Edited version of your written advice

Authorisation Number: 1012789046908

Ruling

Subject: GST, marketing support and sponsorship rights

Question 1

Is the provision of marketing support provided by you to your clients, a taxable supply for the purposes of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes. The provision of marketing support provided by you to your clients is a taxable supply for the purposes of section 9-5 of the GST Act.

Question 2

Is the granting of the sponsorship rights by your clients to you, a taxable supply for the purposes of section 9-5 of the GST Act under the following scenarios:

Scenario A: where:

• The client is not a resident of Australia nor has an Australian permanent establishment for tax purposes i.e. the client is not a company incorporated in Australia, nor does it carry on business in Australia and have either its central management and control in Australia, or its voting power controlled by shareholders who are residents of Australia;

• The Sponsorship Agreement is executed within Australia; and

• The total Australian GST turnover for the client (including the value of supplies made in accordance with the terms of the Agreement) is more than $75,000

Scenario B: As above for Scenario A, with the exception of:

• The total Australian GST turnover for the client (including the value of supplies made in accordance with the terms of the Agreement) is less than $75,000; and

• The client is not registered for GST in Australia

Scenario C: As above for Scenario A, with the exception of:

• The Sponsorship Agreement is executed outside Australia; and

• The total Australian GST turnover made by the client may be less than or more than $75,000

Answer

The granting of the sponsorship rights by your clients to you is a taxable supply for the purposes of section 9-5 of the GST under scenario A.

The granting of the sponsorship rights by your clients to you is not a taxable supply for the purposes of section 9-5 of the GST Act under scenarios B and C.

Relevant facts and circumstances

You are a not-for-profit organisation registered for GST.

You enter into an agreement (the Sponsorship Agreement) with a client who has committed to conducting a conference or event in Australia.

Under the general terms of the agreement, the client will grant sponsorship rights to you and in return, you will provide planning and marketing support to the client.

The specific terms and value of the granting of the rights and/or the planning and marketing support is provided under the agreement and can differ from client to client.

The client may be an Australian resident, a foreign company, or a foreign organisation with a GST registered local presence.

You have provided a sample of a typical Sponsorship Agreement outlining the standard terms and conditions.

The agreement will nominate the monetary value of the marketing support and sponsorship rights agreed by the parties.

According to your private ruling application, you are seeking clarification as to whether GST is payable by the client on their supply of sponsorship rights to you in relation to Scenario A, B and C. The facts are as follows:

Scenario A: where:

• The client is not a resident of Australia nor has an Australian permanent establishment for tax purposes i.e. the client is not a company incorporated in Australia, nor does it carry on business in Australia and have either its central management and control in Australia, or its voting power controlled by shareholders who are residents of Australia;

• The Sponsorship Agreement is executed within Australia; and

• The total Australian GST turnover for the client (including the value of supplies made in accordance with the terms of the Agreement) is more than $75,000.

Scenario B: As above for Scenario A, with the exception of:

• The total Australian GST turnover for the client (including the value of supplies made in accordance with the terms of the Agreement) is less than $75,000; and

• The client is not registered for GST in Australia

Scenario C: As above for Scenario A, with the exception of:

• The Sponsorship Agreement is executed outside Australia; and

• The total Australian GST turnover made by the client may be less than or more than $75,000

Relevant legislative provisions

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

A New Tax System (Goods and Services Tax) Act 1999, section 9-10

A New Tax System (Goods and Services Tax) Act 1999, section 9-15

A New Tax System (Goods and Services Tax) Act 1999, section 9-23

A New Tax System (Goods and Services Tax) Act 1999, section 9-25

A New Tax System (Goods and Services Tax) Act 1999, section 9-75

A New Tax System (Goods and Services Tax) Act 1999, section 195-1

Reasons for decision

Question 1

Summary

The provision of marketing support provided by you to your clients is a taxable supply for the purposes of section 9-5 of the GST Act

Detailed reasoning

GST is payable on taxable supplies. Section 9-5 of the GST Act sets outs the elements of a taxable supply:

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.

A supply is any form of supply whatsoever, and includes supplies of goods, services and the provision of advice or information, amongst other things.

The provision of marketing support provided by you is a supply and will be taxable if it meets all the requirements in section 9-5 of the GST Act.

Supply for consideration

Consideration is defined in section 9-15 of the GST Act to include any payment, or any act or forbearance in connection with the supply of something. Therefore consideration is not limited to the payment of money.

Paragraph 12 of the Goods and Services Tax Ruling GSTR 2001/6 Goods and services tax: non-monetary consideration (GSTR 2001/6) discusses non-monetary consideration and provides:

12. A 'payment' is not limited to a payment of money. It includes a payment in a non-monetary or in an 'in kind' form, such as:

• providing goods;

• granting a right or performing a service (an act); and

• entering into an obligation, for example to refrain from selling a particular product (a forbearance).

Under section 9-75 of the GST Act, the value of a taxable supply, where the consideration is not expressed in an amount of money, is based on the GST inclusive market value of the consideration.

Where there is a supply and something is received from the recipient in return for the supply, then there is a supply for consideration. The something in return may be a monetary payment, or non-monetary. There must be some outcome that flows back to the supplier.

However, whether there is a nexus between the supply and the consideration will depend on the facts of the particular circumstance.

Paragraph 71 of GSTR 2001/6 provides that:

71. In determining whether a sufficient nexus exists between supply and consideration, regard needs to be had to the true character of the transaction. An arrangement between parties will be characterised not merely by the description that parties give to the arrangement, but by looking at all of the transactions entered into and the circumstances in which the transactions are made.

Further paragraph 81 and 82 of the GSTR 2001/6 provides as follows:

81. For a thing to be treated as a payment for a supply, it must have economic value and independent identity provided as compensation for the making of the supply. That is, it must be capable of being valued and be a thing that an acquirer would usually or commercially pay money to acquire. Whether this requirement is satisfied will usually be demonstrated by the parties to an arrangement assigning a specific or separate value to the thing. However, the assigning of a value by the parties is not necessary for a thing to have economic value.

82. Whether a payment is consideration for a supply depends on the true character of the transaction. Consideration for a supply is something the supplier receives for making the supply. Although a non-monetary payment (and acts or forbearances) can form consideration, the character of the transaction will determine whether it forms part of the consideration received by the supplier for making the supply.

Based on the information you have provided, you are making a supply of services under section 9-10 of the GST Act. The services that you are to provide are the provisions of marketing support. In exchange for this marketing support, you will be granted sponsorship rights by your client. A GST-inclusive market value of the granting of sponsorship rights is nominated by the parties under the terms of the Sponsorship Agreement. As such, it is considered that this payment for your supply has economic value and independent identity as outlined under the terms of the Sponsorship Agreement. Therefore, paragraph 9-5(a) of the GST Act is satisfied as you are making a supply of marketing support for consideration.

Enterprise

Paragraph 9-5(b) of the GST Act is satisfied as you are considered to be carrying on an enterprise that provides assistance and advice on planning and holding events in Australia.

Connected with Australia

Paragraph 9-5(c) of the GST Act is satisfied as the supply is connected with Australia as you are performing your services in Australia.

Registered for required to be registered for GST

Paragraph 9-5(d) of the GST Act is satisfied as you are registered for GST.

There are no provisions in the GST Act under which your supplies of marketing support are input taxed.

Therefore, what remains to be determined is whether you make GST-free supplies to your clients.

Item 2 in the table in subsection 38-190(1) of the GST Act (item 2) provides that a supply of something other than goods or real property is GST-free if the supply is made to a non-resident who is not in Australia when the thing supplied is done, and

(a) the supply is neither a supply of work physically performed on goods situated in Australia when the work is done nor a supply directly connected with real property situated in Australia, or

(b) the *non-resident acquires the thing in *carrying on the non-resident's *enterprise, but is not registered or required to be registered for GST.

You are supplying marketing support to your client. These services are not goods or real property.

Paragraph 31 of Goods and Services Tax Ruling GSTR 2004/7 states:

31. The requirement that the non-resident in item 2, or the recipient in item 3, is not in Australia when the thing supplied is done is a requirement, in our view, that the non-resident or recipient is not in Australia in relation to the supply when the thing supplied is done.

Paragraph 35 of GSTR 2004/7 states:

35. A non-resident individual is in Australia if that individual is physically in Australia. If a non-resident individual is physically in Australia and in contact (other than contact which is only of a minor nature) with the supplier, that presence is in relation to the supply.

In your circumstances, your client may be an Australian resident, a foreign company, or a foreign organisation with a GST registered local presence. Under the Sponsorship Agreement, your client will be committed to conduct a conference or event in Australia. As your clients will physically be in Australia, and in contact with you, it is considered that the client will be in Australia when the thing supplied is done.

As such, item 2 of the GST Act is not satisfied. You will not be making GST-free supplies to your clients.

As all the requirements of section 9-5 of the GST Act have been met, you are making a taxable supply when you provide marketing support to your clients.

Question 2

Summary

The granting of the sponsorship rights by your clients to you is a taxable supply for the purposes of section 9-5 of the GST under scenario A.

The granting of the sponsorship rights by your clients to you is not a taxable supply for the purposes of section 9-5 of the GST Act under scenarios B and C.

Detailed reasoning

Under the general rules, GST will apply to any taxable supplies an entity makes.

A taxable supply is defined in section 9-5 of GST Act:

'You make a taxable supply if:

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

(b) the supply is made in the course 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 for GST.

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

Subsection 9-10(2) of the GST Act includes within the meaning of supply, a supply of rights and obligations. The supply of sponsorship rights by the entity to you under the sponsorship agreement is a supply under subsection 9-10(2) of the GST Act.

According to your private ruling application, you are seeking clarification as to whether GST is payable by the client on their supply of sponsorship rights to you in relation to Scenario A, B and C.

Scenario A:

Your private ruling application provided the following facts under Scenario A:

• The client is not a resident of Australia nor has an Australian permanent establishment for tax purposes i.e. the client is not a company incorporated in Australia, nor does it carry on business in Australia and have either its central management and control in Australia, or its voting power controlled by shareholders who are residents of Australia;

• The Sponsorship Agreement is executed within Australia; and

• The total Australian GST turnover for the client (including the value of supplies made in accordance with the terms of the Agreement) is more than $75,000

Supply for consideration

As mentioned in the detailed reasoning in question one, consideration is defined in section 9-15 of the GST Act to include any payment, or any act or forbearance in connection with the supply of something. Consideration is not limited to the payment of money.

Therefore, your provision of marketing support will be consideration for your client's supply of the grant of sponsorship rights. As a GST-inclusive market value of the granting of sponsorship rights is nominated by the parties under the terms of the Sponsorship Agreement; it is considered that this payment for your supply has economic value and independent identity as outlined under the terms of the Sponsorship Agreement. Therefore, paragraph 9-5(a) of the GST Act is satisfied as your client's supply of the grant of sponsorship rights is made for consideration, being the supply of marketing support by you.

Enterprise

It is assumed that your client will be carrying on an enterprise for the purposes of the GST Act. Therefore paragraph 9-5(b) of the GST Act is satisfied.

Connected with Australia

Section 195-1 of the GST Act refers to section 9-25 of the GST Act for the meaning of 'connected with Australia' in relation to a supply.

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

(a) the thing is done in 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.

Whether the supply of the grant of sponsorship rights by a non-resident client is connected with Australia is a matter of fact and degree.

If a supply is made by a non-resident who is not in Australia, it will depend on where the right is created, granted or assigned to determine whether the supply is connected with Australia.

The Goods and Services Tax Ruling GSTR 2000/31 Goods and services tax: supplies connected with Australia (GSTR 2000/31) provides further insight into determining whether a supply is connected with Australia or not.

According to paragraph 74 to 76 of the GSTR 2000/31:

74. If the supply is the creation, grant, transfer, assignment or surrender of a right, the creation of that right in another, the granting, transfer or assignment of that right to another, or the surrender of that right, is done where the right is created in that other person, granted, transferred or assigned to that other person or surrendered respectively.

75. The act that creates that right in another or grants, transfers or assigns that right to another, or surrenders the right, will depend on the facts of each individual case.

76. If, for example, a right is granted under an agreement to another to use certain intellectual property, the granting of that right to another is done where the agreement is made. If the agreement is made in Australia, the supply of that right is connected with Australia. If the agreement is made outside Australia, the supply is not connected with Australia under paragraph 9-25(5)(a). However, even if the agreement is made outside Australia the supply is connected with Australia under paragraph 9-25(5)(b) if the supplier makes the supply through an enterprise that the supplier carries on in Australia.

According to the facts provided in Scenario A, the Sponsorship Agreement between you and your non-resident client is executed within Australia. Therefore, paragraph 9-5(c) of the GST Act is satisfied as the supply of the grant of sponsorship rights by a non-resident client is connected with Australia as the agreement is made in Australia.

Registered or required to be registered

Section 23-5 of the GST Act provides that you are required to be registered for GST if you are carrying on an enterprise; and your GST turnover meets the registration turnover threshold (currently $75,000 per annum).

According to Scenario A, the total value of supplies made by the non-resident client will be more than $75,000.

Therefore, paragraph 9-5(d) of the GST Act will be satisfied as the non-resident client will be required to be registered for GST.

There are no provisions in the GST Act which would make the supply of the granting of sponsorship rights GST-free or input taxed.

As all the requirements of section 9-5 of the GST Act have been met, the non-resident client will be making a taxable supply. GST will be payable by the client.

Scenario B

Your private ruling application provided the following facts under Scenario B:

• As above for Scenario A, with the exception of:

• The total Australian GST turnover for the client (including the value of supplies made in accordance with the terms of the Agreement) is less than $75,000; and

• The client is not registered for GST in Australia

Supply for consideration

Paragraph 9-5(a) of the GST Act is satisfied as your client's supply of the grant of sponsorship rights is made for consideration, being the supply of marketing support by you.

Enterprise

It is assumed that your client will be carrying on an enterprise for the purposes of the GST Act. Therefore, paragraph 9-5(b) of the GST Act is satisfied.

Connected with Australia

The supply of the grant of sponsorship rights by a non-resident client is connected with Australia as the agreement is made in Australia. Therefore, paragraph 9-5(c) of the GST Act is satisfied.

Registered or required to be registered

Section 23-5 of the GST Act provides that you are required to be registered for GST if you are carrying on an enterprise; and your GST turnover meets the registration turnover threshold (currently $75,000 per annum).

According to Scenario B, the total value of supplies made by the non-resident client will be less than $75,000. The client is not registered for GST in Australia.

Therefore, paragraph 9-5(d) of the GST Act will not be satisfied as the non-resident client is not registered and is not required to be registered for GST.

As all the requirements of section 9-5 of the GST Act have not been met, the non-resident client will not be making a taxable supply. The client will have no GST payment or reporting obligations with respect to the supplies made under the Sponsorship Agreement.

Scenario C

Your private ruling application provided the following facts under Scenario C:

• As above for Scenario A, with the exception of:

• The Sponsorship Agreement is executed outside Australia; and

• The total Australian GST turnover made by the client may be less than or more than $75,000

Supply for consideration

Paragraph 9-5(a) of the GST Act is satisfied as your client's supply of the grant of sponsorship rights is made for consideration, being the supply of marketing support by you.

Enterprise

It is assumed that your client will be carrying on an enterprise for the purposes of the GST Act. Therefore, paragraph 9-5(b) of the GST Act is satisfied.

Connected with Australia

As outlined in Scenario A, paragraph 76 of the GSTR 2000/31 states that 'if the agreement is made outside Australia, the supply is not connected with Australia under paragraph 9-25(5)(a). However, even if the agreement is made outside Australia the supply is connected with Australia under paragraph 9-25(5)(b) if the supplier makes the supply through an enterprise that the supplier carries on in Australia.'

Therefore, as the Sponsorship agreement is made outside Australia, and the supplier is not carrying on an enterprise in Australia, the supply would not be connected with Australia and therefore, would not be taxable. Therefore paragraph 9-5(c) of the GST Act is not satisfied.

As the requirements of section 9-5 of the GST Act have not been met, the granting of the sponsorship rights by your non-resident clients to you will not be a taxable supply for the purposes of section 9-5 of the GST Act. The non-resident client will have no GST payable or reporting obligations in respect to these supplies even if the client is registered or required to be registered for GST in Australia.

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