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This edited version has been archived due to the length of time since original publication.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: 1051360671520

Date of advice: 18 April 2018

Ruling

Subject: GST and supply made to a non-resident company

Question 1

Is the supply made by the Australian company to the overseas company a GST-free supply under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) as per contract entered into by the two companies?

Advice

The Australian company makes two distinct supplies under the contract with the overseas company:

Relevant facts

You are an Australian company and registered for GST.

You have entered into a Supply Contract (contract) with an overseas company in regard to assisting in the construction of some building overseas.

You have provided us a copy of the contract. Under the contract your responsibility is:

You have appointed an overseas company to design the equipment for you. All materials and equipment are supplied and sourced from outside Australia and sent to the overseas site.

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 9-25

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.

GST is payable on a taxable supply. A supply is a taxable supply under section 9-5 of the GST Act if:

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 under the contract to be a taxable supply.

From the information given, your supply to the overseas company satisfies paragraphs (a), (b) and (d) of section 9-5 of the GST Act as:

Next is to consider whether your supply is connected with Australia under paragraph 9-5 (c) of the GST Act.

Paragraph 9-5(c) of the GST Act

Section 9-25 of the GST Act defines when a supply is ‘connected with Australia’.

For the purposes of determining whether a supply is connected with Australia, section 9-25 of the GST Act makes a distinction between a supply of goods, a supply of real property and a supply of anything other than goods or real property.

Accordingly, we need to determine the character of your supply under the contract before determining whether your supply is connected with Australia.

Characterisation of supply

Taking into consideration all information received, we consider you make two distinct supplies to the overseas company:

Supply of goods

A supply of goods is connected with Australia if any of the following applies:

From the facts given, none of the above applies to your supply of goods to the overseas company since the goods are supplied and sourced from outside Australia..

In this instance your supply of goods is not connected with Australia and therefore outside the scope of GST.

Supply of services

Relevant to your supply of services is subsection 9-25(5) of the GST Act.

Under subsection 9-25(5) of the GST Act, a supply of anything other than goods or real property is connected with Australia if:

Your supply of services is connected under paragraph 9-25(5)(b) of the GST Act as the services are made through a business that you carry on in Australia.

Accordingly, your supply of services will be a taxable supply to the extent that it is not GST-free. There is no provision that makes your supply of services input taxed.

GST-free supply

Under item 1 in the table in subsection 38-190(1) of the GST Act (item 1), a supply of thing other than goods or property is GST-free if the supply is directly connected with goods or real property situated outside Australia.

According to Goods and Services Tax Ruling GSTR 2003/7, where a supply has a direct connection with goods or real property, or is a supply of work physically performed on goods, the location of the goods or real property is the basis upon which the GST treatment of the supply is determined under item 1. If the goods or real property are located outside Australia, the supply of the thing is GST-free under item 1.

From the facts given, your supply of services is directly connected with goods and real property situated outside Australia as the services are for the supervision and inspection of the equipment and materials located outside Australia including their installation to the buildings located at an overseas specific site.

Your supply of services is therefore GST-free under item 1.

Summary

You make two distinct supplies under the contract – a supply of goods and a supply of services.

Your supply of goods is not connected with Australia and therefore outside the scope of GST.

Your supply of services is GST-free under item 1.


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