Edited version of your written advice

Authorisation Number: 1012998436258

Date of advice: 18 April 2016

Ruling

Subject: GST and port services

Question 1

Is the supply of boat standby services by the entity to the non-resident entity a taxable supply within the meaning of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer 1

No, the supply of boat standby services by the entity to the non-resident entity is not a taxable supply within the meaning of section 9-5 of the GST Act as that supply is GST-free pursuant to paragraph (b) of item 5A in subsection 38-355(1) and paragraph (a) of subsection 38-355(2) of the GST Act.

Question 2

Is the supply of port services (i.e. water, fuel, laydown, hire of equipment, operation of equipment, movement of cargo, berthing, line handling, quarantine, boat or pilotage) made by entity to an Australian resident entity a taxable supply?

Answer 2

A supply of water by the entity to an Australian resident entity is GST-free under section 38-285 of the GST Act provided the water is not supplied in, or transferred into a container that has a capacity of less than 100 litres; a supply of water or fuel to an Australian resident entity is GST-free under paragraph (b) of item 5 in subsection 38-185(1) of the GST Act as being ship's stores where the water or fuel is for use, consumption or sale on a voyage that has a destination outside the indirect tax zone; but a supply of laydown, hire of equipment, operation of equipment, movement of cargo, berthing, line handling, quarantine, boat or pilotage to an Australian resident entity is not GST-free as that supply falls within item 5A in subsection 38-355(1) but the requirements of subsection 38-355(2) are not satisfied.

Question 3

Is the supply of port services (i.e. water, fuel, laydown, hire of equipment, operation of equipment, movement of cargo, berthing, line handling, quarantine, boat or pilotage) made by the entity to a non-resident entity a taxable supply?

Answer 3

A supply of water by the entity to a non-resident entity is GST-free under section 38-285 of the GST Act provided the water is not supplied in, or transferred into a container that has a capacity of less than 100 litres; a supply of water or fuel to a non-resident entity is GST-free under paragraph (b) of item 5 in subsection 38-185(1) of the GST Act as being ship's stores where the water or fuel is for use, consumption or sale on a voyage that has a destination outside the indirect tax zone; and a supply of laydown, hire of equipment, operation of equipment, movement of cargo, berthing, line handling, quarantine, boat or pilotage to a non-resident entity which is not in the indirect tax zone when the thing supplied is done in the indirect tax zone is GST-free as that supply falls within item 5A in subsection 38-355(1) and the requirements in paragraph (a) of subsection 38-355(2) are satisfied.

Question 4

Is a non-resident entity considered to be 'in the indirect tax zone' for the purposes of subparagraph (a)(ii) of subsection 38-355(2) if that entity owns or charters a vessel that is in Australian waters?

Answer 4

No, a non-resident entity such as a company which does not carry on business or activities in Australia at or through a fixed and definite place of its own for a sufficiently substantial period of time or through an agent at a fixed and definite place for a sufficiently substantial period of time is not considered to be 'in Australia' merely as a result of being either the owner or charterer of a vessel which happens to be in Australia.

Relevant facts and circumstances

The entity supplies port services to vessels calling at the port in Australia. Port services typically supplied by the entity include:

• Berthing - during the period a vessel is moored dockside for loading and unloading;

• Line handling - entity personnel tie up lines to secure a vessel to a berth and release the lines when the vessel is ready to depart;

• Laydown - the entity supplies temporary storage space for cargo while waiting loading or unloading;

• Equipment hire - the entity hires out equipment used to move cargo from one location to another within the port, from vessel to shore or from shore to vessel;

• Equipment operation - entity personnel operate equipment and move cargo;

• Fuel - the entity supplies fuel to vessel owners or retail customers;

• Water - the entity supplies drinking and X water to vessels;

• Quarantine - the entity plans to supply a wash down facility, AQIS inspection services and Customs services;

• Boat - the entity supplies a boat when required to guide large vessels from anchor to a berth or from a berth when departing without damaging the berth; and

• Pilotage - the entity supplies pilots to assist the masters of large vessels to manoeuvre from anchor to a berth and from a berth when departing.

The entity does not supply international transport of goods.

Services supplied by the entity to the non-resident entity:

The entity recently hired assist boats from local third party operators and used the assist boats to supply boat standby services to the vessel). The vessel berthed at the port to collect cargo that was being transported to a destination outside the indirect tax zone.

The entity supplied a copy of a tax invoice issued by the entity to the non-resident entity's address.

The entity advised that boat standby is usually requested by the master of a vessel for safety reasons to guide the vessel in and out of the berth and to hold the vessel in position in the tide.

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 38-185,

A New Tax System (Goods and Services Tax) Act 1999 Section 38-190,

A New Tax System (Goods and Services Tax) Act 1999 Section 38-285 and

A New Tax System (Goods and Services Tax) Act 1999 Section 38-355.

Reasons for decision

Question 1- boat standby services

Summary

The supply of boat standby services by the entity to the non-resident entity is GST-free as that supply falls within paragraph (b) of item 5A in the table in subsection 38-355(1) of the GST Act and paragraph (a) of subsection 38-355(2) is satisfied.

Detailed reasoning

GST is payable on taxable supplies. Section 9-5 of the GST Act 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.

Subsection 38-355(1) of the GST Act:

Division 38 of the GST Act deals with GST-free supplies. Division 38 includes Subdivision 38-K which deals with transport and related matters and includes section 38-355. Subsection 38-355(1) contains a table containing 8 items, each of which describes supplies which are GST-free. Items 5 and 5A relate to the international transport of goods.

In the ruling request the entity confirmed that the entity does not provide international transport services. On that basis we do not consider that the boat standby services fall within item 5 in the table in subsection 38-355(1) which refers to the supply of 'international transport' of goods.

However the boat standby services may fall within paragraph (b) in the third column in item 5A in the table in subsection 38-355(1):

38-355 Supplies of transport and related matters

(1) The third column of this table sets out supplies that are GST-free:

Supplies of transport and related matters
Item	Topic	These supplies are GST-free ...
5A	Loading or handling etc.	subject to subsection (2): (a) loading or handling of goods, the international transport of which is covered by item 5, during the course of the international transport; or (b) supply of a service, during the course of the international transport of goods covered by item 5, that facilitates the international transport.

Item 5A was inserted into the table in subsection 38-355(1) by section 3 and Schedule 1 item 8 of the Tax Laws Amendment (2010 GST Administration Measures No. 3) Act 2010. Paragraphs 1.27 to 1.29 of the Explanatory Memorandum to the Tax Laws Amendment (2010 GST Administration Measures No. 3) Act 2010 (Explanatory Memorandum) state:

Loading, handling and other services

1.27 These amendments also ensure that other services that facilitate the international transport of goods, such as loading, handling and other services, can qualify for GST-free treatment [Schedule 1, item 8, item 5A in the table in subsection 38-355(1)]. For example, supplies of fumigation services that are carried out to facilitate the international transport of goods are

1.28 GST-free for inbound and outbound movement of goods when:

 supplied by the transporter that brings the goods to or from Australia; or

 supplied by another party to a non-resident that is not in Australia.

1.29 The GST treatment of loading, handing and other services reflects the intention that GST-free treatment should extend to not only international transport but also necessary related services to prevent embedded tax arising for non-residents.

Paragraph 1.28 in the Explanatory Memorandum appears to be a continuation of paragraph 1.27, i.e. the last sentence in paragraph 1.27 of the Explanatory Memorandum should state:

For example, supplies of fumigation services that are carried out to facilitate the international transport of goods are GST-free for inbound and outbound movement of goods when:

supplied by the transporter that brings the goods to or from Australia; or

supplied by another party to a non-resident that is not in Australia.

The Explanatory Memorandum distinguishes between 'loading and handling' (which fall within paragraph (a) of item 5A) and 'other services' (which fall within paragraph (b) of item 5A) and provides fumigation services as an example of services which fall within paragraph (b) in item 5A. A publication on the ATO's website, GST and international freight transport, contains Example 4 which deals with an Australian international removalist company which is engaged to transport household items from an apartment and storage facility in X, store those items prior to exporting them to Y, insure the items and clean the apartment in X. Example 4 states:

However, the supply of cleaning services is not GST-free as these services do not facilitate the supply of GST-free transport.

These examples suggest that the supply by the entity to the non-resident entity of boat standby services falls within paragraph (b) of item 5A as that supply enabled the movement of the vessel to a berth and held her in position in the tide. We understand that this allowed the cargo to be loaded for export and therefore 'facilitated' the international transport of goods as required by paragraph (b) of item 5A.

Subsection 38-355(2) of the GST Act:

Item 5A in subsection 38-355(1) is stated to be subject to subsection 38-355(2) which states:

(2) Paragraphs (a) and (b) of item 5, and item 5A, in the table in subsection (1) do not apply to a supply to the extent that the thing supplied is done in the indirect tax zone, unless:

(a) the *recipient of the supply:

(i) is a *non-resident; and
(ii) is not in the indirect tax zone when the thing supplied is done in the indirect tax zone; or


(b) the supply is done by the supplier of the transport of the goods from or to the indirect tax zone (whichever is relevant).

Subsection 38-355(2) was inserted by section 3 and item 9 in Schedule 1 to the Tax Laws Amendment (2010 GST Administration Measures No. 3) Act 2010. The Explanatory Memorandum states that subsection 38-355(2) is intended to reduce compliance costs, particularly for Australian transport subcontractors, in relation to the correct GST treatment of the outbound transport of goods, as explained in paragraphs 1.7 to 1.11 of the Explanatory Memorandum:

GST treatment of the outbound transportation of goods

1.7 The current law causes difficulties for Australian transport subcontractors in establishing the correct GST treatment and imposes compliance costs when they transport mixed loads, with some goods qualifying for GST-free treatment and some being subject to GST. The current law also does not always allow the Australian leg of transport services supplied to non-residents for the export of goods from Australia to be GST-free, with the result that embedded GST is incurred by non-residents that do not register for GST.

…

1.9 The purpose of these amendments is to provide certainty for industry and reduce the number of non-resident entities without a presence in Australia being liable for GST or incurring GST on their acquisitions that is likely to cascade through the supply of any goods or services they make.

Summary of new law

1.10 These amendments to the GST law make the transport of goods by transport subcontractors within Australia, that forms part of the international transport of those goods by another entity to Australia, GST-free in specific circumstances. Supplies of international transport services are treated as GST-free where they are made to a non-resident that is not in Australia. However, the supply is subject to GST if it is made to a resident or a non-resident that is in Australia. This reduces compliance costs for Australian transporters and affected non-residents.

1.11 These amendments also make the transport of goods by subcontractors within Australia, that forms part of the international transport of those goods by another entity from Australia, GST-free where the supply is made to a non-resident that is not in Australia. However, the supply is subject to GST if it is made to a resident or a non-resident that is in Australia. This reduces compliance costs for Australian transporters and affected non-residents.

The Explanatory Memorandum then explains the operation of paragraph (b) of subsection 38-355(2):

1.23 Where transport suppliers provide both the Australian and international legs of international transport then the transport supply is GST-free . [Schedule 1, item 9, paragraph 38-355(2)(b)]

The Explanatory Memorandum then explains how paragraph (a) of subsection 38-355(2) is intended to reduce compliance costs for GST registered Australian transport subcontractors.

1.24 Treating the Australian leg of international transport as taxable for transport subcontractors in all circumstances when supplied to an Australian entity or a non-resident entity with a presence in Australia reduces compliance costs for GST-registered subcontractor transport entities. This is achieved by allowing them to apply the same GST treatment to all transported goods, regardless of whether the goods are for Australian delivery or export or whether the entity to which the goods are ultimately being provided to is outside of Australia. This is important because transport subcontractors may carry a range of goods that are for final delivery both in Australia and overseas and they may not be aware of the final destination of some goods.

Unfortunately the focus of the Explanatory Memorandum on Australian transport subcontractors means that the Explanatory Memorandum does not provide much guidance in the present case where the entity does not supply international transport.

Done in the indirect tax zone:

Subsection 38-355(2) commences by providing that item 5A does not apply to the supply of boat standby services by The entity to the extent the thing supplied is done in the indirect tax zone. 'Indirect tax zone' is defined in section 195-1 of the GST Act to mean Australia (within the meaning of the Income Tax Assessment Act 1997 (ITAA 97)), subject to certain exclusions. Section 995-1 of the ITAA 1997 states that 'Australia' has the meaning affected by section 960-505 of the ITAA 1997 and a note to section 960-505 states that 'Australia' also includes coastal seas for up to 12 nautical miles, based on section 15B of the Acts Interpretation Act 1901 (which states that a reference in an Act to Australia is taken to include a reference to the coastal sea of Australia).

We understand that the boat standby services were done within the coastal sea and therefore done in the indirect tax zone.

That means that the boat standby services are not GST-free under paragraph (b) of item 5A unless the exceptions in paragraphs (a) or (b) of subsection 38-355(2) apply.

Paragraph (b) in subsection 38-355(2):

The exception in paragraph (b) of subsection 38-355(2) does not apply because The entity is not the supplier of the transport of the goods from the indirect tax zone.

Paragraph (a) in subsection 38-355(2):

The first requirement in paragraph (a) of subsection 38-355(2) is that the recipient of the supply is a non-resident. 'Non-resident' is defined in section 195-1 of the GST Act:

Non-resident means an entity that is not an Australian resident

'Australian resident' is defined in section 195-1 pf the GST Act:

Australian resident means a person who is a resident of Australian for the purposes of the ITAA 1936.

Section 6 of the Income Tax Assessment Act 1936 states:

resident or resident of Australia means:

…
(b) a company which is incorporated in Australia, or which, not being incorporated in Australia, carries on business in Australia, and has either its central management and control in Australia, or its voting power controlled by shareholders who are residents of Australia.

ASIC's website records that the non-resident entity is a foreign company which is registered in Australia. That indicates that the non-resident entity is not incorporated in Australia and does not have its central management and control in Australia or its voting power controlled by Australian residents. On that basis we consider that the non-resident entity is a 'non-resident' and the first requirement in paragraph (a) of subsection 38-355(2) is satisfied.

The requirement in subparagraph (a)(ii) of subsection 38-355(2) is that the recipient is not in the indirect tax zone when the thing supplied is done in the indirect tax zone. As subparagraph (a)(i) requires that the recipient is a non-resident, the combined requirements in subparagraphs (a)(i) and (a)(ii) are similar to the first requirement in the third column item 3 in the table in subsection 38-190(1) of the GST Act:

a supply that is made to a non-resident who is not in the indirect tax zone when the thing supplied is done,

Paragraph 31 of Goods and Services Tax Ruling GSTR 2004/7 (GSTR 2004/7), which was issued before references to 'Australia' in the GST Act were replaced by references to the 'indirect tax zone' in 2015, states:

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

Paragraphs 181 and 184 of GSTR 2004/7 state:

181. The requirement that a supply is made to a non-resident (item 2), or recipient (item 3), who is 'not in Australia' 'when the thing supplied is done' is in effect a proxy test for determining where the supply to that entity is consumed. The presumption is that if the non-resident or other recipient of the supply is 'not in Australia' when the thing supplied is done, the supply of that thing is for consumption outside Australia and is GST-free, provided the other requirements of the item are met.

184. As the Australian location of the entity to which the supply is made at the relevant time is a proxy test for identifying when consumption occurs in Australia, we consider that the expression 'not in Australia' should be interpreted in the context of the supply in question. The expression 'not in Australia' requires, in our view that the non-resident or other recipient is not in Australia in relation to the supply. This means that a non-resident or other recipient of a supply may satisfy the 'not in Australia' requirement if that entity is in Australia but not in relation to the supply. We examine this more fully when considering the application of items 2 and 3 and paragraph (b) of item 4 to specific entity types in Part III

Part III of GSTR 2004/7 paragraphs 230 to 332 which discuss when a non-resident company is 'in Australia' for the purposes of item 2 in subsection 38-190(1). Paragraph 241 of GSTR 2004/7 states:

241. We consider, therefore, that a non-resident company is in Australia for the purposes of item 2 and paragraph (b) of item 4 if that company carries on business (or in the case of a company that does not carry on business, carries on its activities) in Australia: )

at or through a fixed and definite place of its own for a sufficiently substantial period of time; or

through an agent at a fixed and definite place for a sufficiently substantial period of time

Paragraphs 247 and 248 of GSTR 2004/7 state:

247. We consider that it would be reasonable for a supplier to conclude that a non-resident company is in Australia if:

the company is registered with ASIC; or

the company has a permanent establishment in Australia for income tax purposes.

248. However, a non-resident company to which the supplier makes a supply may be able to demonstrate to the supplier that, even though it is registered with ASIC or has a permanent establishment, on application of the test set out in this Ruling (at paragraph 241) to its particular circumstances, the non-resident company is not in Australia.

As noted above, the non-resident entity is registered with ASIC as a foreign company. A foreign company wishing to carry on business in Australia must be registered under Part 5B.2 of the Corporations Act 2001. We therefore consider that the non-resident entity is 'in the indirect tax zone' for the purposes of subparagraph (a)(ii) of subsection 38-355(2) unless the non-resident entity can satisfy the 'not in the indirect tax zone' requirement on the basis that the non-resident entity is in the indirect tax zone but not in relation to the supply.

Paragraph 348 of GSTR 2004/7 provides that to work out whether a company is in the indirect tax zone in relation to the supply, it is necessary to examine the role the presence of the company plays in the indirect tax zone in relation to the supply. Paragraphs 349 to 352 of GSTR 2004/7 state:

349. Clearly if the supply to a company is solely or partly for the purposes of the Australian presence, for example its Australian branch, representative office or agent if it is a non-resident company, or the Australian head office if it is an Australian incorporated company, the company is in Australia in relation to the supply. There is a connection between the supply and the presence in Australia that is not a minor connection.

350. If the supply is not for the purposes of the Australian presence, but that Australian presence is involved in the supply, the company is 'in Australia in relation to the supply', unless the only involvement is minor.

351. If the involvement of the Australian presence is limited to the carrying out of simple administrative tasks on behalf of the company, as a matter of administrative convenience, that involvement is minor. The connection between the supply and the presence is so minor in nature that it is reasonable to conclude that the presence of the company in Australia is not in relation to the supply.

352. Tasks of a simple administrative nature include:

payment of, or arranging for payment of, the supplier's invoice on behalf of the company;

passing on an e-mail to the company;

being a point of telephone contact to pass on messages to the company;

being a mailing address or delivery contact on behalf of the company;

being a point of contact for a visiting representative of the company; and

on-forwarding information to the company.

We note that the tax invoice issued by the entity is addressed to the non-resident entity which indicates that the supply is not for the purposes of the non-resident entity's Australian presence. In addition, there is no evidence of the non-resident entity's Australian presence having any connection with the supply made by the entity such as arranging payment of the entity's invoice or being a point of contact. On that basis we consider that the non-resident entity is a non-resident and is not in the indirect tax zone when the boat standby services were done and subparagraph (a)(ii) in subsection 38-355(2) is satisfied.

As the supply of standby boat services by the entity to the non-resident entity i falls within paragraph (b) of item 5A in the table in subsection 38-255(1) and the requirements in subparagraphs (a)(i) and (ii) of subsection 38-355(2) are satisfied, the supply is GST-free.

Reasons for decision Question 2 - port services supplied to an Australian resident entity

Summary

A supply of X or drinking water made by the entity to an Australian resident entity is GST-free under section 38-285 of the GST Act provided the water is not supplied or transferred into a container that has a capacity of less than 100 litres, irrespective of whether the amount of water supplied or transferred fills the container.

A supply of water or fuel by the entity to an Australian resident entity is GST-free under paragraph (b) of item 5 in subsection 38-185(1) as being ship's stores where the water or fuel is for use, consumption or sale on a voyage that has a destination outside the indirect tax zone.

A supply of laydown, hire of equipment, operation of equipment or movement of cargo by the entity to an Australian resident entity is not GST-free - although these supplies fall within paragraph (a) of item 5A in subsection 38-355(1), item 5A is subject to subsection 38-355(2) and the requirements of subsection 38-355(2) are not satisfied where the recipient of the supply is an Australian resident entity.

A supply of berthing, line handling, quarantine, boat or pilotage by the entity to an Australian resident entity is not GST-free - although these supplies fall within paragraph (b) of item 5A in subsection 38-355(1), item 5A is subject to subsection 38-355(2) and the requirements of subsection 38-355(2) are not satisfied where the recipient of the supply is an Australian resident entity.

Detailed reasoning

The ruling request referred to the following supplies made by the entity to an Australian entity: berthing, line handling, laydown, equipment hire, stevedoring, fuel, water, quarantine, boat or pilotage.

Water:

The entity advised that the entity supplies X water or drinking water to vessels that call at the port.

In relation to X water or drinking water supplied to a vessel owned by an Australian resident entity, subsection 38-285(1) of the GST Act provides that a supply of water is GST-free. Paragraph 18 of Goods and Services Tax Ruling GSTR 2000/25 states that 'water' includes drinkable water, untreated bulk water, salt water and recycled water but does not include ice or steam (as ice and steam are not liquids).

However subsection 38-285(1) is qualified by subsection 38-285(2) which provides that a supply of water is not GST-free under section 38-285 if the water is either supplied in a container or transferred into a container that has a capacity of less than 100 litres, irrespective of whether the amount of water supplied or transferred fills the container. Consequently a supply of water by the entity to a vessel owned by an Australian entity is not GST-free if the vessel's water tank has a capacity of less than 100 litres.

Water or fuel supplied as ship's stores:

Subdivision 38-E of the GST Act deals with exports and other supplies for consumption outside the indirect tax zone and includes section 38-185 which deals with the export of goods. Paragraph (b) in item 5 in the table in subsection 38-185(1) states that the following supply is GST-free:

A supply of

…

(b) ships stores, or spare parts, for use, consumption or sale on a ship on a voyage that has a destination outside the indirect tax zone;

whether or not part of the flight or voyage involves a journey between places in the indirect tax zone.

 Section 195-1 of the GST Act states that 'ships stores' has the meaning given by section 130C of the Customs Act 1901 (CA) i.e.

ship's stores means stores for the use of passengers or crew of a ship, or for the service of a ship

Section 130C CA also provides that 'ship' does not include a ship that is not currently engaged in making international voyages or a ship that is currently engaged in making international voyages but is about to make a voyage other than an international voyage and that 'international voyage', in relation to a ship, means a voyage, whether direct or indirect between a place in Australia and a place outside Australia.

In relation to water and fuel, paragraph 12 of Goods and Services Tax Ruling GSTR 2003/4 (GSTR 2003/4) states:

12. The term 'stores' includes all consumable goods such as food, water and beverages intended for consumption on board an aircraft or ship, and any goods taken on board to be sold, such as souvenirs, photographic film, confectionery and tobacco products. 'Stores' also includes consumables necessary for the operation and maintenance of an aircraft or ship, such as fuel and lubricants.

In relation to the requirement in item 5 that the ships stores are for use, consumption, or sale on a ship on a voyage that has a destination outside the indirect tax zone, paragraph 15 of GSTR 2003/4 provides that it is sufficient if the ships stores are intended to be so used when the ships stores are supplied by the entity. In relation to the requirement that the ships stores are for use on a voyage that has a destination outside the indirect tax zone, paragraphs 16 to 20 of GSTR 2003/4 states:

16. To be GST-free, the stores or spare parts must be supplied for a flight or voyage which has a destination outside Australia (that is, an international flight or voyage). An international flight or voyage may include a journey between places in Australia.

17. Destination means the predetermined end to a journey or voyage. For a voyage or flight to have a destination outside Australia, it must be intended that a ship 'lay anchor', or an aircraft land, at a predetermined location outside Australia. It is not enough for a ship to simply pass through international waters, or for an aircraft to merely fly through international air space.

18. A journey between places in Australia may form part of, or be a component of, an international flight of voyage. However, a journey between places in Australia is not part of an international flight or voyage if that journey is identifiable as a distinct and separate flight or voyage from the international flight or voyage.

19. A domestic journey is a separate flight or voyage if it has a different purpose to that of the ultimate international flight or voyage, if its route is disconnected geographically to that of the international flight or voyage, or if the timing of the journey is distinct and independent of the international flight or voyage.

20. Stores supplied for use on an aircraft or ship embarking on an international flight or voyage, where the stores will be exported on board the ship or aircraft, are taken to be for use on the flight or voyage. This is so even if it is known that some of the stores may be used, sold or consumed on a subsequent flight or voyage, such as a return journey to Australia

Paragraph 21 of GSTR 2003/4 states:

21. For practical purposes, where Customs approves the uplifting of duty-free aircraft's or ship's stores in relation to a particular international flight or voyage, we accept that the supply of aircraft's or ship's stores or spare parts for that flight or voyage is a GST-free supply. This is because Customs approval will only be given where the flight or voyage is an international flight or voyage.

Subsection 382-5(1) of Schedule 1 to the Taxation Administration Act 1953 requires the entity to keep records that record and explain all transactions and other acts that the entity engages in that are relevant to a supply.

Paragraph 22 of GSTR 2003/4 provides that for a supplier to demonstrate that supplies of goods are GST-free under item 5, the supplier must retain sufficient documentary evidence to show that the goods supplied are ship's stores and those ship's stores are for use, consumption or sale on board a ship which is on, or embarking on, an international flight or voyage.

Paragraphs 78 to 83 of GSTR 2003/4 set out the documentary requirements in relation to supplies of goods to commercial ships and to private vessels:

78. For supplies to commercial ships and aircraft, the documentary evidence could include a combination of:

purchase orders from the airline or shipping line (for example, a stores order from a foreign airline indicating that the stores are for use on international flights);

 Customs approval to load duty-free stores;

delivery dockets or receipts signed by the master or other officer evidencing delivery of the stores or spare parts directly to the ship or aircraft; and

shipping routes and schedules or flight timetables, which may provide evidence of the international voyage.

Private vessels

79. For supplies to private ships or aircraft, a supplier has evidence that the ship or aircraft departed on an international voyage if the supplier has a copy of the final certificate of clearance issued by Customs. A supplier may obtain a copy of this certificate immediately before departure or a copy may be forwarded to the supplier by the recipient, subsequent to departure.

80. If the supplier is not able to obtain a copy of the final certificate of clearance, the supplier should sight and retain the following evidence to demonstrate that the aircraft or yacht has a destination outside Australia:

 a copy of a small craft cruising permit with an imminent expiry date or temporary import documents;

 a copy of the recipient's passport; and

 a signed declaration to the effect that the goods are for use as stores or spare parts on an international flight or voyage.

81. Such a declaration should include a description of the goods supplied, information on the date of departure, destination, and name of the vessel or call sign of the aircraft. An example of the statement that could be made in respect of stores for a visiting yacht is:

Purchaser's Statement to the Commissioner of Taxation

I, ............. of ....................., hereby declare that the goods described above are to be shipped as stores or spare parts for use, consumption or sale on board [....name of ship....] while on a voyage to a destination outside Australia. The goods will not be used, consumed or sold prior to the commencement of a voyage where the next port of call is outside Australia.

................................................

Signature of Purchaser

82. However, we do not consider a declaration alone to be sufficient to demonstrate that the requirements of item 5 are met.

83. In addition to the evidence listed in paragraph 80, other supplementary evidence may be available, such as evidence of foreign ownership or registration of the vessel or aircraft, or a Customs export entry for Australian vessels being exported under their own power.

Laydown, hire of equipment, operation of equipment or movement of cargo - item 5A:

In our view these supplies by the entity fall within paragraph (a) of item 5A in subsection 38-355(1) which refers to the loading or handling of goods, the international transport of which is covered by item 5, during the course of the international transport. We understand that laydown involves the supply of temporary storage of cargo pending loading on or unloading off a vessel, hire of equipment relates to equipment used to move cargo on or off a vessel or around the entity's facility and the entity bears the costs of personnel engaged on operating equipment and moving cargo.

Item 5A is subject to subsection 38-355(2). Where the recipient of the supply made by the entity is an Australian resident entity paragraph (a) of subsection 38-335(2) is not satisfied (because paragraph (a) requires the recipient to be a non-resident and not in the indirect tax zone when the thing supplied is done. Nor will paragraph (b) of subsection 38-355(2) be satisfied because paragraph (b) requires the supply to be done by the supplier of the transport of the goods to or from the indirect tax zone and the entity confirmed that the entity does not supply international transport of goods. Consequently supplies of laydown, hire of equipment or stevedoring to an Australian resident entity are not GST-free.

Berthing, line handling, quarantine, boats or pilotage - item 5A:

In our view these supplies by the entity fall within paragraph (b) of item 5A in subsection 38-355(1) which refers to the supply of a service, during the course of the international transport of goods covered by item 5, that facilitates the international transport.

However, as is the case with laydown etc. the requirements of subsection 38-355(2) is not satisfied where the recipient of the supply made by the entity is an Australian resident entity and the supply of berthing etc. is not GST-free.

Reasons for decision Question 3 - port services supplied to a non-resident entity

Summary

A supply of X or drinking water made by the entity to a non-resident entity is GST-free under section 38-285 of the GST Act provided the water is transferred into a container that has a capacity of less than 100 litres, irrespective of whether the amount of water supplied or transferred fills the container.

A supply of water or fuel by the entity to a non-resident entity is GST-free under paragraph (b) of item 5 in subsection 38-185(1) as being ship's stores where the water or fuel is for use, consumption or sale on a voyage that has a destination outside the indirect tax zone.

A supply of laydown, hire of equipment, operation of equipment or movement of cargo by the entity to a non-resident entity may be GST-free. These supplies fall within paragraph (a) of item 5A in subsection 38-355(1), item 5A is subject to subsection 38-355(2) and the requirement in subparagraph (a)(i) of subsection 38-355(2) that the recipient is a non-resident is satisfied. The requirement in subparagraph (a)(ii) of subsection 38-355(2) that the recipient is not in the indirect tax zone when the thing supplied is done may be satisfied as explained in the reasons for decision for Question 1.

A supply of berthing, line handling, quarantine, boat or pilotage by the entity to an Australian resident entity may be GST-free. These supplies fall within paragraph (b) of item 5A in subsection 38-355(1), item 5A is subject to subsection 38-355(2) and the requirement in subparagraph (a)(i) of subsection 38-355(2) that the recipient is a non-resident is satisfied. The requirement in subparagraph (a)(ii) of subsection 38-355(2) that the recipient is not in the indirect tax zone when the thing supplied is done may be satisfied as explained in the reasons for decision for Question 1.

Detailed reasoning

Water

As stated in the reasons for decision for Question 2, a supply of drinking or X water by the entity is GST-free under section 38-285 of the GST Act provided the water is supplied in or transferred to a container that has a capacity of less than 100 litres. That is the case whether the recipient of the supply is an Australian resident entity or a non-resident entity.

Water or fuel supplied as ship's stores:

As stated in the reasons for decision for Question 2, a supply of water or fuel by the entity is GST-free under paragraph (b) of item 5 in subsection 38-185(1) as being ship's stores where the water or fuel is for use, consumption or sale on a voyage that has a destination outside the indirect tax zone. That is the case whether the recipient of the supply is an Australian resident entity or a non-resident entity.

Laydown, hire of equipment, operation of equipment or movement of cargo - item 5A:

These supplies by the entity fall within paragraph (a) of item 5A in subsection 38-355(1) which refers to the loading or handling of goods, the international transport of which is covered by item 5, during the course of the international transport.

Item 5A is subject to subsection 38-355(2), which means that either paragraph (a) or (b) of subsection 38-355(2) must be satisfied for the supply to be GST-free. Where the recipient of the supply is a non-resident, paragraph (a) of subsection 38-255(2) may be satisfied. Paragraph (a) of subsection 38-355(2) requires that the recipient of the supply is a non-resident and is not in the indirect tax zone when the thing supplied is done. In the reasons for decision for Question 1 we outlined the matters to be taken into account in determining whether a non-resident is not in the indirect tax zone.

Berthing, line handling, quarantine, boats or pilotage - item 5A:

As stated in the reasons for decision for Question 2, these supplies by The entity fall within paragraph (b) of item 5A in subsection 38-355(1) which refers to the supply of a service, during the course of the international transport of goods covered by item 5, that facilitates the international transport.

Item 5A is subject to subsection 38-355(2), which means that either paragraph (a) or (b) of subsection 38-355(2) must be satisfied for the supply to be GST-free. Where the recipient of the supply is a non-resident, paragraph (a) of subsection 38-255(2) may be satisfied. Paragraph (a) of subsection 38-355(2) requires that the recipient of the supply is a non-resident and is not in the indirect tax zone when the thing supplied is done. In the reasons for decision for Question 1 we outlined the matters to be taken into account in determining whether a non-resident is not in the indirect tax zone.

Reasons for decision Question 4 - is a non-resident which owns or charters a vessel which is in Australian waters 'in the indirect tax zone when the thing supplied is done'

Summary

Assuming that the non-resident which owns or charters a vessel is a company, that a company is 'in Australia' if that company carries on business or activities at or through a fixed and definite place of its own for a sufficiently substantial period of time or through an agent at a fixed and definite place for a sufficiently substantial period of time. This suggests a non-resident company which does not have such a presence in Australia is not considered to be 'in Australia' merely as a result of being either the owner or charterer of a vessel which happens to be in Australia.

Detailed reasoning

In our reasons for decision in Question 1 we explained how the requirement in subparagraph (a)(ii) in subsection 38-355(2) that the recipient of a supply is not in the indirect tax zone when the thing supplied is done is applied.

The requirement in subparagraph (a)(ii) of subsection 38-255(2) is a proxy test for determining whether that supply is consumed in Australia and requires that the recipient is not in Australia in relation to the supply and requires an examination of the role that any Australian presence of the recipient plays in relation to that supply.

Assuming that the non-resident which owns or charters a vessel is a company, the first step required by GSTR 2004/7 is to determine whether that company has a presence in Australia.

As noted in the reasons for decision for Question 1, paragraph 241 of GSTR 2004/7 provides that a company is 'in Australia' if that company carries on business or activities at or through a fixed and definite place of its own for a sufficiently substantial period of time or through an agent at a fixed and definite place for a sufficiently substantial period of time and paragraph 247 of GSTR 2004/7 states that it is reasonable for a supplier to conclude that a non-resident company is in Australia if the company is registered with ASIC.

This suggests a non-resident company which does not have such a presence in Australia is not considered to be 'in Australia' merely as a result of being either the owner or charterer of a vessel which happens to be in Australia.

Even if a non-resident company has a presence in Australia, paragraph 348 of GSTR 2004/7 provides that it is then necessary to examine the role that the company's Australian presence plays in relation to the supply made by The entity. This is discussed in the reasons for decision for Question 1.

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