Edited version of your written advice

Authorisation Number: 1012776725890

Ruling

Subject: GST registration

Question

Whether you are required to be registered for the Australian goods and services tax (GST) under section 23-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Advice

Based on the information received you are required to be registered for the Australian GST under section 23-5 of the GST Act.

However, if you agree to have a reverse charge agreement with the Australian recipient under Division 83 of the GST Act you will not need to register for GST. More information on Division 83 of the GST Act is in the reasoning.

Relevant fact

You are a company incorporated outside Australia. Your principal activities are those relating to chartering of ships, barges and boats with crew (freight). You are not registered for the Australian GST.

You have entered into a hire charter agreement with an Australian company where you will time charter some vessels from overseas to a gas field located on the continental shelf of Australia for XX days.

You advised that you did not carry on any operations in Australia previously and do not have a permanent establishment in Australia.

You have provided us with a copy of the agreement and a copy of the Towing Tug Scope of Work.

Under the scope of work you will:

• deliver the vessels from overseas;

• upon arrival at the gas field, the vessels will be used to perform mooring lines hookup/disconnection and manoeuvring, or on standby to assist where and when required by the Australian company. The consideration for performing this service at the gas field is above A$75,000.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section 23-5

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

Reasons for decision

Under section 23-5 of the GST Act you are required to be registered for GST if:

a) You are carrying on an enterprise; and

b) Your GST turnover meets the registration turnover threshold of $75,000 and $150,000 if you are a non-profit organisation.

Your GST turnover is your gross business income excluding GST for either the 12 months leading to the current month (current GST turnover) or the 12 months starting with the current month (projected GST turnover).

When calculating your GST turnover supplies that are not connected with Australia are discarded.

Accordingly, we need to determine whether your supply of services to the Australian company is connected with Australia before considering whether you are required to be registered for GST for this supply.

Is your supply of services connected with Australia?

Under subsection 9-25(5) of the GST Act a supply of anything other than goods or real property is connected with Australia if:

a) the thing is done is 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.

Only one of the paragraphs needs to be satisfied for a supply to be connected with Australia.

From the information received, paragraphs 9-25(5)(b) and 9-25(5)(c) are not applicable to you since you are not making the supply through a business that you carry on in Australia and the supply of the services is not of a right or option to acquire some other thing and the supply of the other thing would be connected with Australia.

We will now consider paragraph 9-25(5)(a) of the GST Act.

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

Under paragraph 9-25(5)(a) of the GST Act a supply of anything other than goods or real property is connected with Australia if the thing is done in Australia.

Is the gas field in Australia for GST purposes?

'Australia' for the purposes of the GST, means the Commonwealth of Australia and does not include any external territories. However, it does include certain installations deemed by the Customs Act 1901 (the Customs Act) to be a part of Australia.

Under the Customs Act, resource and sea installations are deemed to be a part of Australia if they are attached to the Australian seabed. Resources industry fixed structures are defined in subsection 4(5) of the Customs Act and resources industry mobile units are defined in subsection 4(6) of the Customs Act. Section 4 of the Customs Act refers to the Sea Installation Act 1987 for the definition of sea installations. Oil rigs are resource installations under these definitions. "Attached to the Australian seabed" is also defined in section 4 of the Customs Act. 

Section 4 of the Customs Act defines the Australian seabed as the seabed adjacent to Australia (other than the seabed within Area A of the Zone of Cooperation) as follows:

"Australian seabed" means so much of the seabed adjacent to Australia (other than the seabed within the Joint Petroleum Development Area) as is:

(a) within the area comprising:

i. the areas described in Schedule 1 to the Offshore Petroleum and Greenhouse Gas Storage Act 2006 ; and

ii. the Coral Sea area; and

(b)  part of:

i. the seabed beneath the coastal area; or

ii. the continental shelf of Australia.

The gas field are located on the continental shelf of Australia and therefore are in Australia for GST purposes.

Are your supply connected with Australia?

'Thing' in paragraph 9-25(5)(a) of the GST Act is defined to mean anything that can be supplied or imported such as a service, advice, information or a right. It is the subject of the supply.

Under paragraph 9-25(5)(a) of the GST Act the connection with Australia requires that the thing being supplied is done in Australia.

The meaning of 'done' depends on the nature of the thing being supplied. Done can mean for example performed, executed, completed, finished and so on depending on what is supplied.

If the thing being supplied is a service, the supply of the service is typically done where the service is performed. If the service is performed in Australia, the service is done in Australia and the supply of that service is connected with Australia under paragraph 9-25(5)(a) of the GST Act. This is the case even if the recipient of the supply is located outside Australia.

From the information received, the vessels will be located at the gas field upon arrival in Australia. Accordingly, when your vessels are at the gas field your supply of services for that period will be connected with Australia under paragraph 9-25(5)(a) of the GST Act as the supply will be done in Australia.

Are you required to be registered?

The payments for the supply that are done in Australia will be included when calculating your annual turnover for GST purposes since the supply is connected with Australia. In this instance your projected GST annual turnover during that period will be above A$75,000.

Accordingly, you will be required to be registered for GST under section 23-5 of the GST Act as all the requirements in that section will be satisfied.

You can register online at https://abr.gov.au/. The fact sheet GST registration for non-resident which is available from www.ato.gov.au will be of assistance to you.

Other information

Taxable supply

GST is payable on a taxable supply. Under section 9-5 of the GST Act, a supply is a taxable supply if:

a) an entity makes the supply 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.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

From the information received the supply you will make in Australia will be a taxable supply under section 9-5 of the GST Act as:

a) you will make the supply for consideration; and

b) the supply will be made in the course of a business that you carry on; and

c) the supply will be connected with Australia as it will be done in Australia; and

d) as discussed above, you will be required to be registered for GST.

There is no provision in the GST Act that will make your supply that is done in Australia GST-free or input taxed.

Accordingly, you will be liable to pay GST on the supply you will make in Australia and you will also be entitled to claim back any GST paid on any acquisitions related to your business activity.

Special GST rule - Division 83 of the GST Act

There is a special rule under the GST Act which allows the GST on taxable supplies made by non-residents, with the agreement of the recipients, be reversed charged to the recipients (Division 83 of the GST Act). In this instance the GST liability will be borne by the recipient.

Under subsection 83-5(1) of the GST Act, the GST on a taxable supply is payable by the recipient of the supply, and is not payable by the supplier if:

a) the supplier is a non-resident; and

b) the supplier does not make the supplier through an enterprise that the supplier carries on in Australia; and

c) the recipient is registered or required to be registered for GST; and

d) the supplier and the recipient agree that the GST on the supply be payable by the recipient.

However, Division 83 of the GST Act does not apply to all supplies. Under subsection 83-5(2) the following supplies cannot be reverse charged:

• a taxable supply under Division 84 of the GST Act;

• a taxable supply made by a non-resident through a resident agent;

• a supply that is disregarded under paragraph 188-15(3)(b) or 188-20(3)(b) of the GST Act. That is the supply is connected with Australia because of paragraph 9-25(5)(c) of the GST Act; and

• a supply that is disregarded under paragraph 188-15(3)(c) or 188-20(3)(c) of the GST Act. That is, the supply is of a right or option to use commercial accommodation in Australia that is made on or after 1 October 2005, is not made in Australia and is made through an enterprise that the supplier does not carry on in Australia.

All of the above must be satisfied before a Division 83 agreement is made.

The non-resident supplier that is making taxable supplies (on the basis that it is required to be registered for GST) need not apply to register for GST under section 83-25 of the GST Act if the only reason that the supplier is required to be registered is because the registration turnover threshold is met when taxable supplies covered by section 83-5 are taken into account.

As an agreement under Division 83 changes the liability for GST from the supplier to the recipient, this agreement must be in place for the tax period in which the GST is attributable.

Accordingly, if you have a Division 83 agreement with the Australian company you will not need to register for GST. However, the Division 83 agreement has to be in place at the time of the supply if you and the Australian company want to apply the reverse charge provision under this division.

Please note that if you decide to have a Division 83 agreement, you will not be able to claim any refund of the GST paid on the creditable acquisitions you make since you will not be registered for GST.

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).