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This edited version has been archived due to the length of time since original publication.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: 1012841832964

Date of advice: 16 July 2015

Ruling

Subject: Goods and services tax (GST) and international project management services

Question 1

Is GST payable on your supply of project management services to X?

Answer

If you are registered or required to be registered for GST, GST will be payable on the fees you charge X, but only to the extent that the fees are reasonably apportionable to work performed in Australia (either by your staff or by Y's staff).

If you expect that your fees that are reasonably apportionable to the work performed in Australia would be $75,000 or more in a year, you will be required to be registered for GST. However, see information below regarding reverse charging.

If you expect that your fees that are reasonably apportionable to the work performed in Australia would be less than $75,000 in a year, you will not be required to be registered for GST.

You are entitled to be registered for GST regardless of your turnover.

If you are not registered or required to be registered for GST, GST will not be payable on the fees you charge.

Question 2

Are you entitled to an input tax credit on your purchase of services from Y?

Answer

If you are registered or required to be registered for GST, you will be entitled to an input tax credit on your purchase of services from Y.

Otherwise, you are not entitled to an input tax credit.

Relevant facts and circumstances

You are not registered for GST.

You are an overseas company.

You do not have a branch or office in Australia.

You have two contracts (contract 1 and contract 2) for the provision of project management services to X, which is in Australia. The two contracts flow from an overarching agreement.

X is registered for GST.

Details of contract 1:

Format is e-mail, phone and if required short term on site works.

Details of contract 2:

You have engaged an Australian entity (Y) to service the bulk of the work. You can also service this contract work from overseas. Y is based in Australia and performs work in Australia and it is registered for GST.

The total turnover on the contracts if they run full term will more than likely be over $75,000.

Monies are paid into a personal bank account in Australia from which Y will be paid and the balance will then be transferred to overseas.

You carry the full burden of delivery of the services and could fully complete the contracts without Y, however for practical reasons it helps to have an onsite contact with the skills etc.

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 subsection 9-25(5)

A New Tax System (Goods and Services Tax) Act 1999 subsection 9-25(6)

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

A New Tax System (Goods and Services Tax) Act 1999 section 11-5

A New Tax System (Goods and Services Tax) Act 1999 section 11-15

A New Tax System (Goods and Services Tax) Act 1999 section 11-20

A New Tax System (Goods and Services Tax) Act 1999 section 83-5

A New Tax System (Goods and Services Tax) Act 1999 section 83-30

A New Tax System (Goods and Services Tax) Act 1999 subsection 83-35(1)

A New Tax System (Goods and Services Tax) Act 1999 Division 188

Reasons for decisions

Question 1

Summary

If you are registered or required to be registered for GST, GST will be payable on the fees you charge X, but only to the extent that the fees are reasonably apportionable to work performed in Australia (either by your staff or by Y's staff). GST is payable under such circumstances, because you would meet the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

Detailed reasoning

GST is payable 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:

(*Denotes a term defined in the GST Act)

You meet the requirements of paragraphs 9-5(a) and 9-5(b) of the GST Act. This is because:

There are no provisions of the GST Act under which your supplies of services to PTA are GST-free or input taxed.

Therefore, what remains to be determined is whether your supplies of services to X will be connected with Australia and whether you will be registered or required to be registered for GST.

Connected with Australia

In accordance with subsection 9-25(5) of the GST Act, a supply of something other than goods or real property (for example, services) is connected with Australia if:

Subsection 9-25(6) of the GST Act provides that an enterprise is carried on in Australia if the enterprise is carried on through a permanent establishment that the supplier has in Australia.

Paragraph 65 of Goods and Services Tax Ruling GSTR 2000/31 states:

Paragraph 226 of GSTR 2000/31 discusses the situation where a supply is partly connected with Australia. It states:

You are based overseas. Your supply of the services under contract 1 will be connected with Australia, but only to the extent that your staff are in Australia to deliver the services. Therefore, you will meet the requirement of paragraph 9-5(c) of the GST Act to that extent.

Your supply of the services under contract 2 will be connected with Australia to the extent that your staff or Y's staff perform the services in Australia. Therefore, you will meet the requirement of paragraph 9-5(c) of the GST Act to that extent.

GST registration

Section 23-5 of the GST Act provides that an entity is required to be registered for GST if:

Section 23-10 of the GST Act provides that an entity is entitled to be registered for GST if they carrying on an enterprise (whether or not the entity's GST turnover is at, above or below the registration turnover threshold).

You are carrying on an enterprise. Therefore, you meet the requirement of paragraph 23-5(a) of the GST Act.

Division 188 of the GST Act sets out the rules for determining whether an entity's GST turnover is $75,000 or more.

Only supplies that are connected with Australia are included in the GST turnover calculation, and only to the extent that the supplies are connected with Australia.

If you expect that your fees that are reasonably apportionable to the work performed in Australia (either by your staff or by Y's staff) would be $75,000 or more in a year, you will meet the GST registration turnover threshold. Hence, under such circumstances, you would meet the requirement of paragraph 23-5(b) of the GST Act. Under such circumstances, you would be required to be registered for GST, because you would meet both requirements of section 23-5 of the GST Act.

If you expect that your fees that are reasonable apportionable to the work performed in Australia will be less than $75,000 a year, you will not meet the registration turnover threshold. Under such circumstances, you would not be required to be registered for GST, because you would not meet the requirement of paragraph 23-5(b) of the GST Act.

However, in any case, you are entitled to be registered for GST because you are carrying on an enterprise.

If you are registered or required to be registered for GST, you will meet the requirement of paragraph 9-5(d) of the GST Act. Under such circumstances, GST will be payable on the fees you charge X, but only to the extent that they are reasonably apportionable to work performed in Australia, because you would meet all of the requirements of section 9-5 of the GST Act to that extent.

If you are not registered or required to be registered for GST, you will not meet the requirement of paragraph 9-5(d) of the GST Act. Under such circumstances, GST would not be payable on the fees you charge at all, because you would not meet all of the requirements of section 9-5 of the GST Act.

Reverse charging

Section 83-5 of the GST Act provides that in certain circumstances, a non-resident supplier can reverse charge the GST liability on their supply, to the recipient of the supply.

The GST on a taxable supply is payable by the recipient of the supply, and is not payable by the supplier, if:

You will meet the requirements of section 83-5 of the GST Act if your supply of services to X is subject to GST and X and you agree that your GST liability be payable by X.

In accordance with section 83-30 of the GST Act, even if you are required to be registered for GST for the purposes of section 9-5 of the GST Act, the Australian Taxation Office need not register you for GST if your GST turnover would not meet the registration turnover threshold but for your taxable supplies for which the GST liabilities are reverse charged.

If reverse charging applies, you are not required to issue a tax invoice to X.

For information on non-residents registering for GST, type in GST registration information for a non-resident in the search box of www.ato.gov.au

For guidelines on calculating GST turnover, type in GSTR 2001/7 into an internet search engine.

Question 2

Summary

Y's supply of services to you is not GST-free under section 38-190 of the GST Act, because consumption of these services will take place in Australia.

If you are registered or required to be registered for GST, you will be entitled to an input tax credit on your purchase of services from Y, because you would meet all of the requirements of section 11-5 of the GST Act. Otherwise, you are not entitled to an input tax credit.

Detailed reasoning

You are entitled to input tax credits on your creditable acquisitions.

You make a creditable acquisition where you meet the requirements of section 11-5 of the GST Act, which states:

You make a creditable acquisition if:

Acquisition for creditable purpose

Subsection 11-15(1) of the GST Act states:

You acquire a thing for a creditable purpose to the extent that you

acquire it in *carrying on your *enterprise.

Subsection 11-15(2) of the GST Act states:

You will acquire Y's services in carrying on your enterprise.

This acquisition will not relate to making supplies that would be input taxed and would not be of a private or domestic nature.

Hence, you will acquire Y's services for a creditable purpose. Therefore, you meet the requirement of paragraph 11-5(a) of the GST Act.

Receiving a taxable supply

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

There are no provisions of the GST Act under which Y's supply of services to you is input taxed.

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:

However, subsection 38-190(3) of the GST Act provides that a supply covered by item 2 is not GST-free if:

Y will supply services to a non-resident - you. In accordance with paragraph 37 of Goods and Services Tax Ruling GSTR2004/7, you are not in Australia for the purposes of item 2 because your business establishment is based outside Australia.

Paragraphs 59 and 60 of Goods and Services Tax Ruling GSTR 2005/6 explain the exclusion at subsection 38-190(3) of the GST Act. They state:

Although Y will supply services to you - a non-resident company without a branch/office in Australia, pursuant to an agreement between Y and you, Y will provide/deliver these services to a third party which is in Australia (X).

Therefore, Y's supply of services to you is not GST-free under item 2.

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

Therefore, as all of the requirements of section 9-5 of the GST Act are met, Y will make a taxable supply to you. Hence, you meet the requirement of paragraph 11-5(b) of the GST Act.

Consideration

You will provide consideration for Y's supply. Therefore, you meet the requirement of paragraph 11-5(c) of the GST Act.

GST registration

If you are registered or required to be registered for GST, you will meet the requirement of paragraph 11-5(d) of the GST Act.

Therefore, if you are registered or required to be registered for GST, you will meet all of the requirements of section 9-5 of the GST Act. Hence, under such circumstances, you will be entitled to an input tax credit on your purchase of Y's services.

If you are not registered or required to be registered for GST, you will not meet the requirement of paragraph 11-5(d) of the GST Act. Therefore, under such circumstances, you not be entitled to an input tax credit because you will not meet all of the requirements of section 11-5 of the GST Act.


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