Edited version of private advice

Authorisation Number: 1051753400920

Date of advice: 14 September 2020

Ruling

Subject: GST and supply of migration services

Question

Is the supply of migration services you make to non-resident individuals and companies located outside Australia at the time the supply is done, a GST-free supply under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes, the supply of migration services you make to non-resident individuals and companies located outside Australia at the time the supply is done is a GST-free supply under item 2 in the table in subsection 38-190(1) of the GST Act.

Relevant facts

You carry on a migration consulting business in Australia and are registered for GST.

You supply your migration services to non-resident individuals, and they are located outside Australia at the time you make your supply to them. These individuals acquire your services for the purpose of securing a visa in order to migrate to Australia.

You occasionally supply your migration services to companies operating outside Australia and they are not a resident of Australia.

The overseas companies would acquire your migration services when they plan to send their workers to Australia for three months for short training or work purposes. These workers are located outside Australia when you supply your services to the overseas companies.

The overseas companies are neither registered nor required to be registered for GST since they are not based in Australia and are not Australian companies. They do not have a representative or subsidiary company in Australia. They do not have any presence in Australia.

You are not required to provide your migration services to another entity in Australia when supplying your migration services to the non-resident individuals and 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.

Summary

From the facts given, the supply of migration services you make to non-resident individuals and companies located overseas is a GST-free supply under item 2 in the table in subsection 38-190(1) of the GST Act.

Detailed reasoning

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 the above for your supply of migration services to the non-resident individuals and companies to be a taxable supply and to be liable for the GST.

From the facts given, you satisfy paragraphs 9-5(a) to (d) of the GST Act as:

a)    you make the supply for consideration

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

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

d)    you are registered for GST.

However, your supply of migration services is not a taxable supply to the extent that it is GST-free.

There is no provision under the GST Act that makes your supply of migration services input taxed.

GST-free supply

Relevant to your supply of migration services to the non-resident individuals and companies is item 2 in the table in subsection 38-190(1) of the GST Act (item 2).

Under Item 2 a supply of a thing (other than goods or real property) made to a non-resident who is not in Australia when the thing supplied is done, is GST-free if:

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 needs to be satisfied for the supply to be GST-free.

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

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.

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 ruling is available at ato.gov.au

Non-resident company

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:

a)        at or through a fixed and definite place of its own for a sufficiently substantial period of time; or

b)        through an agent at a fixed and definite place for a sufficiently substantial period of time.

A non-resident company is in Australia in relation to a supply if:

·         the supply is for the purposes of the Australian presence of the company; or

·         the presence of the company in Australia is involved in the supply unless the only involvement is minor.

Non-resident individuals

A non-resident individual must be physically in Australia to be 'in Australia'.

A non-resident individual is in Australia in relation to the supply if the non-resident individual is involved with the supply while in Australia. A non-resident individual is involved with the supply where the non-resident is in contact with the supplier while in Australia and that contact is not minor (e.g. a courtesy call or checking on the progress of the supply).

If the non-resident individual is in Australia for a purpose that is not related to the supply, e.g. the individual is on holiday in Australia and has no contact with the supplier or only has minor contact, the non-resident individual is not considered to be involved with the supply and is therefore 'not in Australia in relation to the supply'.

A supply to a non-resident individual who is physically in Australia and involved, other than in a minor way, with the supply is taxable during the period of that involvement. The period of the individual's involvement while in Australia is determined on a reasonable basis having regard to the circumstances of the case. That part of the supply that is done when the non-resident individual is not physically in Australia or is physically in Australia but not involved with the supply will satisfy the requirement that the 'non-resident is not in Australia in relation to the supply'.

From the facts given your supply of migration services is made to non-resident companies and individuals located outside Australia when the supply is done. In this instance the pre-condition for the non-resident not to be 'in Australia in relation to the supply' in item 2 is satisfied.

The next step is to consider the paragraphs in item 2.

Paragraph (a) of item 2

Paragraph (a) of item 2 requires that the supply of 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.

Goods and Services Tax Ruling GSTR 2003/7 provides guidance on when a supply is a supply of work physically performed on goods and when a supply is directly connected with real property.

From the facts given, your supply of migration services to the non-residents satisfies paragraph (a) of item 2 as:

·         your supply is made to non-resident individuals and companies that are not in Australia in relation to the supply when the supply is done; and

·         your supply of migration services is neither a supply of work physically performed on goods situated in Australia when done nor a supply directly connected with real property situated in Australia.

In this instance your supply of migration services is GST-free under paragraph (a) to the extent it is not negated by subsection 38-190(3) of the GST Act.

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.

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

Your supply of migration services is made and provided to the non-resident individuals and companies located outside Australia. Your supply of migration services to the non-resident individuals and companies located outside Australia is therefore GST-free under item 2.

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