Edited version of your written advice

Authorisation Number: 1051480376300

Date of advice: 6 February 2019

Ruling

Subject: GST and supply of advisory services to overseas companies

Question

Is the supply of advisory services made by you to the overseas companies a GST-free supply under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Advice

Yes, the supply of advisory services made by you to the overseas companies is a GST-free supply under item 2 in the table in subsection 38-190(1) of the GST Act.

Relevant facts

You are an entity that carries on your business activity in Australia and are registered for the goods and services tax (GST).

You provide advisory services to overseas companies, which include you learning about their solution and sharing your knowledge with the global community about their solution. You share your knowledge through numerous media and social media platforms. You publish your own content which you share with the community. Your post provides educational information to a global community.

You have interaction across social media with people - but you do not know with certainty where they are located. You are aware that some of the people you interact with are located in Australia during the interaction - for example about 20% of the forums you post in are Australian only - but again you are not sure if the membership is only Australian, but it should be. For your podcast most of the people who contact you are from overseas.

The reason for the interaction with the audience may be that they are asking you a question, or are sharing or liking the content. Sometimes you message people and tell them you think they will like the content you have shared. You do not receive any payment from the audience reading your post.

You invoice the overseas companies for your services. One of the overseas companies is registered for GST and you have advised that this overseas company may have an Australian presence in Australia as they have employees in Australia but the employees are not in contact with you when you supply your services to that GST registered overseas company.

You are not required to provide your services to another entity in Australia when supplying your services to the overseas companies.

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.

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 of advisory services to be a taxable supply.

From the information given, your supply of advisory services satisfies paragraphs (a) to (d) of section 9-5 of the GST Act as:

a) you make your supply for consideration; and

b) the supply is made in the course of a business that you carry on; and

c) your supply is connected with Australia as it is made through a business that you carry on in Australia; and

d) you are registered for GST.

However, your supply of advisory 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 advisory services input taxed.

GST-free supply

Relevant to your supply of advisory services 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) is GST-free if it is a supply that is made to a non-resident that 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

b) 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.

Only one of the paragraphs in item 2 needs to be satisfied.

Precondition of item 2 – non-resident is 'not in Australia'

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.

Company in Australia

We consider that a non-resident company is in Australia for the purposes of item 2 if that company carries on its business (or in the case of a company that does not carry on its 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; or

● the company has an enterprise that is carried on for the purposes of section 9-27 of the GST Act (Law Companion Ruling LCR 2016/1 provides guidance when an enterprise is carried on in Australia for the purposes of section 9-27 of the GST Act. And is available at http://atolaw/181101083708/FullScreen.htm?DocID=COG%2FLCR20161%2FNAT%2FATO%2F00001&PiT=99991231235958&Database=ATO )

Company in Australia in relation to the supply

Even if a company is in Australia, it may not be in Australia in relation to the supply and so can still satisfy the 'not in Australia' requirement in item 2. The following principles, which explain when a company is in Australia in relation to the supply, apply to all companies whether they are incorporated in Australia or outside Australia and whether they are residents of Australia or non-residents. Companies, unlike individuals, may have a presence in more than one location. A resident company that has a presence in Australia as well as offshore, may be regarded as not in Australia in relation to a particular supply that is provided to its offshore presence.

To work out whether a company is in Australia in relation to the supply, it is necessary to examine the role the presence of the company in Australia plays in relation to the supply.

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.

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.

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.

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.

You advised that one of the overseas companies may have an Australian presence in Australia as they have employees in Australia but the employees are not in contact with you when you supply your services to that overseas company. In this case we consider that this GST registered overseas company is not in Australia in relation to your supply since your supply is not for the purpose of their Australian presence in Australia.

From the facts given, the precondition for item 2 is satisfied when you make your supply of advisory services to the overseas companies. Next is to consider the paragraphs in item 2. Only one of the paragraphs in item 2 needs to be satisfied.

Paragraph (a) of item 2

Goods and Services Tax Ruling GSTR 2003/7 provides guidance in regard to when a supply is a supply of work physically performed on goods situated in Australia when the work is done, or is a supply directly connected with real property situated in Australia.

Your supply of advisory services satisfies the requirements in paragraph (a) as it is neither a supply of work physically performed on goods situated in Australia when the work is done, nor is a supply directly connected with real property situated in Australia.

Your supply of advisory service is GST-free to the extent that it is not negated by subsection 38-190(3) of the GST Act.

There is no need to consider paragraph (b) of item 2 as paragraph (a) is satisfied.

Subsection 38-190(3) of the GST Act

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.

All of the requirements in this subsection have to be satisfied for the GST-free supply under item 2 to be negated from being GST-free and be a taxable supply under section 9-5 of the GST Act.

From the facts given, subsection 38-190(3) does not apply as you are not required to provide your advisory services to another entity in Australia.

Summary

Your supply of advisory services to the overseas companies is GST-free under paragraph (a) in item 2.

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