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Edited version of your written advice
Authorisation Number: 1051202722988
Date of advice: 15 March 2017
Ruling
Subject: GST and supply of consulting services to a non-resident
Question 1
Is the supply of consulting services you made to the non-resident entities a GST-free supply under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Advice
Yes, the supply of consulting services you made to non-resident entities is a GST-free supply under item 2 in the table in subsection 38-190(1) of the GST Act.
Note: You are required to register for GST despite your supplies to non-resident entities are GST-free as your expected annual turnover will exceed $75,000.
Relevant facts
You run a consultancy business with turnover now expected to exceed the $75,000 threshold. You currently are not registered for the goods and services tax (GST).
Your service consists of streamlining administration processes of companies. To date all of your customers are based outside Australia and your fee consists of consultancy fees per day, accommodation, living expenses and various travel costs.
A snapshot of your supplies to the non-resident customers is as follows:
● Project 1 -The contract for was for a number of months. You spent some time overseas and worked remotely from Australia between visits.
● Project 2 -You were able to work remotely from Australia for the duration of the contract with the non-resident.
● Project 3 -The contract was for a number of weeks and you spent some time overseas.
The work you performed for the three projects consists of reviewing and analysing business processes with an outcome of recommendation for improvements to provide better customer service and improve sales.
The non-resident customers for the projects do not carry on any business in Australia through a subsidiary, agent or a third party. They did not have any entity or employees located in Australia to be involved with your supply. They are not registered for GST.
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 section 195-1 of the GST Act.
Question
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 of an enterprise that the supplies carries on; and
c) the supply is connected with Australia; and
d) the supplier is registered for GST.
However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.
You must satisfy all of the above for your supply to be a taxable supply and liable for GST.
From the information given you satisfy the requirements in paragraphs 9-5(a) to (d) of the GST Act when you supply your consulting services to the non-resident entities as:
a) you make your supply for consideration;
b) you make the supply in the course of an enterprise that you carry on in Australia;
c) your supply is connected with Australia as the services are made through a business that you carry on in Australia; and
d) under section 23-5 of the GST Act you are required to register for GST where your current and/or projected annual turnover meets the GST registration threshold. You advised that you expect your turnover to exceed $75,000. As your projected GST turnover will be above the GST registration threshold you are required to be registered for GST.
However, your supply of consulting services 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 consulting services input taxed.
GST-free supply
Relevant to your supply of consulting services to the non-resident entities is item 2 in the table in subsection 38-190(1) of the GST Act (item 2).
Item 2 provides that a supply of a thing (other than goods or real property) made to a non-resident is GST-free if it is a supply that 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
(a) 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.
Goods and Services Tax Ruling GSTR 2004/7 provides guidance on when a non-resident is 'not in Australia' for the purposes of item 2.
The requirement that the non-resident in item 2 is not 'in Australia' when the thing supplied is done is a requirement that the non-resident is not in Australia in relation to the supply when the thing supplied is done.
From the information received your supply of consulting services satisfies the requirements in paragraph (a) of item 2 as:
● your services are made to non-residents who are not in Australia in relation to the supply when the consulting services are done; and
● the supply of consulting services 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.
Your supply of services is GST-free to the extent that it is not negated by subsection 38-190(3) of the GST Act.
Since paragraph (a) is satisfied there is no need to consider paragraph (b).
Subsection 38-190(3) of the GST Act
From 1 October 2016 subsection 38-190(3) of the GST Act provides that without limiting subsection 38-190(2) or (2A), a supply covered by item 2 in that table is not GST-free if:
a) it is a supply under an agreement entered into, whether directly or indirectly, with a non-resident; and
b) the supply is provided or the agreement requires it to be provided to another entity in Australia; and
c) for a supply other than an input taxed supply - none of the following applies:
i. the other entity would be an Australian-based business recipient of the supply, if the supply had been made to it;
ii. the other entity is an individual who is provided with the supply as an employee or officer of an entity that would be an Australian-based business recipient of the supply, if the supply had been made to it; or
iii. the other entity is an individual who is provided with the supply as an employee or officer of the recipient, and the recipient's acquisition of the thing is solely for a creditable purpose and is not a non-deductible expense.
From the facts given subsection 38-190(3) of the GST Act is not applicable to your supply since you are not required to provide your services to another entity in Australia.
Your supply of consulting services to the non-resident entities is therefore GST-free under paragraph (a) of item 2.
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