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This edited version has been archived due to the length of time since original publication.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.

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Edited version of your written advice

Authorisation Number: 1012690138140

Ruling

Subject: GST and GST-free education course and refund of overpaid GST

Question 1

Is the supply of Learn to Swim (LTS) classes provided by Entity A at the Building A a supply of a GST-free aquatic education course under section 38-85 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when the LTS classes mainly provide personal aquatic survival skills and are taught by instructors who possess Austswim Limited qualifications?

Answer

Yes

Question 2

Will the Commissioner exercise his discretion under Schedule 1, section 105-65 of the Taxation Administration Act 1953 (TAA) to allow you a refund of the goods and services tax (GST) you incorrectly included in the price of a non-taxable supplies in the period 1 August 2009 to 31 July 2013 (relevant period)?

Answer

No.

Relevant facts and circumstances

• Entity A owns and operates the Building A.

• Entity A offers LTS classes at Building A for a fee payable to Entity A.

• The classes mainly provide instruction in personal aquatic survival skills.

• The LTS classes at all relevant times have been taught by instructors who held training qualifications to teach the classes issued by Austswim Limited.

• During the relevant period, Entity A collected fees in exchange for the provision of the LTS classes.

• Fees are typically paid over the counter or by direct debit and receipts are automatically generated by an automated receipting machine.

• The prices paid by the customer were calculated on a per lesson basis and were always even numbers.

• The LTS customers were mums and dads who were not registered or required to be registered for GST.

• During the relevant period, Entity A paid GST on the fees collected for the LTS classes to the Australian Taxation Office ('ATO').

• Entity A made these payments to the ATO incorrectly believing the fees collected for the LTS classes were for taxable supplies.

• As is their practice, Building A recommended pricing for LTS classes each year to Entity A and those price recommendations were set according to market forces and with the aim of maintaining a value for money program that is affordable to lower income families without reference to or consideration of GST.

• Building A did not know that neighbouring councils were correctly treating their LTS earnings as GST-free.

• You contend that Entity A adopted the prices recommended by Building A without reference to or consideration of GST.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999:

Division 38

Subdivision 38-C

Subdivision 38-85

Section 195-1

A New Tax System (Goods and Services Tax) Regulations 1999

Regulation 195-1.02 - First aid or life saving course

Schedule 12

Taxation Administration Act 1953

Divisions 3 and 3A of Part IIB

Sections 105-65 to the Schedule 1

Reasons for decision

Issue 1

Question 1

Summary

The supply of the learn-to-swim courses provided by Entity A at Building A is a supply of a GST-free education course.

Detailed reasoning

An education course is GST-free under section 38-85 of the GST Act. An education course includes, amongst other things, a first aid or lifesaving course as defined in section 195-1 of the GST Act.

To be GST-free as a first aid or lifesaving course, a course must satisfy two requirements.

First requirement

A first aid or lifesaving course is one that is principally trains individuals in one or more of the following:

We accept that personal aquatic survival skills include:

You have advised and provided information which indicates that all the levels of your courses principally involve training adults and children, in personal aquatic survival skills as described above.

As all the levels of your courses and the courses as a whole, principally provide training in personal aquatic survival skills, the courses satisfy the first requirement, irrespective of whether they are provided to children or adults.

Second Requirement

To be GST-free as an education course a first aid or lifesaving course must be provided by an entity that is:

You have advised that Austswim qualified instructors conduct all of your classes or programs and therefore the second requirement is satisfied.

As both of the requirements are satisfied, the courses provided by you, as listed above, are GST-free as a first aid or lifesaving course.

Question 2

Summary

The Commissioner is satisfied that you have overpaid an amount because you treated a supply as a taxable supply when the supply was not a taxable supply.

However, the Commissioner is not satisfied that you have reimbursed a corresponding amount to the recipient of the supply and so need not give you a refund.

Section 105-65 of Schedule 1 of the TAA contains a discretion which the Commissioner may exercise in certain limited circumstances to allow the refund. Your circumstances do not warrant the exercise of the discretion.

Detailed reasoning

Under the general rules the Commissioner is required to give a refund or apply that amount in accordance with the running balance account provisions in Divisions 3 and 3A of Part IIB of the TAA.

However, the requirement to give a refund of overpaid GST is subject to section
105-65 of Schedule 1 to the TAA which modifies the general rules so that the Commissioner need not give a refund or apply that amount if an entity overpaid its net amount or an amount of GST where the requirements of the section are satisfied.

Whether subsection 105-65(1) of Schedule 1 to the TAA applies to your circumstances

The restriction on refunds of overpaid GST under subsection 105-65 (1) of Schedule 1 to the TAA will apply if all three of the following conditions are satisfied:

Miscellaneous Tax Ruling MT 2010/1 provides the view of the Commissioner on section 105-65 of Schedule 1 to the TAA.

In this case you remitted GST of 1/11 of the price of your supplies (being the supply of certain learn to swim courses) when these supplies were in fact not taxable. It follows that you remitted more than was legally payable and that there has been an overpayment of GST.

You have advised that the majority of the recipients of your supply would not be registered for GST purposes. You have also advised that they have not been reimbursed for any amount corresponding to the GST overpaid.

As the three conditions are satisfied, section 105-65 of Schedule 1 to the TAA applies and the Commissioner has no obligation to pay a refund that would otherwise be payable under section 8AAZLF of the TAA.

However, it is the view of the ATO in paragraph 27 of MT 2010/1 that the Commissioner may exercise his discretion and choose to pay a refund even though the conditions in paragraphs 105-65(1)(a), (b) and (c) of Schedule 1 to the TAA are satisfied.

Paragraphs 116 and 117 of MT 2010/1 state:

This view is supported by the decision in Luxottica Retail Australia Pty Ltd v FC of T 2010 ATC 10-119 (Luxottica) at 57 when the AAT referred to "residual discretion":

The question then becomes whether, in these circumstances, the discretion to pay the refund to the applicant should be exercised.

Paragraph 128 of MT 2010/1 provides some guiding principles to consider when exercising the discretion. It states:

Paragraphs 126 and 127 explain further:

It follows from the above that it is important when exercising the discretion to determine who has borne the burden of the GST. That is, whether a supplier has passed on the GST to the recipients.

In answering this question, the Commissioner takes into consideration the factors outlined in paragraphs 9-12 of Avon Products Pty Ltd v Commissioner of Taxation (2006) HCA 29 (Avon). It is considered that the guidance provided by the Avon case about who bears the burden of the indirect tax impost applies equally in the GST context given the similarity in the sales tax and GST regimes in that respect. Those paragraphs are reproduced as follows:

Whether GST is passed on is a question of fact that needs to be determined in any particular case.

In your circumstances, the following facts/contention are considered:

This indicates that prima facie, the supplies made during the relevant period were treated as taxable supplies.

The Commissioner's approach is set out in MT 2006/1, at paragraphs 36 - 45 and summarised at paragraph 126 which provides that the GST Act is structured on a basis that GST is passed on when the supply is treated as a taxable supply. This means that the presumption is that:

There are many situations where GST may not consciously be factored into a price by the supplier, but such a failure to consider the GST is not normally sufficient to show that GST has not been passed on. Not explicitly considering the GST at the time of the price setting does not mean that the supplier has not passed on the GST.

It is the commissioner's view that where an entity which sets price without immediate regard to the GST or other particular costs, this does not mean that GST or other costs are not accounted for by the entity or are not passed on by it.

As the supplies were treated as taxable supply during the relevant period, the correct report was to include the supply in G1. There was no reporting error made during the relevant period in relation to the supply.

The Commissioner will not exercise his discretion under section 105-65 of Schedule 1 to the TAA to refund any incorrectly remitted GST from your supply of supply of certain learn to swim courses for the relevant period.

In conclusion, the Commissioner is satisfied that you have overpaid an amount because you treated a supply as a taxable supply when the supply was not a taxable supply. However, the Commissioner is not satisfied that you reimbursed a corresponding amount to the recipient of the supply and so need not give you a refund.


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