Edited version of your written advice

Authorisation Number: 1012959236423

Date of advice: 4 February 2016

Ruling

Subject: Goods and services tax (GST) and professional services

Question 1

Is GST payable on your supply of the service of supervising a probationary professional?

Answer

No.

Question 2

Is GST payable on your supply of the service of endorsing a professional?

Answer

Yes.

Relevant facts and circumstances

You are registered for GST.

You are a registered professional running a private practice.

Certain legislation provides that the relevant authority is to register an applicant to practice as a professional if the applicant has:

(a) complied with all of the requirements of provision X; and

(b) paid the registration fee, if any, prescribed by the regulations.

Provision X provides that one of the requirements to be registered as a professional is that the applicant has successfully completed a period of supervised practical experience in the practice of the chosen field of at least (X) years or has other relevant practical experience that is of a type and for a period prescribed by the regulations.

You provide supervised practical experience to probationary professionals for a fee. This involves mentoring, and providing professional development, to the probationary professionals. Either the probationary professional or a certain government department contracts you to provide this service.

You endorse applicants for registration as professionals. The endorsement is given once you have assessed a candidate as being sufficiently skilled to practice as a professional. You charge a fee for endorsement.

You are not an RTO (a 'Registered Training Organisation'). You are not registered by a training recognition authority of a State or Territory in accordance with the Australian Recognition Framework to provide skill recognition (assessment only) services.

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 section 9-20

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

A New Tax System (Goods and Services Tax) Act 1999 section 38-85

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

Reasons for decisions

Question 1

GST is payable on any taxable supply.

You make a taxable supply if you meet the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), which states:

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 the indirect tax zone; 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.

(*Denotes a term defined in section 195-1 of the GST Act)

The indirect tax zone is Australia.

You meet the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act. That is:

• you supply your services for consideration

• you make these supplies in the course or furtherance of an enterprise that you carry on

• these supplies are connected with Australia, and

• you are registered for GST.

There are no provisions of the GST Act under which your supplies of the services are input taxed.

Therefore, what remains to be determined is whether your supplies of the services are GST-free.

Paragraph 38-85(a) of the GST Act provides that a supply of an education course as defined in the GST Act is GST-free.

Section 195-1 of the GST Act includes professional or trade course in the definition of education course. Section 195-1 of the GST Act states:

professional or trade course means a course leading to a qualification that is an *essential prerequisite:

(a) for entry to a particular profession or trade in Australia; or

(b) to commence the practice of (but not to maintain the practice of) a profession or trade in Australia.

Section 195-1 of the GST Act defines 'essential prerequisite' for the purposes of the definition of professional or trade course. It states:

essential prerequisite: a qualification is an essential prerequisite in relation to the entry to, or the commencement of the practice of, a particular profession or trade if the qualification is imposed:

(a) by or under an *industrial instrument; or

(b) if there is no industrial instrument for that profession or trade but there is a professional or trade association that has uniform national requirements relating to the entry to, or the commencement of the practice of, the profession or trade concerned - by that association; or

(c) if neither paragraph (a) nor (b) applies but there is a professional or trade association in a State or Territory that has requirements relating to the entry to, or the commencement of the practice of, the profession or trade concerned - by that association.

'Industrial instrument' includes an Australian law.

Goods and Services Tax Ruling GSTR 2003/1 deals with professional or trade courses. Paragraph 81 of GSTR 2003/1 distinguishes between a person entering into a particular profession and a person commencing the practice of a profession on their own account. It states:

81. Entry into a particular profession or trade may be on the basis of a qualification that enables the relevant person to perform work on a supervised basis, but that qualification does not enable the person to commence practice on his or her own account without some additional qualification being obtained. In these situations, both qualifications are essential prerequisites, one being an essential prerequisite for entry into the profession or trade; the other being an essential prerequisite to commence the practice of the profession or trade. Courses leading to each qualification will be professional or trade courses.

Paragraph 45 of GSTR 2003/1 lists examples of qualifications. It states:

45. Documents that are qualifications or that provide evidence of a qualification include:

• a statement of satisfactory completion;

• a certificate (including a degree or diploma);

• a licence; or

• an accreditation.

Certain legislation sets out the requirement that a person must to be registered by the relevant authority to practice as a professional. Therefore, such registration gives a professional a licence to practice. One of the requirements for obtaining this qualification is that a person must complete a period of supervised practical experience. This involves mentoring and professional development of the person. Therefore, the supervisory service provided to a probationary professional is a course that leads to a qualification that is an essential prerequisite to commence the practice of professional. Hence, this course is a professional or trade course. Therefore, it is an education course for the purposes of the GST Act. Hence, your supply of this course is GST-free under paragraph 38-85(a) of the GST Act.

Therefore, GST is not payable on your supply of this course (this is the case whether the probationary professional contracts you or the government department instead contracts you).

Question 2

A supply of an assessment service may be GST-free under section 38-110 of the GST Act, which states:

(1) A supply is GST-free if the supply is the assessment or issue of qualifications for the purpose of:

(a) access to education; or

(b) membership of a professional or trade association: or

(c) registration or licensing for a particular occupation: or

(d) employment.

(e) However, a supply is not GST-free under subsection (1) unless the supply is carried out by:

(a) a professional or trade association; or

(b) an *education institution; or

(c) an entity that is registered by a training recognition authority of a State or Territory in accordance with the Australian Recognition Framework to provide skill recognition (assessment only) services; or

(d) an authority of the Commonwealth or of a State or Territory; or

(e) a local government body.

Your endorsement of professionals is an assessment service, which is done for the purpose of the professional obtaining registration to practice as a professional. However, you are not one of the types of entities listed in subsection 38-110(2) of the GST Act. Therefore, your supply of this service is not GST-free under section 38-110 of the GST Act.

There are no other provisions of the GST Act under which your supply of the endorsement service is GST-free. Therefore, as all of the requirements of section 9-5 of the GST Act are met. GST is payable on your supply of this service.

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