaimer
This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of private advice

Authorisation Number: 1012681345695

Ruling

Subject: GST and apportionment of global supplies

Question 1

Does V make a taxable supply of the One Pass pursuant to section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it issues an invoice for the One Pass to or receives any of the consideration for the One Pass from an Australian resident customer who activates the One Pass whilst in Australia?

Answer

No.

Question 2

Does V make a taxable supply of the Two Pass pursuant to section 9-5 of the GST Act when it issues an invoice for the Two Pass or receives any of the consideration for the Two Pass from an Australian ABN/ACN registered resident customer whose employees or authorised representatives activate the Two Pass whilst in Australia?

Answer

No.

Question 3

Is the supply by V of the One Pass to an Australian resident customer who activates the One Pass whilst in Australia wholly GST-free pursuant to section 38-190 of the GST Act?

Answer

Yes.

Question 4

Is the supply by V of the One Pass to an Australian resident customer who activates the One Pass whilst in Australia partially GST-free pursuant to section 38-190 of the GST Act?

Answer

Yes.

Question 5

If the answer to question 4 is Yes, to what extent is the supply by V of the One Pass to an Australian resident customer who activates the One Pass whilst in Australia, GST-free pursuant to section 38-190 of the GST Act?

Answer

Based on the usage calculations submitted, the entire supply is GST-free.

Question 6

Is the supply by V of the Two Pass to an Australian ABN/ACN registered resident customer whose employees or authorised representatives activate the Two Pass whilst in Australia wholly GST-free pursuant to section 38-190 of the GST Act?

Answer

Yes.

Question 7

Is the supply by V of the Two Pass to an Australian ABN/ACN registered resident customer whose employees or authorised representatives activate the Two Pass whilst in Australia partially GST-free pursuant to section 38-190 of the GST Act?

Answer

Yes.

Question 8

If the answer to question 7 is Yes, to what extent is the supply by V of the Two Pass to an Australian ABN/ACN registered resident customer whose employees or authorised representatives activate the Two Pass whilst in Australia GST-free pursuant to section 38-190 of the GST Act?

Answer

Based on the usage calculations submitted, the entire supply is GST-free.

Relevant facts and circumstances

V is registered for GST and has an ABN.

V is about to embark in the global business.

V will create the following Global plans:

One Pass-

charged for the day is used when travelling overseas;

Two Pass-

Has a minimum monthly fee for up to X registered users) Plus a per user fee of $C per user per month (for every registered user over and above X users).

All plans are casual and do not attract Early Termination Charges and are available through direct and indirect sales channels (e.g. Licensees, Dealers).

Plans are automatically charged at the account level rather than the service level. For example, if a company has subscribed to the one pass plan and has 2 employees who connect for 5 days each, the company will be charged a One pass fee at the account level (in this case $A x 5 days x 2 users= $AA). The bill will indicate that the company used 10 user days in the month (2 employees each for 5 days) and the charge of $AA.

While the product is targeted at business customers who travel overseas, V would like to have access available in Australia for minor and incidental use by these customers prior to travelling (e.g. customers can use this when they are in the airport waiting to board a plane, and also use it on the plane (if/when the airlines make this available). Both products require activation before the user travels overseas.

Relevant legislative provisions

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

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

Reasons for decision

Summary

V makes a taxable supply of the One Pass pursuant to section 9-5 of the GST Act issues an invoice for the One Pass to or receives any of the consideration for the One Pass from an Australian resident customer who activates the One Pass whilst in Australia to the extent that the One Pass is used in Australia apart from where the consideration for the component of the supply used in Australia does not exceed the lesser of $3.00; or 20% of the consideration for the total supply.

Detailed reasoning

Supply of rights generally - One and Two Passes

The Commissioner's view is that the resolution of an interpretative issue requires that the meaning of the words of the legislation be determined so that the legislation can be applied to a set of facts. Broadly the ATO should adopt a purposive approach to the interpretation of legislation, to ensure that, to the extent that it is possible to do so, the underlying policy intent of the legislation is achieved.

In this regard, when classifying supplies of the One Pass and Two Pass for GST purposes it is appropriate to accept that both are in fact supplies of global roaming rather than the supply of a right to global roaming. The addition of 'rights' to the notional chain of supply adds an unnecessary step to what is reality a simpler transaction. This Commissioner's view, as espoused in the Goods and Services Tax Ruling GSTR 2005/6, is that if an arrangement is one under which an entity contracts to supply a particular service, the essential character of the supply is a supply of the particular service, not a supply of rights. It follows that the One Pass is considered to be a single supply of Global access.

As such, supplies of the One Pass and Two Pass cannot be considered GST-free under item 4 of subsection 38-190(1) of the GST Act.

Supplies used or enjoyed outside Australia - One Pass

Item 3 in subsection 38-190(1) of the GST Act confers GST-free status to a supply:

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.

You have provided evidence that currently (i.e. for the six months ended 30 June 2014) 'XX%' of all Pass use is within Australia. Nominally, this 'XX%' of use should attract GST. However the Commissioner's policy, as set down in the Goods and Services Tax Ruling GSTR 2001/8, is that you may treat something (or things taken together) as integral, ancillary or incidental if the consideration apportioned to it (if it were a separately identifiable part of a mixed supply) does not exceed the lesser of:

The calculation of theoretical 'XX%' of the daily fee for a One Pass falls within these tolerances. Therefore you may treat the whole of the One Pass as a GST-free supply while the consideration for the Australian component of your supply remains inside the $3.00/20% tolerances.

Two Pass

Summary

V makes a taxable supply of the Two Pass pursuant to section 9-5 of the GST Act when it issues an invoice for the Two Pass or receives any of the consideration for the Two Pass from an Australian ABN/ACN registered resident customer whose employees or authorised representatives activate the Two Pass whilst in Australia to the extent that the Two Pass is used in Australia apart from where the consideration for the component of the supply used in Australia does not exceed the lesser of $3.00; or 20% of the consideration for the total supply.

Detailed reasoning

While the One pass is considered to be a single supply of Global access, the Two Pass is considered to be the supply of minimum accesses for a longer rather than daily period. In addition, further supplies can be accommodated over the mandated minimum accesses, albeit for an additional, but reduced fee.

As with the One Pass you have indicated that 'XX%' of Two Pass' use will be based on current Pass usage. The calculation of theoretical 'XX%' of the $ABC/minimum user monthly fee for a Two Pass falls within these $3.00/20% tolerances set out in GSTR 2001/8. The calculation of the theoretical 'XX%' of the fee imposed for each additional user over the initial minimum user limit also falls within the tolerances. Therefore you may treat the whole of the Two Pass as a GST-free supply while consideration for the Australian component of your supply remains inside the $3.00/20% tolerances.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).