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Edited version of private advice

Authorisation Number: 1051670107726

Date of advice: 11 May 2020

Ruling

Subject: Goods and services tax (GST) and the supply of Asian language courses

Question

For which of these educational teaching services provided to Australian residents or overseas entities do you need to charge GST?

1.    Teaching language lessons as part of school's curriculum (both private and government).

2.    Teaching language classes at child care centres with government funded kindergarten program.

3.    Teaching after school language classes at school venues paid for by parents.

4.    Teaching non-accredited online language classes to school aged children paid by parents.

5.    Teaching non-accredited online language classes to adults paid by themselves.

Answer

Currently you are not registered for GST. Your supply of teaching the language lessons for all scenarios is outside the scope of GST.

Where you are registered or required to be registered for GST:

For all scenarios where you are contracted by third parties (that is, Australian schools, Australian child care centres, parents of children) and by the adults, your supply of teaching the language lessons made to the third parties and adults is a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when the children and adults receiving the teaching of the language lesson are located in Australia at the time of the supply.

However, where the children and adults receiving the online teaching of your language lessons are located outside Australia at the time your online teaching is done, your supply to the parents and adults is GST-free under item 3 in the table in subsection 38-190(1) of the GST Act.

Relevant facts and circumstances

You are not registered for GST. You will soon register for GST as your GST turnover reaches AUD $75,000.

You are a resident of Australia and teach Asian languages.

You teach the Asian languages either face to face or online. None of the courses are Vocational Education and Training courses (V.E.T. courses). Further none of the courses are Masters or Doctoral level courses.

Students do not receive a qualification, such as a certificate on completion of a course. You are available to answer questions from students when they need help learning the course material.

The online courses are not pre-vocational courses (that is, courses designed to assist people to gain entry to a specified related V.E.T course or Australian apprenticeship). Some students are located overseas when the online class is done. There are video chats between the teachers and students as part of the online courses.

You are not:

You provide language lessons under the following scenarios:

Scenario 1:

You supply the service of teaching the Asian language as part of the school curriculum where the school contracts you to deliver the teaching. The schools are a government school and a non-government school.

You provide these language lessons with a teacher attending the virtual classroom at the school.

Scenario 2

You teach Asian languages at child care centres, which pay you and contract you to deliver the teaching. The child care centres have government funded kindergarten programs.

All children in a particular age group must attend the lessons.

Scenario 3

You are considering delivering after school language lessons at school venues. The parents will pay you for these lessons and contract you to deliver the lessons. The students would be receiving after school hours care at the time.

The Asian language lessons are optional; they are not a compulsory part of an after school hours care curriculum.

Scenario 4

You supply online language lessons to school age children. The lessons are paid for by parents. The students may be in Australia or non-residents located outside of Australia.

These courses are provided by way of private tuition.

There are video chats between teachers and students as part of these online courses.

Scenario 5

You supply online language lessons to adults who are interested to learn the language for their work mostly. These adults pay for the courses. The students may be in Australia or non-residents located outside Australia.

These courses are available to adults in the general community.

These courses are provided by way of private tuition.

There are video chats between teachers and students as part of these online courses.

You market the courses on the internet.

The courses are not:

·         similar to 'V.E.T. courses'

·         provided to employees at the request of their employer

·         provided to members of your organisation

·         provided at the request of an organisation to members of that organisation

·         directed at people who want to add to their employment related skills

The objectives of these courses do not specify the employment related skills the students will learn. The means of imparting employment related skills are not clearly identified to students prior to commencing these courses.

There is no reasonable expectation that the skills being developed by undertaking these courses will be used in the course of being an employee, or working in a business, occupation, profession or trade.

You cannot provide evidence that the majority of people undertaking the online courses are gaining employment relevant to the skills they have acquired in the course.

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 38-85

A New Tax System (Goods and Services Tax) Act 1999 section 38-145

A New Tax System (Goods and Services Tax) Act 1999 section 38-150

A New Tax System (Goods and Services Tax) Act 1999 section 38-155

A New Tax System (Goods and Services Tax) Act 1999 section 38-190

A New Tax System (Goods and Services Tax) Act 1999 section 195-1

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.

Summary

Currently you are not registered for GST. Your supply of teaching the language lessons for all scenarios is outside the scope of GST.

Where you are registered or required to be registered for GST:

·         For all scenarios where you are contracted by third parties (that is, Australian schools, Australian child care centres, parents of children) and by the adults, your supply of teaching the Asian language made to the third parties and adults is a taxable supply under section 9-5 of the GST Act when the children and adults receiving the teaching of the Asian language are located in Australia at the time of the supply.

·         However, where the children and adults receiving the online teaching of your Asian language are located outside Australia at the time your online teaching is done, your supply of teaching the Asian language to the parents and adults is GST-free under item 3 in the table in subsection 38-190(1) of the GST Act.

Detailed reasoning

GST is payable on a taxable supply.

An entity makes a taxable supply if it meets the requirements of section 9-5 of the GST Act, which states:

You make a taxable supply if:

(a)  you make the supply for *consideration; and

(b)  you make the supply in the course or furtherance of an *enterprise that you *carry on; and

(c)   the supply is *connected with the indirect tax zone; and

(d)  you are *registered or *required to be registered for GST.

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

(*Denotes a term defined in section 195-1 of the GST Act)

From the information given, your supply of teaching Asian languages satisfies paragraphs (a) to (c) 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 you carry on; and

(c)   your supply is connected with Australia, as it is made through a business you carry on in Australia.

Paragraph 9-5(d) of the GST Act

Currently you are not registered for GST. Your supply of teaching the language lessons for all scenarios is outside the scope of GST.

You are required to be registered for GST when your GST annual turnover (current or expected) is AUD $75,000 or more.

You advised you will soon register for GST as your turnover will reach the GST registration threshold of AUD $75,000. In this instance you will satisfy paragraph 9-5(d) of the GST Act and your supply will be a taxable supply to the extent that it is not GST-free or input taxed under the GST Act.

Your supply of teaching Asian languages is not an input taxed supply under the GST Act.

GST-free supply

To whom are you making the supply of teaching Asian languages?

From the facts given, you are contracted by Australian primary schools, Australian child care centres, parents and adults to supply the teaching of Asian languages to students.

When the adults contract you to supply the Asian language online to them your supply of teaching them the Asian language is made and provided to them. In this instance, the adult is the recipient of your supply.

However, where you are contracted by Australian schools, Australian child care centres and parents and you are required to provide the teaching of the Asian language to the children, there is a tripartite arrangement in place for your supply of teaching the Asian language.

Goods and Services Tax Rulings GSTR 2000/30 and GSTR 2006/9 provide guidance on tripartite arrangements when teaching services are provided.

Paragraph 47 of GSTR 2000/3 sets out a tripartite scenario where a supplier of a secondary course hires a teacher to deliver curriculum related lessons to a student. It states:

47. Georgia is a Year 7 student and the school engages a private tutor to assist Georgia with her reading skills. The private tutor charges the school a GST inclusive fee. Engaging the services of private tutors to assist students with learning difficulties is a creditable acquisition and the school is entitled to an input tax credit for the GST paid. The subsequent supply by the school to Georgia is GST-free.

Further, paragraphs 165 to 170 of GSTR 2006/9 set out another tripartite arrangement which consists of a GST-free supply of an education course and a supply of teaching services by a teacher to the supplier of the education course. They state:

Example 6: teaching services

165. A, a supplier of teaching services, enters into a contract with B, a course provider, to provide teaching services to B's students.

166. B conducts professional or trade courses that are GST-free under section 38-85. Students enrol with, and pay fees directly to, B. When a student completes the course, B is authorised by the relevant State or Territory authority to conduct a test. If a student passes the test, B facilitates the issuing of the qualification/licence by the relevant State or Territory authority.

167. A has no contractual relationship with the students.

168. A makes a supply of the teaching services to B and A provides this supply to the students. A's supply is not a GST-free supply of a professional or trade course.

169. However, B does make a GST-free supply of a professional or trade course to the students. The students enter into contractual arrangements with B for the supply of the professional or trade course. B makes a supply of the course to the students. It does not matter whether B's employees do the actual teaching or B subcontracts the teaching to another entity (in this case A).

170. Based upon these contractual arrangements, the students are the recipients of the supply of the professional or trade course made by B, and B is the recipient of the supply of teaching services made by A.

From the above, where you are contracted by Australian schools, Australian child care centres and parents to deliver the teaching of Asian languages to the children, you are making a supply of teaching services to the Australian schools, Australian child care centres and parents as they are the recipient of your supply when provided the language lessons to the children.

We shall now consider the GST status of your supply of teaching the Asian languages.

1. Contracts with adults

Relevant to your supply of the teaching of the Asian language online to adults located in and outside Australia is section 38-85 and item 3 in the table in subsection 38-190(1) of the GST Act (item 3).

Section 38-85 of the GST Act

Under section 38-85 of the GST Act, a supply of an education course is GST-free. Section 195-1 of the GST Act defines education course and includes an adult and community education course (ACE course)

Goods and Services Tax Ruling GSTR 2000/27 provides guidance when a course is an ACE course.

According to paragraph 10 in GSTR 2000/27, an ACE course means a course of study or instruction that is likely to add to the employment related skills of people undertaking the course and:

(a)  is of a kind determined by the *Student Assistance Minister to be an adult and community education course and is provided by, or on behalf of, a body:

(i)            that is a *higher education institution; or

(ii)           that is recognised, by a State or Territory authority, as a provider of courses of a kind described in the determination; or

(iii)          that is funded by a State or Territory on the basis that it is a provider of courses of a kind described in the determination; or

(b)  is determined by the Student Assistance Minister to be an adult and community education course.

Accordingly for a course to be a GST-free ACE course under paragraph (a), the following three requirements must be satisfied:

                      i.        The course must be a course of study or instruction that is likely to add to the employment related skills of people undertaking the course; and

                     ii.        The course must be of a kind determined by the Education Minister to be an adult and community education course; and

                    iii.        The course must be provided by a body that is either a higher education institution or by a body that is recognised or funded by a State or Territory authority to conduct adult and community education courses as described in the Education Minister's determination.

It is important to note that the Education Minister is not responsible for determining whether an adult and community education course is likely to add to the employment related skills of people undertaking the course. This criterion is separate from the Minister's Determination, and will depend on the facts of each case.

Under subsection 5(2) of A New Tax System (Goods and Services Tax) (Adult and Community Education Courses) Determination 2016 (ACE determination), the Student Assistance Minister determined that for a course to be an Adult and Community Education course under paragraph (a) of the definition of Adult and Community Education course in section 195-1 of the GST Act , it must:

(a)  not be a course mentioned, in paragraph (a), (b), (c), (d), (f), (h), (i), (j) or (k) of the definition of education course in section 195-1 of the GST Act; and

(b)  be a course that is available to adults in the general community; and

(c)   not be a course that is provided by, or at the request of an employer to the employees of that employer; and

(d)  not be a course that is provided by, or at the request of, an organisation to the members of that organisation, except an organisation for which membership is open to adults in the general community; and

(e)  not be a course that is provided by way of private tuition to an individual.

From the facts given when you supply and provide the teaching of the Asian Language online to the adults, you are not

·         a higher education institution,

·         recognised by a State or Territory, as a provider of Adult and Community Education courses

·         funded by a State or Territory on the basis that you are a provider of Adult and Community Education courses

·         a non-profit body; and

·         your online teaching of the Asian language is not a course of a kind determined by the Education Minister to be an ACE course under paragraph (b) of the definition of ACE course in section 195-1 of the GST Act.

Instead you are providing the teaching of the Asian Language online by way of private tuition to the individual which in this instance is not an ACE course determined by the Education Minister.

Your supply of teaching the Asian language online is not a GST-free supply of an education course under section 38-85 of the GST Act.

Item 3

Item 3 applies to residents and non-residents of Australia.

Under item 3, supplies of things other than goods or real property are GST-free where:

Further subsection 38-190(4) of the GST Act extends the GST-free provision of item 3 where the contract is with an Australian entity and the supply is to be provided to another entity outside Australia.

Under subsection 38-190(4) of the GST Act, a supply is taken for the purposes of item 3 to be a supply made to a recipient who is not in Australia if:

(a)  it is a supply 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 located

outside Australia

Adults located in Australia

When you make and provide the supply of the online teaching of Asian languages to adults located in Australia, the requirements in item 3 are not satisfied since the use and enjoyment of the receipt of the online teachings of the Asian languages by the adults is in Australia

Your supply of the online teaching of Asian languages is a taxable supply under paragraph 9-5 of the GST Act, provided that you are registered, or required to be registered, for GST at the time of supply since:

·         there is no provision in the GST Act that makes your supply of the online teaching of the Asian Languages to adults located in Australia GST-free or input taxed; and

·         the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act would be met.

Adults located outside Australia

When you make and provide the supply of the online teaching of Asian languages to adults located outside Australia, the requirements in item 3 are satisfied since the use and enjoyment of the receipt of the online teachings by the adults located outside Australia at the time of the supply is outside Australia and the supply is neither a supply of work physically performed on goods situated in Australia when the teaching is done nor is a supply directly connected with real property located in Australia.

Summary

When you supply and provide your supply of teaching the Asian language online to an adult located in Australia your supply is a taxable supply under section 9-5 of the GST Act, provided that you are registered, or required to be registered, for GST at the time of supply.

When you supply and provide your supply of teaching the Asian language online to an adult located outside Australia your supply is a GST-free supply under item 3.

2. Contracts with Australian schools, Australian child care centres and parents

Children located in Australia

When you supply the teaching of Asian languages to Australian schools, Australian child care centres and parents and the children are located in Australia at the time you provide the teaching to the children, your supply of teaching the Asian languages made to the Australian schools, Australian child care centres and parents is not a supply of an education course as defined in section 195-1of the GST Act.

You supply teaching services to the Australian schools, Australian childcare centres and parents and your supply is a taxable supply under section 9-5of the GST Act, provided that you are registered, or required to be registered, for GST at the time of supply since there is no provision under the GST Act that makes your supply that is provided to children located in Australia GST-free or input taxed and all of the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act would be met.

Children located outside Australia

Under item 3, supplies of things other than goods or real property are GST-free where:

Further subsection 38-190(4) of the GST Act extends the GST-free provision of item 3 where the contract is with an Australian entity and the supply is to be provided to another entity outside Australia.

Under subsection 38-190(4) of the GST Act, a supply is taken for the purposes of item 3 to be a supply made to a recipient who is not in Australia if:

(a)  it is a supply 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 located outside Australia.

When the parents are located outside Australia and contract you to provide the online teaching of the Asian language to their children located outside Australia at the time the teaching is done, your supply of teaching the Asian language made to the parents located outside Australia is GST-free under item 3 because the use and enjoyment of your supply of teaching the Asian language is outside Australia when provided to the children who are located outside Australia and the supply is neither a supply of work physically performed on goods situated in Australia when the teaching is done nor is a supply directly connected with real property located in Australia.

Further, where the parent is a resident of Australia and contracts you to provide the online teaching of the Asian language to a child located outside Australia, subsection 38-190(4) of the GST Act applies to your supply. Your supply of teaching the Asian language made to the parent is GST-free under item 3 because the use and enjoyment of your supply of teaching the Asian language is outside Australia when the teaching is performed and the supply is neither a supply of work physically performed on goods situated in Australia when the teaching is done nor is a supply directly connected with real property located in Australia.

Where the parent is a non-resident who is in Australia and the parent requests you to provide the supply to a child located outside Australia, you make a GST-free supply under item 3 because the use and enjoyment of your supply of teaching the Asian language is outside Australia when provided to the child who is located outside Australia when the teaching is performed and the supply is neither a supply of work physically performed on goods situated in Australia when the teaching is done nor is a supply directly connected with real property located in Australia.

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