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Edited version of your written advice
Authorisation Number: 1013060325952
Date of advice: 28 July 2016
Ruling
Subject: GST and aircraft maintenance services
Is the supply of aircraft maintenance management services made by you to the overseas company a GST-free supply under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Advice
Yes, the supply of aircraft maintenance management services made by you to the overseas company is a GST-free supply under item 1 in the table in subsection 38-190(1) of the GST Act.
Relevant facts
You are an Australian company and registered for the goods and services tax (GST). You provide aircraft maintenance management services to many clients, Australian and international entities.
You are to contract with an overseas company. The overseas company owns an Australian registered aircraft and operates its business overseas.
Your supply to the overseas company is to oversee the maintenance of the aircraft located overseas by preparing and providing maintenance reports and systems. The reports must be prepared as per the relevant Australian Authority' regulations since the aircraft is an Australian registered aircraft.
Your aircraft engineer prepares and completes the maintenance reports and systems in your office while liaising with the overseas client via email and telephone.
As per the Australian aviation guidelines, the aircraft being maintained overseas must be visited by your aircraft engineer during the year to ensure the aircraft is being maintained and serviced as the records indicate (Compliance Review).
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 38-190
Reasons for decision
Note: Where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act.
GST is payable on a taxable supply. A supply is a taxable supply under section 9-5 of the GST Act if:
a) the supplier makes the supply for consideration; and
b) the supply is made in the course or furtherance of an enterprise that the supplier carries on; and
c) the supply is connected with Australia; and
d) the supplier 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.
All of the above must be satisfied for your supply to be a taxable supply under section 9-5 of the GST Act.
Your supply of aircraft maintenance management services satisfies paragraphs 9-5(a) to 9-5(d) of the GST Act as:
a) you make the supply for consideration; and
b) the supply is made in the course of an enterprise (business) that you carry on; and
c) the supply is connected with Australia under paragraph 9-25(5)(b) of the GST Act as the supply is made through a business that you carry on in Australia; and
d) you are registered for GST.
However, your supply is not a taxable supply to the extent that it is GST-free or input taxed.
There is no provision under the GST Act that makes your supply of aircraft maintenance management services an input taxed supply.
GST-free supply
Relevant to your supply to the overseas company is item 1 in the table in subsection 38-190(1) of the GST Act (item 1).
Item 1 provides that a supply that is directly connected with goods or real property situated outside the indirect tax zone is GST-free.
Goods and Services Tax Ruling GSTR 2003/7 which is available at www.ato.gov.au provides guidance on when a supply is directly connected with goods or real property. We consider that the expression 'directly connected with' contemplates a very close link or association between the supply and goods or real property.
Under item 1 where the connection between the supply and the goods or real property is a direct one then the location of the goods or real property is regarded as the place where consumption occurs.
The purpose of the aircraft maintenance management services is to see whether the aircraft located overseas meets Australian authority regulations. In this instance your supply satisfies the requirements in item 1 as there is a close connection between your supply and the aircraft that is located overseas.
Your supply of aircraft maintenance management services is GST-free under item 1 to the extent that it is not negated by subsections 38-190(2) and 38-190(2A) of the GST Act.
Limits to item 1
Subsection 38-190(2) of the GST Act
Subsection 38-190(2) of the GST Act is not applicable as your supply is not a supply of a right or option to acquire something the supply of which would be connected with the indirect tax zone and would not be GST-free.
Subsection 38-190(2A) of the GST Act
Subsection 38-190(2A) of the GST Act is not applicable as your supply is not directly or indirectly connected with real property in Australia.
Summary
Your supply of aircraft maintenance management services is therefore GST-free under item 1.
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