Edited version of private advice

Authorisation Number: 1051539078355

Date of advice: 10 July 2019

Ruling

Subject: GST and acquisition of a report

Question 1

Regarding the overseas scoping visits made by the employee of an Australian organisation (entity A) and the expenses incurred by the employee during these visits, are the tax invoices received from entity A a request for reimbursement of expenses or a request for consideration for a supply made by the entity A to the Australian entity, entity B?

Answer

Regarding the overseas scoping visits made by the employee of entity A and the expenses incurred by the employee during these visits, the tax invoices received from entity A are a request consideration for a supply of information (which is the required report) made by entity A to the Australian entity, entity B.

Question 2

Where the tax invoices are a request for consideration for a supply, is the supply made by entity A to entity B a taxable supply for the purposes of paragraph 11-5(b) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) where the supply includes overseas scoping visits to islands and a report of the visits was subsequently given to entity B?

Answer

Yes, the supply made by entity A to entity B is a taxable supply under section 9-5 of the GST Act for the purposes of paragraph 11-5(b) of the GST Act where the supply includes overseas scoping visits to islands and a report of the visits was subsequently given to entity B.

Relevant facts

Entity B is a not for profit organisation and is registered for GST. It is responsible for supporting activities to strengthen clinical services in islands located outside Australia.

Entity B extended an invitation to entity A to provide assistance in suggesting clinicians (not employees) who are able and willing to assist in providing the specialist assistance requested for an overseas project.

Entity A accepted entity B's requests to assist in recommending visiting teams for the purposes of undertaking overseas visits to two islands as part of assisting entity B's overseas project.

Entity B agrees to directly fund travel and accommodation related expenses of the visiting teams who have to sign entity B's Terms and Conditions, and comply with entity B's Terms and Conditions in obtaining reimbursement for expenses incurred during the visit."

At the end of each visit to the island, there was a requirement for a report to be submitted to entity B by the visiting team outlining the discussion they had and to make recommendations.

Direct costs related to the visit and payable/reimbursable by entity B includes:

·         Return Airfares;

·         Accommodation;

·         Per diem (meant to cover the cost of meals, local taxis and other travel incidentals);

·         Medical consumables/drugs, where required.

Entity B's terms and condition include submitting a report (where applicable) within two weeks of the overseas activity's conclusion and ensure that it covers the criteria outlined in the relevant report template which has been provided to them by the program management team.

The visiting team for the two islands included an employee of entity A. The employee attended for the purpose of assisting with post visit report writing of the visits to the two islands. Entity A with consultation with the visiting team has submitted a report to entity B after the visits were done.

Entity B at its discretion decides how to proceed with the report's recommendations. Upon receipt of the report entity B will edit and compile the final report and share this with other entities.

Entity B has received two invoices from entity A regarding the expenses incurred by the employee of entity A for the scoping visits the employee did to the two islands.

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.

Detailed reasoning

Question 1

GSTR 2012/2 - Goods and Services Tax Ruling: financial assistance payments provides guidance when a financial assistance is consideration for a supply.

Paragraphs 15, 15A, 16 and 24 in GSTR 2012/2 state the following:

15. For a financial assistance payment to be consideration for a supply there must be a sufficient nexus between the financial assistance payment made by the payer and a supply made by the payee. A financial assistance payment is consideration for a supply if the payment is 'in connection with', 'in response to' or 'for the inducement of' a supply. The test is an objective one.

15A. Further, in identifying the character of the connection, the word 'for' ensures that not every connection between supply and consideration meets the requirements for a taxable supply. That is, merely having any form of connection of any character between a supply and payment of consideration is insufficient to constitute a taxable supply

16. Reference to all of the surrounding circumstances of the arrangement, in particular any written documentation, determines whether a financial assistance payment is 'in connection with', 'in response to' or 'for the inducement of' a supply. The surrounding circumstances may include the statutory purpose of the payer in providing the financial assistance, the activities which are to be undertaken by the payee and any other terms and conditions attached to the payment. However, none of these factors will be determinative on their own and the arrangement must the considered as a whole. The description the parties may give to the arrangement, whilst relevant, is not determinative.

24. Providing advice or information is a supply. A financial assistance payment has a sufficient nexus with such a supply where the payment is made for the purpose of obtaining the information.

From the facts given:

• Entity A accepted requests of entity B to assist in recommending visiting teams for the purposes of undertaking visits to two islands as part of assisting entity B with its overseas project.
• The visiting teams has signed entity B's Terms and Conditions before starting the visits and one of the conditions is to submit a report of their activities and ensure that it covers the criteria outlined in the relevant report template which has been provided to them by the program management team.
• Entity B offers financial assistance to the visiting teams by reimbursing them for the expenses incurred during these overseas visits upon receipt of evidence of the expenses incurred.
• An employee of entity A was a member of the visiting teams that perform the scoping visits to the two islands. The employee attended for the purpose of assisting with post visit report writing. The tax invoices relate to the expenses incurred by the employee when the scoping visits were made to the two islands
• The predominant purpose of the scoping visits to the two islands is to provide a report to entity B on the findings of the scoping visits. Entity A has completed the report on behalf of the visiting team and submitted the report to entity B as per requirement.

·         Entity B upon receipt of the report at its discretion will edit and compile the final report and share this with other entities.

From the above we consider there is a nexus between the consideration made by entity B for the employee's expenses incurred during the scoping visits to the two islands and the report which the employee's employer entity A submitted to entity B since the consideration was given to the visiting teams for the purpose of obtaining information on the findings of the scoping visits (that is the report) and the employee was there for the purpose of assisting with post visit report writing. Entity B has obtained the information from entity A for its business purposes and under its discretion will edit and compile the final report which it will share with other entities.

In this instance the provision of information from entity A is a supply with the consideration received from entity B.

Question 2

Under section 11-20 of the GST Act you are entitled to an input tax credit for any creditable acquisitions that you make.

Section 11-5 of the GST Act provides when a supply is a creditable acquisition. One of the requirements for a creditable acquisition is the supply of the thing to the purchaser is a taxable supply (paragraph 11-5(b) of the GST Act).

Taxable supply

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

a)    the supply is made for consideration; and

b)    the supply is made through an enterprise that the supplier carries on;

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.

From the information given, entity A (supplier) satisfies paragraphs 9-5(a) to 9-59d) of the GST Act as:

a)    the supply of information is made for consideration; and

b)    the supply is made through an enterprise that the supplier carries on; and

c)    the supply is connected with Australia as the supply is made through a business that the supplier carries on in Australia; and

d)    the supplier is registered for GST.

However, the supply is not a taxable supply to the extent that the supply is GST-free or input taxed.

There is no provision under the GST Act that the supply made by the supplier is input taxed.

GST-free supply

Relevant to the supply made by the supplier to entity B is item 3 in the table in subsection 38-190(1) of the GST Act (item 3).

Under item 3, a supply of a thing other than a supply of work physically performed on goods situated in Australia when the thing supplied is done or a supply directly connected with real property situated in Australia is GST-free if:

a)    the supply is made to a recipient who is not in Australia when the thing supplied is done; and

b)    the effective use or enjoyment of which takes place outside Australia.

All the requirements in item 3 must be satisfied for the supply of information made by the supplier to be treated as GST- free under that item.

Paragraph (a) of item 3

'Recipient' is defined in section 195-1 of the GST Act and means in relation to a supply, the entity to which the supply was made

Entity B is an entity that carries on its business activity in Australia. In this instance paragraph (a) in item 3 is not satisfied since the recipient (entity B) is in Australia in relation to the supply.

If a supply is made to a recipient who fails the 'not in Australia' requirement in paragraph (a) of item 3, it is necessary to consider whether subsection 38-190(4) of the GST Act applies.

Subsection 38-190(4) of the GST Act extends the scope of item 3 by treating a supply that is made to a recipient who is in Australia in relation to the supply as being made to a recipient who is not in Australia if:

a)    the supply is made under an agreement entered into, whether directly or indirectly, with an Australian resident; and

b)    the supply is provided, or the agreement requires it to be provided, to another entity outside Australia.

The expression 'provided to another entity' in subsection 38-190(4) of the GST Act, seeks to identify the entity to which the item 3 supply actually flows. For example, if a supply of a service is made to an Australian resident recipient who is in Australia in relation to the service and that service is rendered to or received by another entity at the time it is performed, the supply is provided to that other entity. If that other entity is outside Australia, subsection 38-190(4) of the GST Act treats the supply as being made to a recipient who is not in Australia. In that instance paragraph (a) of item 3 will be satisfied.

From the facts given, the main purpose for the team to visit the two islands was to provide entity B with a report outlining their understanding and recommendations in relation to the overseas project. This report was not given to anyone else in the islands. Upon receipt of the report from the supplier, entity B at its discretion will edit and compile the final report and share this with other entities.

In this instance we consider the report is the result of the supply of the information made by the supplier and entity B is the recipient of the supply. Subsection 38-190(4) of the GST Act does not apply to the supply of information made by the supplier. Paragraph (a) in item 3 is not satisfied.

As paragraph (a) in item 3 is not satisfied, the supply of information made by the supplier to entity B is therefore a taxable supply under section 9-5 of the GST Act.

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