Edited version of private advice

Authorisation Number: 1051888116620

Date of advice: 20 August 2021

Ruling

Subject: GST and supply of legal services

Question 1

Is the supply of legal services described in scenario 1 made by the Australian company ('you') to an individual located in Australia a GST-free supply under item 1 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No, your supply of legal services described in scenario 1 to an individual located in Australia is not GST-free under item 1 in the table in subsection 38-190(1) of the GST Act as the services are indirectly connected with property or goods located outside Australia.

Question 2

Is the supply of legal services described in scenario 2 that you make to an individual located outside Australia a GST-free supply under paragraph (a) of item 2 in the table in subsection 38-190(1) of the GST Act (item2)?

Answer

Yes, your services are GST-free to the extent your client is not in Australia when your services are performed as you have stated your client is a non-resident.

When your client is in Australia to attend meetings with you in relation to your services then the services you provide at this meeting will not be GST-free.

The residency status of your client and their location needs to be considered on a case by case basis and you should not solely rely on their overseas mailing address as being an indicator of residency.

Question 3

Is your supply of referral services to the non-resident legal lawyer a GST-free supply under paragraph (b) of item 2 in the table in subsection 38-190(1) of the GST Act (item 2)?

Answer

Yes, your services are GST-free when you are able to satisfy that the lawyer is a non-resident and is neither registered for GST nor required to be registered for GST. We are satisfied the lawyer acquires the services in carrying on an enterprise if the overseas legal firm has a current authorisation to practice law.

The residency status of your client and their location needs to be considered on a case by case basis and you should not solely rely on their mailing address overseas as being an indicator of residency or location.

The ABN Look-up cannot be used solely to determine the GST registration status or otherwise of the overseas legal firm. If the lawyer does not have an ABN you need to also be satisfied they are not registered for GST under the limited registration system within Division 146 of the GST Act.

Question 4

Is your supply of services made to an Australian resident individual located outside Australia a GST-free supply under item 3 in the table in subsection 38-190(1) of the GST Act (item 3)?

Answer

The supply is GST-free under item 3 as you are making and providing, or only providing your services to an Australian resident (as contractor or providee) who is temporally living overseas, and those services relate to their presence in the overseas country to purchase a property in the overseas country or to administer a deceased estate established under an overseas will. These services are integral to their presence outside Australia and therefore the effective use or enjoyment of the supply takes place outside Australia.

Question 5

Is your supply of legal services described in scenario 5 and made to an individual located in Australia a GST-free supply under item 4 (a) in the table in subsection 38-190(1) of the GST Act?

Answer

No. Item 4 does not apply to your supply of legal services because the services you provide are preliminary work that have no direct connection with rights, nor do they facilitate a dealing in or exercise of rights

Relevant facts

You are a company located in Australia and you are registered for GST.

You are requesting a private binding ruling on the following 5 scenarios which apply to the legal services you provide:

Scenario 1

For this scenario you want us to consider item 1 in the table in subsection 38-190(1) of the GST Act.

1.    The services relevant to this scenario are made to a client who is an individual who is in Australia at the time the services are provided.

2.    During the initial communications the client is informed about the prerequisites of an overseas law, usually for:

•         Probate of the overseas Estate which covers property and goods situated in the overseas country. You advise the Executor of the Estate what is their role as an executor and how the overseas law applies to the overseas Estate. You ascertain the assets for the overseas Estate and refer the client to a lawyer based in the overseas country who will do the legal work for the probate.

•         Acceptance of inheritance of real property situated in an overseas country.

•         Sale, Purchase, Conveyance and Management of real property situated in an overseas country. This includes related filings with and representations to overseas authorities such as Courts, Land Registry, Zoning Planning Authorities and conducting title searches. It covers arranging civil engineers, topographers, real estate agents, tax accountants.

•         The legal services also involve the drafting and executing of Deeds, Agreements, Applications for Leases, Evictions and Enforcement of Court orders. This may necessitate drafting and executing lawsuits and petitions before overseas courts regarding real property and goods, including representations before overseas courts.

3.    The services you provide are in assessing the individual's requirements, advise the individual the relevant documentation required and the procedures that need to be followed in the overseas country. If the individual is in possession of documents (relevant to the above under 2), the documents are viewed to ascertain whether they are sufficient and proper. If the individual wishes to proceed, then they are referred to an overseas lawyer appropriately specialised and located in the relevant overseas municipality.

4.    The preliminary work is sometimes free of charge and on other occasions it is for a fee.

Scenario 2

For this scenario you want us to only consider item 2(a) in the table in subsection 38-190(1) of the GST Act.

1.    You are engaged by an individual located outside Australia as you are registered in Australia to provide advice in relation to overseas law. The services are not related to goods or real property situated in Australia. and the individual is not in Australia at the time the services are done.

2.    The individual requires services such as preparation of documentation, translation of documentation, execution of Power of Attorney, swearing of affidavits.

3.    Correspondence with the individual is usually done by email. You complete documents and forward them to the individual's mailing address overseas. You consider that the services are made and provided to the individual located overseas.

4.    The individual is located outside of Australia at the time the translation, execution of Power of Attorney and swearing of affidavits are done. The parties to the Power of Attorney are the individual and the appointed Proxy. The parties to the swearing of affidavits are the individual and the appointed Proxy.

5.    The individual does not carry on an enterprise in Australia, is not registered for GST and is not required to be registered for GST.

Scenario 3

For this scenario you want us to only consider item 2(b) in the table in subsection 38-190(1) of the GST Act.

In this scenario:

•         You have bilateral arrangements with overseas legal firms that contract with you as a referrer of clients who are individuals.

•         These legal firms are based outside Australia. You are not aware of whether the overseas legal firms have other operations in Australia or carry on any other business in Australia. The contracted services are provided to representatives located outside Australia.

•         You receive an introduction fee from the overseas legal firm for your referral services.

•         The overseas firm or its representatives are not registered or required to be registered for the Australian GST.

•         All correspondence is with representatives based outside Australia.

•         Regarding item 2(b) you use the following criteria to consider if the requirements in this paragraph are satisfied:

­   the tax residence and presence in Australia can be determined based on the mailing and billing address of the legal firms, except where a representative of the overseas legal firm visits Australia in relation to the referral services provided by you.

­   the overseas legal firm's authorisation to practice law outside Australia is taken to be sufficient evidence to satisfy the requirement that it is carrying on an enterprise. The overseas legal firm's enterprise is also an innate feature of its agreement with you.

­   the ABN Look-up will be used to determine the GST registration status or otherwise of the overseas legal firm. If the overseas lawyer does not have an ABN or is not registered for GST, then you propose to treat the overseas lawyer as not registered for GST.

Scenario 4

For this scenario you want us to only consider item 3 in the table in subsection 38-190(1) of the GST Act (item 3)

1.    Scenario 4 covers situations where you are engaged to perform services to an Australian resident. The nature of your services in this scenario consist of drafting documents or advice to use under an overseas law and they are related to legal actions to be taken or being taken in that overseas country.

2.    The contracting party is an Australian resident individual and the reasonable inference is the services are for private purposes. The services would be preliminary advice to resident individuals, temporarily living outside Australia and, who decide to purchase property in that overseas country or are required to administer a deceased estate established under an overseas will.

3.    You state you do not need information as to the reason why the resident individual is outside Australia or wants to purchase real property situated outside Australia in order to render your services. Accordingly, no inquiry is made into why people have travelled to that country or why they have made a decision to purchase property in that country.

4.    You advised the following:

•         The billing and mailing address are outside Australia;

•         Your supply is not work physically done on goods;

•         You are not authorised to provide legal advice on real property located in Australia; and

•         The advice covers overseas laws.

5.    All correspondence is with representatives located outside Australia. You provide your advice to the contracting party, although there may be rare circumstances where the advice is not for the contracting party but instead for (or provided to) another entity who is resident individual located outside Australia. The contracting party may incorporate that advice into its own advice.

6.    The services in the scenario do not involve either documents or advice to be provided to an entity in Australia.

Scenario 5

For this scenario you want us to only consider item 4(a) in the table in subsection 38-190(1) of the GST Act.

1.    Your legal activities in this scenario are related to overseas bank accounts, shares in overseas companies, interest in trust estates and debts that are governed by overseas law and made to individuals located in Australia. The activities are:

•         Advice regarding overseas bank accounts

You advise the individual all the prerequisites of the overseas law to open a new account, or if the individual has an existing account, you provide information on how to update and activate the overseas bank account.

You advise on all the documents that will be required by the overseas tax authority, the overseas bank, etc in order for the individual can get access to their account, internet banking, cash card, etc. The advice is given in Australia. The individual receiving the information from you is the accountholder (prospective account holder) of the bank account and lives in Australia. It is only preliminary work. If the client wishes to proceed to pursue such account in that country, then you refer them to a lawyer in that country.

•         Prepare enforcement of debts or demands for payments from account keepers where the debtor is situated outside Australia.

The work is preparing letters of protest to debtors located outside Australia towards creditors (clients) in Australia. You draft the letter according to the individual's facts, details and instructions. The letter is delivered to the individual in Australia who signs and posts the letter to the debtor in that overseas country.

If the individual wishes to proceed and pursue their case in that overseas country for the satisfaction of their claim, then you refer the individual to a lawyer in that country.

•         Organise power of attorney (POA)

The individual engages the overseas lawyer directly to be their Proxy, however there are other parties to the power of attorney (POA), namely the appointed attorneys. The critical service for organising a POA is ensuring efficacy of the POA under the overseas law and completing registrations with the relevant overseas authorities. You may perform some initial work before referring the client onto the overseas lawyers.

The individual contacts you and requests for a POA to be given to their Proxy located outside Australia. The POA is for work to be done in an overseas country (for example representation before the various overseas Public Authorities, Banks, the utilities companies, management of property etc).

The individual executes the POA, the Public Notary notarizes it and then you take care of its "apostile" certification from the Department of Foreign Affairs (passport office) for its use in that overseas country according to the 1961 Hague Convention. Then, the apostilled document is delivered to the individual and your role/task is accomplished. The individual sends it to the overseas country (to their Proxy) for further work there.

The parties to the POA are on one side the individual that has interests/affairs in the overseas country and on the other side the Proxy in the overseas country (their lawyer or relative, friend, etc).

The individual is in Australia and is the entity that contracts you for the work. The individual is understood to be a resident of Australia, based on passport nationality.

•         Organise passports

The passport application is on behalf of an individual located in Australia. You advise the individual about the prerequisites of the overseas law for the procurement of an overseas passport, the relevant documentation required, and the procedure that needs to be followed in that overseas country. If the individual is in possession of some documents, you review them to determine whether they are sufficient and proper.

If the individual wishes to proceed in pursuing procurement of the overseas passport, then you refer them to the overseas lawyer. The overseas lawyer will complete the application process and correspond with registries in Greece to obtain the necessary document, for example birth certificate or proof of citizenship or parent's citizenship.

2.    You also provide preliminary advice for the following services:

•         Probate of the overseas Estate

•         Acceptance of inheritance of real property situated outside Australia

•         Sale, Purchase, Conveyance and Management of real property situated outside Australia. This includes related filings with and representations to overseas authorities such as Courts, Land Registry, Zoning Planning Authorities and conducting title searches. It covers arranging civil engineers, topographers, real estate agents, tax accountants.

•         Drafting and executing of Deeds, Agreements, Applications for Leases, Evictions and Enforcement of Court orders. This may necessitate drafting and executing lawsuits and petitions before overseas courts regarding real property and goods, including representations before overseas courts.

3.    In supplying the above services under 1 and 2, the interaction with third parties when performing the legal activity would be:

•         correspondence with banks to prove a client's claim to money and to direct payment;

•         correspondence with a company to provide client's claims to shares and to obtain registration of client as shareholder;

•         arrange the sale of shares through stockbroker;

•         issue letter of demand or commence court proceedings to recover debt.

4.    You act on behalf of the individual and the services are preliminary work provided to the individual. In parallel the overseas lawyer will be providing the substantive services to the individual under separate engagements. You may complete some preliminary work before referring the individual to the overseas Lawyers. The substantive part of the engagements will be completed by lawyers based outside Australia.

5.    You will interact with the individual located in Australia and lawyers who are based outside Australia.

6.    Other than dealing with the individuals (your clients) that may be in Australia there are no other Australian entities that are involved with your supply.

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.

Question 1

Summary

Your supply of legal services to the individual located in Australia is not GST-free under item 1.

Reasoning

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

Where a supply has a direct connection with goods or real property, the location of goods or real property is the basis upon which the GST treatment of the supply is determined under item 1. The place of consumption is, in effect, determined by the location of the goods or real property. If the goods or real property are located outside Australia, the supply of a thing is GST-free under item 1.

Goods and Services Tax Ruling GSTR 2003/7 provides guidance when a supply is directly connected with goods or real property for the purpose of item 1.

Regarding item 1 GSTR 2003/7 provides the following guidance and examples:

Directly connected with goods or real property

21. Under items 1, 2 and 3 it is only where the connection between the supply and the goods or real property is a direct one that the location of goods or real property is regarded as the place where consumption occurs. The addition of the adverb 'directly' to the phrase 'connected with' implies a more emphatic connection between the supply and goods or real property. The inference is that the supply is so closely aligned with goods or real property that it is appropriate to treat the location of the goods or real property as the place where consumption occurs.

22. We consider, therefore, that the expression 'directly connected with' contemplates a very close link or association between the supply and goods or real property. (This is discussed further at paragraphs 113 to 134 of the Explanations section of the Ruling.)

23. The goods or real property must, in our view, be particular goods or real property for this very close connection to exist. A supply that is connected with goods or real property in general, rather than with particular goods or real property, does not have a sufficiently close connection with goods or real property for that connection to be a direct one.

24. For example, a supply of advice or information to a non-resident about the potential for investment in the real property market in Melbourne is not directly connected with real property. While the supply is connected with real property, the generality of the advice or information means that the supply does not have a direct connection with real property. The supply is not one so closely connected with real property in Melbourne that the place of consumption is regarded as Melbourne.

25. Fundamental to establishing whether there is a direct connection between a supply and particular goods or real property is determining what the supply is for. For example, without knowing what legal services are for, it cannot be said what they are connected with. Legal services in acting for a purchaser or vendor in the conveyance of land are directly connected with that real property. However, legal services in establishing a trust that will subsequently hold real property are not directly connected with the underlying real property.

26. A supply of a thing may comprise more than one part. You need to determine what each part is for. Where a part is separately identifiable, distinct, or has an aim in itself, it is necessary to consider the application of subsection 38-190(1) to that part including whether that part is directly connected with goods or real property. Where a part is only integral, ancillary or incidental to another dominant part of a supply, it is not necessary to consider whether the incidental part is directly connected with goods or real property. If the dominant part of the supply is not directly connected with goods or real property, the supply is treated as a supply of a single thing that is not directly connected with goods or real property.

27. For example, in the case of legal services supplied in the general administration or winding up of a deceased person's estate which includes real property, part of that service may involve acting for a beneficiary in the conveyance of land. That part of the service is directly connected with real property. If that part of the supply is separately identifiable, and the real property is situated outside Australia, that part of the supply is GST-free under item 1. However, if the real property is situated in Australia, that part of the supply is not GST-free under paragraph (a) of item 2, or item 3. If, on the facts, the conveyancing part of the services is only incidental to a dominant part of the supply which is not directly connected with goods or real property, the incidental connection with real property does not characterise the dominant part of supply as one directly connected with real property.

28. In some instances, a direct connection between a supply and particular goods or real property is self-evident. For example, a supply of repairs to goods or a building is directly connected with those goods or that building.

29. In other cases, you need to establish the exact nature of what the supplier is supplying to the recipient so that the transaction is analysed correctly. For example, a supply of advertising space in a newspaper to publicise the sale of goods is about conveying the advertising message. Even though the subject matter of the advertisement is goods, this does not establish a direct connection with the underlying goods. The advertising supply is directly connected with all the things necessary for the conveying of the message (see paragraphs 140 to 142 of the Explanations section of the Ruling).

31. In determining whether there is a direct connection between a supply and particular goods or real property, the location of the recipient of a supply is not relevant. Rather, the issue is one of determining whether the relationship between the supply and the goods or the real property is sufficiently close to be directly connected (see Example 4 at paragraphs 148 to 151 of the Explanations section of the Ruling).

130. Although the expression 'in respect of' is potentially much wider than 'directly connected with', Revenue Canada read the expression down. The relationship between the service and the property must be more than a mere indirect or incidental connection for the service and the property to be considered to be 'in respect of' each other.

135. In many cases, the description of the supply is likely to be clear enough in itself to establish whether or not the supply is directly connected with goods or real property. For example, it is clear that a supply of repairs to goods or a building is directly connected with those goods or real property. However, in other cases, to establish whether there is a direct connection between the supply and the goods or real property, a close analysis of the supply is necessary to reveal what the supply is really for.

137. Thus there will be cases where the arrangements between the supplier and the recipient must be examined to establish what the supply is for. Often this can be ascertained by looking at the written contract between the supplier and the recipient and, where necessary, the actions of those parties. If there is no written contract, other documentation such as purchase orders, correspondence between the parties or invoices or receipts may be useful in establishing what the supply is for.

138. Sometimes a supply may be given a generic label such as consultancy services or management services. In these circumstances it is necessary to examine what, in substance, the supply is for.

139. It is also important to understand the exact nature of what the supplier is supplying to the recipient so that in assessing whether there is a direct connection between that supply and particular goods or real property the transaction is analysed correctly. Two New Zealand cases illustrate this point.

173. Example 14 - supply of legal services in the preparation of a will

174. Example 15 - supply of legal services - provision of an opinion

176. Example 17 - provision of capital gains tax advice

177. Example 18 - provision of land tax advice

183. Example 24 - supply of debt recovery service

Your supply

From the facts given, the individual is informed about the prerequisites of an overseas law, usually for:

•         Probate of an overseas Estate and acceptance of inheritance regarding real estate property located in the overseas country that has been inherited; You advised the individual what is their role as an executor of the overseas Estate and how the overseas law applies to the overseas Estate.

•         Parental Gift and Gift (from parents to their children or third parties) regarding real estate property located outside Australia; You advise the individual of the consequences including financial of accepting the inheritance of the overseas property since under the overseas law you can accept or decline to accept a property as an inheritance, and

•         Sale, purchase, conveyancing and management of real estate property in an overseas country. You explain to the individual how the overseas law applies and what legal services are required in this case.

The work you do for the above is preliminary work for the above which is to advise the individual the relevant documentation required and the procedure that need to be followed in the overseas country. If the individual wishes to proceed in pursing any of the above in the overseas country, then they are referred to an overseas lawyer appropriately specialised and located in the relevant overseas municipality.

Based on the above information and the guidance given in GSTR 2003/7, we consider your supply of services to the individual are indirectly connected with property or goods located in the overseas country.

Accordingly, your supply of the above legal services to the individual located in Australia is not GST-free under item 1.

Your supply of the above legal services is a taxable supply under section 9-5 of the GST Act as:

•         your supply is for consideration; and

•         your supply is made in the course of an enterprise that you carry on; and

•         the supply is connected with Australia as it is made through the enterprise that you carry on in Australia; and

•         you are registered for GST; and

•         your supply is neither GST-free nor input taxed.

Question 2

Summary

Your services are GST-free to the extent your client is not in Australia when your services are performed as you have stated your client is a non-resident.

When your client is in Australia to attend meetings with you in relation to your services than the services you provide at this meeting will not be GST-free.

The residency status of your client and their location needs to be considered on a case by case basis and you should not solely rely on their mailing address overseas as being an indicator of residency

Reasoning

Under item 2 in the table in subsection 38-190(1) of the GST Act (item 2) a supply of things 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 performed on goods located in Australia nor a supply directly connected with real property located 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.

Precondition of item 2

The precondition of item 2 is that the supply is made to a non-resident who is not in Australia when the thing supplied is done.

Non-resident

The term 'non-resident' is defined in section 195-1 of the GST Act to mean 'an entity that is not an Australian resident'. 'Australian resident' is defined in section 195-1 to mean 'a person who is a resident of Australia for the purposes of the ITAA 1936.'

A supply is made to a non-resident for the purposes of item 2 if the supply is made to an entity that is a person who is not a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936).

Supply is made to an individual

An individual is a 'resident of Australia' as defined in subsection 6(1) of the ITAA 1936 if that individual is:

(a)  a person, other than a company, who resides in Australia and includes a person:

                                      i.        whose domicile is in Australia, unless the Commissioner is satisfied that the person's permanent place of abode is outside Australia;

                                     ii.        who has actually been in Australia, continuously or intermittently, during more than one-half of the year of income, unless the Commissioner is satisfied that the person's usual place of abode is outside Australia and that the person does not intend to take up residence in Australia; or

                                   iii.        who is:

(A)          a member of the superannuation scheme established by deed under the Superannuation Act 1990; or

(B)          an eligible employee for the purposes of the Superannuation Act 1976; or

(C)          the spouse, or a child under 16, of a person covered by sub-subparagraph (A) or (B).

Residency status is a question of fact and is one of the main criteria that determine an individual's liability to Australian income tax. Taxation Ruling TR 98/17 provides guidance on determining residency status under the income tax definition.

The meaning of '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, in our view, that the non-resident is not in Australia in relation to the supply when the thing supplied is done.

We determine whether the 'not in Australia requirement' is satisfied by determining whether the non-resident entity is in Australia in relation to the supply. If the entity is in Australia in relation to the supply, the entity does not satisfy the 'not in Australia' requirement.

In the case of supplies made to an individual, we consider that the physical location of the individual establishes whether that individual is in Australia when the thing supplied is done.

If a non-resident individual recipient of a supply is physically in Australia and in contact with the supplier (other than contact which is only of a minor nature), we consider that presence is in relation to the supply. The extent to which an individual's presence in Australia is in relation to the supply must be determined on a reasonable basis having regard to the period of the individual's involvement with the supply while in Australia.

Contact is minor if it is limited to contact of a simple administrative nature, such as checking on the progress of the supply or a courtesy call on the supplier. If this is the only contact between the non-resident individual and the supplier, we consider that the individual is not in Australia in relation to the supply.

Your supply

Precondition of item 2

From the facts given your supply is made to an non-resident individual located outside Australia but for when your client attends meetings with you in Australia. When your client is in Australia to attend meetings with you in relation to your services than the services you provide at this meeting will not be GST-free as the client is in Australia in relation to the supplies given during the meeting.

In determining if the client is a non-resident or located outside of Australia, the use of the mailing and billing address will be one indicator that can assist but cannot be your sole indicator. Your interactions with your client and statements from your client about their tax residency status should also be used. Your interactions with you client that give further indications may include the time of day you can ring them, the phone number you ring and the services you supply at the time of any face to face meetings.

Paragraph (a) of item 2

The conditions for paragraph (a) is thesupply is neither a supply of work performed on goods located in Australia nor a supply directly connected with real property located in Australia.

From the facts given your supply of legal services is neither a supply of work performed on goods located in Australia nor a supply that is directly connected with real property. In this case the case the conditions for paragraph (a) are met.

Your supply of services is GST-free under paragraph (a) of item 2 to the extent that subsection 38-190(3) does not negate that GST-free status.

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 the 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.

An Australian based recipient is a GST registered business that carries on its business activity in Australia and the acquisition of the thing supplied to the business is not solely of a private or domestic nature.

All of the requirements in subsection 38-190(3) of the GST Act 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. Where the requirements in subsection 38-190(3) of the GST Act are not satisfied, the supply of services is GST-free under item 2.

Goods and Services Tax Ruling GSTR 2005/6 provides guidance on the application of subsection 38-190(3) of the GST supplies to supplies made to non-residents that satisfy the requirements in item 2.

Paragraph 59 in GSTR 2005/6 states that the word 'provided' is used in subsection 38-190(3) to contrast with the term 'made' in item 2. In the context of section 38-190, the contrasting words indicate that if a non-resident contracts for a supply to be provided to another entity, the place of consumption should be determined with regard to the entity to which the supply is provided, not the entity to which the supply is made.

Thus the expression 'provided to another entity' means, in our view, that in the performance of a service (or in the doing of something), the actual flow of that supply is, in whole or part, to an entity that is not the non-resident entity with which the supplier made the agreement for the supply. The contractual flow is to one entity (the non-resident recipient) and the actual flow of the supply is to another entity.

You advised your supply is made and provided to the individual located outside Australia as such paragraph 38-190(3(b) is not satisfied. In this instance subsection 38-190(3) of the GST Act does not apply.

Accordingly, your services are GST-free under paragraph (a) of item 2 to the extent your client is not in Australia to attend meetings with you in relation to your services you provide.

Question 3

Summary

Yes, your services are GST-free when you are able to satisfy that the overseas lawyer is a non-resident and neither registered for GST nor required to be registered for GST. We are satisfied the overseas lawyer acquires the services in carrying on an enterprise if the overseas legal firm has a current authorisation to practice law.

The residency status of your client and their location needs to be considered on a case by case basis and you should not solely rely on their mailing address overseas as being an indicator of residency or location.

The ABN Look-up cannot be used solely to determine the GST registration status or otherwise of the overseas legal firm. If the overseas lawyer does not have an ABN you need to also be satisfied they are not registered for GST under the limited registration system within Division 146 of the GST Act.

Reasoning

In this scenario you want us to consider that the supply you make to an overseas lawyer is referral services only.

A supply of anything other than goods or real property is a GST-free supply under paragraph (b) in item 2 in subsection 38-190(1) of the GST Act if:

•         the precondition of item 2 is met that is the supply is made to a non-resident who is not in Australia in relation to the supply; and

•         the non-resident is not registered and is not required to be registered for GST and the acquisition is for the purpose of the overseas business carried on by the non-resident; and

•         subsection 38-190(3) does not negate the GST-free of the supply.

Precondition of item 2

From the facts given the overseas lawyer resides in an overseas country, does not carry on an enterprise in Australia and is not in Australia at the time of the supply. The precondition for item 2 is satisfied.

In determining if the client is a non-resident or located outside of Australia, the use of the mailing and billing address will be one indicator that can assist but cannot be your sole indicator. Your interactions with your client and statements from your client about their tax residency status should also be used. Your interactions with your client that give further indications may include the time of day you can ring them, the phone number you ring and any understanding from your contractual arrangement of how the services are to be provided and who you interact with.

Paragraph (b) of item 2

For this paragraph to be satisfied the overseas lawyer must not be registered for GST and must not be required to be registered for GST and the overseas lawyer acquires the services on carrying on their enterprise.

You should hold evidence that this condition is satisfied before treating your supply as a GST-free supply under paragraph (b).

We accept that the overseas lawyer acquires your services for the purpose of the business that they carry on. However, you must be satisfied, on reasonable grounds that the overseas lawyer is not registered or required to be registered for GST before you treat your supply as a GST-free supply.

You advised you will refer to the ABN Look-up website to determine whether the overseas lawyer is registered for GST to satisfy paragraph (b) of item 2. If ABN Look-up does not show that the overseas lawyer is registered for GST, you propose to consider that the overseas lawyer satisfies the requirement of not being registered and not required to be registered for GST.

The Australian business register website will not provide all situations in which a non-resident is registered for GST. From 1 July 2017 non-resident suppliers making supply of services to Australian consumers will be making supplies connected with Australia and if they are required to register for GST they have the option to register as a limited registration entity under Division 146 of the GST Act.

When the ABN Look-up shows that the overseas lawyer is not registered for GST you should enquired with the overseas lawyer if they are registered for the simplified GST as this information is not available on the ABN Look-up website. More information about limited registrations, referred to on the ATO website as simplified GST registration can be found at ato.gov.au/AusGST.

Further, if the overseas lawyer is not registered for GST you should enquire if the overseas lawyer is required to be registered for GST when making their supply of legal services to Australian consumers. The consideration for your referring services payable by the overseas lawyer is based on a percentage of the price they charge their client. You will therefore have some basis to determine if the overseas lawyer's services are being made to an Australian consumer and therefore if that overseas Lawyer might be required to register for GST. We accept that reasonable grounds are satisfied, if the overseas lawyer has provided a written statement, declaring that they are not required to be registered and this does not contradict the information you know, including from your contractual arrangements.

Accordingly, where the overseas lawyer is a non-resident and is not in Australia in relation to your supply, your supply of services to the overseas lawyer will satisfy the requirements in paragraph(b) of item 2 and will be a GST-free supply where you can substantiate that the overseas lawyer is neither registered nor required to be registered for GST.

Subsection 38-190(3) of the GST Act

Subsection 38-190(3) provides that, without limiting subsection 38-190(2) or (2A), a supply covered by item 2 in the 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.

Subsection 38-190(3) of the GST Act does not apply to your supply of referral services as the referral services are made and provided to the overseas lawyer.

Question 4

Summary

The supply is GST-free under item 3 as you are making and providing, or only providing your services to an Australian resident (as contractor or providee) who is temporally living outside Australia and those services relate to their presence in the overseas country to purchase a property in the overseas country or to administer a deceased estate established under an overseas will. These services are integral to their presence outside Australia and therefore the effective use or enjoyment of the supply takes place outside Australia.

Reasoning

Under item 3 in the table in subsection 38-190(1) of the GST Act (Item 3) a supply of things other than goods or real property is GST-free if:

•         the supply is made to a recipient who is not in Australia when the thing supplied is done (paragraph (a) of item 3); and

•         the effective use or enjoyment of which takes place outside Australia (paragraph (b) of item 3); and

•         the supply is not 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.

Item 3 may apply irrespective of whether the recipient is a resident or non-resident of Australia.

All the requirements in item 3 must be met for the supply to be GST-free.

Paragraph (a) of item 3

Goods and Services Tax Ruling GSTR 2004/7 provides guidance on paragraph (a) of item 3.

Recipient not in Australia

The requirement that the recipient in item 3, is not in Australia when the thing supplied is done is a requirement, in our view, that the recipient is not in Australia in relation to the supply when the thing supplied is done.

A recipient, in relation to a supply, is the entity to which the supply was made. If the recipient is in Australia in relation to the supply the recipient does not satisfy the not in Australia requirement.

The requirement that a supply is made to a recipient who is 'not in Australia' 'when the thing supplied is done' is in effect a proxy test for determining where the supply to that entity is consumed. The presumption is that if the other recipient of the supply is 'not in Australia' when the thing supplied is done, the supply of that thing is for consumption outside Australia and is GST-free, provided the other requirements of the item are met.

Paragraph (b) of item 3

It is only necessary to consider paragraph (b) of item 3 if paragraph (a) of item 3 is satisfied.

Goods and Services Tax Ruling GSTR 2007/2 provides guidance in determining when effective use or enjoyment of a supply takes place, or does not take place, outside Australia; and what apportionment is required if effective use or enjoyment of the supply takes place only partly outside Australia.

The following is from GSTR 2007/2

Our approach to determining the place of effective use or enjoyment of a supply

39. Paragraph (b) of item 3 requires the place of effective use or enjoyment of a supply to be determined (that is, whether the place is outside Australia). As paragraph (b) refers to the 'effective' use or enjoyment of the supply, it is necessary to inquire as to the entity that has the actual use or enjoyment of the supply.

40. The requirement in paragraph (a) of item 3 refers to the recipient of the supply. The recipient of the supply is the entity to which the supply is made. A supply that is made to a recipient entity may be provided to another entity. If a supply is made to a recipient and provided to another entity, the entity that actually uses or enjoys the supply is that other entity. For example, if a supply of travel services is made to a company (recipient) and the travel is undertaken by an employee of the recipient, the supply is provided to the employee and it is the employee that actually uses or enjoys the supply.

41. A supply is made to a recipient and provided to another entity if in the performance of a service (or in the doing of some thing) the actual flow of that supply is to an entity that is not the recipient entity with which the supplier made the agreement for the supply. That is, while the contractual flow of the supply is to the recipient entity, the actual flow of the supply is to another entity.

42. Thus in determining where a supply is used or enjoyed it is first necessary to establish the entity to which the supply is provided (the providee entity). The providee entity is also the recipient if the supply is not provided to some other entity. However, if the supply is provided to some other entity that other entity is the providee entity.

43. Having determined the providee entity it is then necessary to consider whether use or enjoyment of the supply by that providee entity takes place outside Australia.

88. A supply is provided as and when the thing supplied is done. This is the relevant time for determining whether a supply is provided to an entity in Australia or outside Australia and thus whether effective use or enjoyment of the supply takes place outside Australia.

Providee is an individual - when effective use or enjoyment of the supply takes place outside Australia

91. To determine whether effective use or enjoyment of a supply by a providee that is an individual takes place outside Australia, we determine whether there is provision of the supply to the individual in Australia or outside Australia. Only if there is provision of the supply to the individual outside Australia does effective use or enjoyment take place outside Australia.

92. To determine whether there is provision of a supply to an individual in Australia or outside Australia we distinguish between resident and non-resident individuals and whether they are physically in or outside Australia when the thing supplied is done. Distinguishing between individuals on the basis of their residency status and physical presence at a location is consistent with the approach taken for individuals in GSTR 2004/7 and GSTR 2005/6.

Resident individual physically in Australia when the thing supplied is done

93. If a supply is provided (or is required to be provided) to a resident individual who is physically in Australia when the thing supplied is done, the supply is provided to that individual in Australia.

94. As the supply is provided to the individual in Australia, effective use or enjoyment of the supply does not take place outside Australia. Paragraph (b) of item 3 is not satisfied and the supply is not GST-free under item 3. (See Flowchart 2, page 34.)

Resident individual not physically in Australia when the thing supplied is done

95. If a supply is provided (or is required to be provided) to a resident individual who is not physically in Australia when the thing supplied is done, it is necessary to determine whether the presence of the resident individual outside Australia is integral to, as distinct from being merely coincidental with, the provision of the supply. (We explain at paragraphs 105 to 115 when a resident individual's presence outside Australia is integral to the provision of the supply.)

96. If a resident individual's presence outside Australia is integral to, as distinct from being merely coincidental with, the provision of the supply, we consider that the supply is provided to that individual outside Australia. As the supply is provided to the individual outside Australia, effective use or enjoyment of the supply takes place outside Australia. Paragraph (b) of item 3 is satisfied. The supply is GST-free under item 3 if the other requirements of item 3 are satisfied. (See Flowchart 2, page 34.)

97. Conversely, if a resident individual's presence outside Australia is not integral to the provision of the supply, we consider that the supply is provided to the individual in Australia. As the supply is provided to the individual in Australia, effective use or enjoyment of the supply does not take place outside Australia. Paragraph (b) of item 3 is not satisfied and the supply is not GST-free under item 3. (See Flowchart 2, page 34.)

98. Apportionment is required if, for part of the time when the thing supplied is done, a resident individual is physically outside Australia and that individual's presence outside Australia is integral to the provision of the supply. That part of the otherwise taxable supply is GST-free. Apportionment is discussed at paragraphs 137 to 145.

How to determine whether an individual's presence at a particular location (that is outside Australia if a resident or in Australia if a non-resident) is integral to the provision of a supply

105. It is necessary to consider this section where a supply is provided to:

•         a resident individual who is physically outside Australia when the thing supplied is done; or

•         a non-resident individual who is physically in Australia, when the thing supplied is done.

106. A supply is provided to an individual at a particular location (that is, outside Australia if a resident or in Australia if a non-resident), if the individual's presence at that location is integral to, as distinct from being merely coincidental with, the provision of the supply.

107. Determining whether an individual's presence at a particular location is integral to the provision of the supply requires an examination of the facts and circumstances of the supply. However, some indicators that an individual's presence at a particular location is integral to the provision of the supply, and is not merely coincidental, include:

•         the need for the supply arises from the individual's presence at that location; or

•         the presence of the individual at that location is integral to the performance, receipt or delivery of the supply.

108. If the need for a supply to be provided to an individual arises from the individual's presence at a particular location we consider that the supply is provided to the individual at that location.

109. Some examples of supplies where the need for the supply arises from an individual's presence at a particular location are as follows:

•         a supply of immigration advice to a non-resident individual who wants to extend his or her stay in Australia;

•         a supply of customs broker services to a non-resident individual who is in Australia and requires the services of a customs broker to enter goods for home consumption in Australia; and

•         a supply of legal services which are provided to an individual at a location in relation to an offence committed by that individual while at that location (see Examples 4 (paragraphs 301 to 304), 5 (paragraphs 305 to 310) and 6 (paragraphs 311 and 312), Part III of the Explanation section.

110. The need for a supply does not arise from an individual's presence outside Australia (in the case of a resident individual), or in Australia (in the case of a non-resident individual), where the facts indicate that the supply is necessitated by the individual's absence from his or her usual place of residence and not by circumstances that arise from the individual's presence at that location.

111. For example, if a resident individual is on an overseas holiday or business trip, and a supply of services is made to that individual to manage his or her private or business affairs in Australia during that time, the need for that supply does not arise from the individual's presence overseas. Rather, the need for the supply arises from the individual's absence from Australia. (See also Example 16, paragraphs 383 to 386, Part III of the Explanation section).

112. A further indicator that an individual's presence at a particular location is integral to, and is not merely coincidental with, the provision of the supply is that the individual's presence at a location is integral to the performance, receipt or delivery of the supply. Some examples of such supplies are as follows:

•         supply of training or entertainment - the services are to be received by the individual at that location (see Example 8, paragraphs 325 to 329, Part III of the Explanation section);

•         supply of travel - the travel is to be undertaken by the individual at that location (see Example 8, paragraphs 325 to 329, Part III of the Explanation section);

•         supply of hairdressing or other similar services applied to the person - the services are to be performed on the individual at that location; and

•         supply of assessment services - the assessment of the individual is undertaken at that location and the individual is required to be present for the assessment.

114. The following are examples or circumstances in which we consider that the individual's presence at a particular location is not integral to the provision of the supply:

•         while a resident individual is on holiday outside Australia, the individual has a graphic design artist in Australia prepare designs for promotional material for the individual's business in Australia;

•         while a resident individual is on holiday outside Australia the individual has his or her tax return prepared by an agent in Australia (see Example 13, paragraphs 366 to 370, Part III of the Explanation section);

•         a service is provided to an individual who is a resident of Australia and, during the period when those services are performed, the individual goes overseas on holiday. While on holiday outside Australia the resident individual checks on the progress of the supply of services or the supplier contacts the resident individual to update the individual on the progress. The need for the supply does not arise from the individual's presence outside Australia and the individual's presence outside Australia is not integral to the performance, receipt or delivery of the supply (a similar example is Example 12, paragraphs 361 to 365 Part III of the Explanation section); and

•         a service is provided to an individual who is a non-resident and, during the period when those services are performed, the individual comes to Australia on holiday. While on holiday in Australia the non-resident individual takes the opportunity to visit the supplier to check on the progress of the supply of services or the supplier contacts the non-resident individual to update the individual on the progress. The need for the supply does not arise from the non-resident individual's presence in Australia and the individual's presence in Australia is not integral to the performance, receipt or delivery of the supply. (A similar example is Example 14, paragraphs 371 to 378, Part III of the Explanation section.)

115. Further explanation and examples about whether an individual's presence at a particular location is integral to the provision of a supply or is merely coincidental are provided at paragraphs 293 to 386, Part III of the Explanation section.

300. We set out below in more detail examples of supplies, the circumstances of which indicate, in our view, that the need for the supply arises from the individual's presence at that location.

Example 4 - supply of legal services to a resident individual physically located outside Australia

301. Jane, an Australian resident, is on holidays in New Zealand and while there commits an offence. While in New Zealand Jane engages an Australian solicitor to supply her with legal services.

Paragraph (a) of item 3

302. The supply of legal services is made to Jane who is not physically present in Australia when the thing supplied is done (that is the period during which the legal services are performed). The supply therefore satisfies paragraph (a) of item 3.

Paragraph (b) of item 3

303. The supply of legal services is provided to Jane. The need for the supply of legal services arises from Jane's presence in New Zealand and therefore her presence in New Zealand is integral to the provision of the supply. The legal services are therefore provided to Jane outside Australia and the effective use or enjoyment of the supply of legal services takes place outside Australia. Paragraph (b) of item 3 is satisfied

304. The supply to Jane is therefore GST-free under item 3.

Example 5 - referring to Example 4, Jane's parents engage the services of the Australian solicitor

305. Referring to Example 4, this example explains the outcome if Jane's parents (who are also Australian residents) engage the legal services of the solicitor instead of Jane.

Paragraph (a) of item 3

306. The supply of the legal services is made to Jane's parents who are physically present in Australia when the thing supplied is done (that is the period during which the legal services are performed). The supply does not satisfy paragraph (a) of item 3 unless subsection 38-190(4) applies

Subsection 38-190(4)

307. Paragraph 38-190(4)(a) is satisfied as the supply is made under an agreement with resident individuals (Jane's parents).

308. It is then necessary to consider if paragraph 38-190(4)(b) is satisfied. Paragraph 38-190(4)(b) is only satisfied if the supply of legal services is provided to another entity outside Australia.

309. The supply of legal services is provided to Jane. As explained at paragraph 303, Jane's presence outside Australia is integral to the supply as the need for the supply arises from Jane's presence outside Australia. The supply is therefore provided to Jane, another entity, outside Australia and paragraph 38-190(4)(b) is satisfied. Subsection 38-190(4) applies and the supply of legal services satisfies paragraph (a) of item 3.

Paragraph (b) of item 3

310. Paragraph (b) of item 3 is satisfied and the supply is therefore GST-free under item 3 See explanation at paragraph 303.

Example 6 - referring to Examples 4 and 5, the solicitor continues to provide legal services following Jane's return to Australia

311. Referring to Examples 4 and 5, this example explains the outcome where the solicitor continues to provide legal services to Jane following her return to Australia.

312. To the extent the solicitor continues to provide legal services to Jane in relation to this matter after she returns to Australia, the supply of those services does not satisfy either paragraph (a) or (b) of item 3 (irrespective of whether the supply is made to Jane or Jane's parents) and to that extent the supply of the legal services is not GST-free. Paragraph (a) of item 3 is not satisfied as Jane (Example 4) or Jane's parents (Example 5) are physically in Australia when the service is performed and subsection 38-190(4) is not satisfied in the case of the supply to Jane's parents (Example 5). Paragraph (b) of item 3 is not satisfied as the supply of legal services is provided to Jane in Australia and to this extent effective use or enjoyment of the supply does not take place outside Australia. Therefore, to the extent legal services are supplied following Jane's return to Australia the supply is not GST-free under item 3.

Your supply

In this scenario the contracting party is an Australian resident. The services are preliminary advice to resident individuals who are temporarily living in an overseas country who decide to purchase property in that country or are required to administer a deceased estate established under an overseas will. The nature of the services consists of drafting documents or advice to use under the overseas law and they are related to legal actions to be taken or being taken in the overseas country.

Paragraph (a) of item 3

In this scenario your supply of services is to a resident individual who is not in Australia at the time the services are done. In this instance paragraph (a) of item 3 is satisfied as the resident individual is not in Australia in relation to your supply when the services are performed.

Paragraph (b)

Your services are preparation of documents or advice sent to the resident individual located outside Australia.

Where the services you supply are integral to your client's presence in the overseas country, for example the advice is for legal actions to be taken or being taken in the overseas country for the purchase of the property in the overseas country or execution of the will in the overseas country, we consider the presence of the resident individual in the overseas country is integral to your supply of legal advice at the time the advice is given. In this instance paragraph (b) is satisfied as the use or enjoyment of your supply is outside Australia.

You advised that there may be rare circumstances where the advice is not for the contracting party but instead for (or provided to) another entity who is resident individual located outside Australia. The contracting party will include this information in their advice. In this instance it is the contracting party engaged by the resident individual located in the overseas country and the advice is for that resident individual. Even if you provide the services directly to the resident individual (providee) , the use or enjoyment of your supply is outside Australia given that individual is outside Australia. Paragraph (b) of item 3 is satisfied.

Other requirements for item 3

Your supply of legal service is neither a supply of work physically performed on goods situated in Australia when the thing supplied is done nor a supply directly connected with real property situated in Australia. The other requirements for item 3 are also satisfied.

Summary

Where the presence of the Australian resident in that overseas country is integral to your supply at the time the services are done, your supply of services to the Australian resident located outside Australia is GST-free under item 3.

Question 5

Summary

No. Item 4 does not apply to your supply of legal services because the services you provide are preliminary work that have no direct connection with rights, nor do they facilitate a dealing in or exercise of rights.

Reasoning

Under paragraph (a) of item 4 in the table in subsection 38-190(1) of the GST Act a supply that is made in relation to rights is a GST-free supply if the rights are for use outside Australia.

Goods and services Tax Ruling GSTR 2003/8 provides guidance in identifying when a supply is in relation to rights.

The following is from GSTR 2003/8:

What is a right?

25. The word 'right' is not defined for GST purposes and has a very broad meaning under the general law. A 'right' has been defined as 'Generally, a benefit or claim entitling a person to be treated in a certain way'

26. However, it is not necessary for the right to be a proprietary right.

What is 'a supply that is made in relation to rights'?

27A. A supply of a thing is a 'supply that is made in relation to rights' if it fits within one of the following three categories.

Category 1 - Supplies identified in paragraph 9-10(2)(e)

27B. The creation, grant, transfer, assignment or surrender of a right is a supply that is made in relation to rights for the purposes of item 4.

27C. While many transactions involve rights being supplied, a supply will only fit within Category 1 if the essential character or substance of the supply, or of a separately identifiable part of the supply, is one of rights. Category 1 does not cover a supply if the supply of rights is merely integral, ancillary or incidental to another dominant part of the supply where the supply is characterised by the dominant part.

Category 2 - Supplies of things comprising a bundle of rights that derive their value exclusively, or almost exclusively, from those rights

27E. A supply of a thing which comprises a bundle of rights is a supply that is made in relation to rights for the purposes of item 4 if:

•         the thing supplied derives its value exclusively, or almost exclusively, from those rights; and

•         through the supply, the supplier either supplies the rights to the recipient or surrenders the rights.

27F. In order to fit within category 2, a supply of a thing need not be properly characterised as a supply of rights for GST purposes, nor must it be a supply under paragraph 9-10(2)(e). The supply must, however, encompass rights and the value of the supply must be in the rights. For this to occur, any tangible thing that passes between supplier and recipient which evidences the rights (such as a bank note) must, without those rights, be worthless or of incidental worth.

Category 3 - Supplies of services directly connected with rights

28. A supply of services (including provision of advice or information) that is directly connected with rights is a supply that is made in relation to rights for the purposes of item 4. A supply of services has a direct connection with rights if for example:

•         the service facilitates a dealing in or exercise of the rights; or

•         the service affects (or its purpose is to affect) or protects the nature or value (including indemnity against loss) of the rights.

28A. Item 4 only applies to a service that facilitates a dealing in rights if the essential character or substance of the dealing is one of rights. Similarly, item 4 only applies to services that affect or protect the nature or value of a thing if the essential character or substance of that thing is rights.

29. Examples of supplies that fit within the three categories outlined at paragraphs 27B to 28 of this Ruling include supplies of intellectual property rights (category 1), supplies of shares (category 2) and supplies of brokerage services in relation to shares (category 3).

79A. Some examples of supplies of services that are considered to fit within Category 3 are included in the following table:

79B. The Commissioner considers that services which relate to an outcome of the exercise of rights, rather than to the exercise of the rights itself, are not relevantly connected with rights for the purposes of item 4. For example, if the exercise of rights produces assessable income, tax return preparation services which (in part) relate to the reporting of that income are not covered by item 4.

79C. The following table provides further examples of services that we consider are not covered by item 4 and the reasons for this. These services may, however, be covered by other items in the table in subsection 38-190(1):

Supply that is made in relation to rights 'for use outside Australia'

Meaning of 'for use'

36. The requirement that 'the rights are for use outside Australia' in paragraph (a) of item 4 is an intention test. That is, to be covered by this paragraph, it must be established that the intention is that the rights will be used outside Australia.

37. The actual use of the rights is not relevant, other than as evidence of the intended use.

38. There is further discussion of the meaning of 'for use' at paragraphs 108 to 123 below.

Supplies of services made in relation to rights that a recipient already owns

123A. If a supply of services is made to a recipient in relation to rights that the recipient already owns, we consider that it is the intended use of the rights at the time the services are provided that is relevant. The previous use of the rights is not relevant, other than as potential evidence of the intended use. Accordingly, a supply of a service is not GST-free if it is made in relation to rights that, before the supply of the service, were used offshore, but following the supply are intended to be used in Australia.

Your supply

You act on behalf of the individual and the services are preliminary work provided to the individual (client). You have advised an overseas lawyer will be providing the substantive services to the individual under separate engagements. You may complete some preliminary work before referring the individual to the overseas Lawyers. The substantive part of the engagements will be completed by lawyers based outside Australia.

Your services in this scenario are made to individuals located in Australia and the preliminary services relate to any of the following:

•         overseas bank accounts,

•         shares in overseas companies,

•         interest in trust estates governed by overseas law

•         debts that are governed by overseas law

•         organising a power of attorney

•         organising an overseas passport.

In supplying your services, the preliminary work may involve interactions with third parties including:

•         correspondence with banks to prove a client's claim to money and to direct payment;

•         correspondence with a company to provide client's claims to shares and to obtain registration of client as shareholder;

•         arrange the sale of shares through a stockbroker;

•         issue letter of demand or commence court proceedings to recover debt.

Is your supply of services in relation to rights?

GSTD 2020/1 is not relevant to the services you supply. GSTD 2020/1 is about the supply of a transaction account that can be accessed whilst the account holder is outside Australia. A transaction account for the purposes of this ruling are those covered by table item 1 of subsection 40-5.09 of the New Tax Systems (Goods and Services Tax) Regulations 2019 (GST regulations). The ruling provides guidance to what extent the supply of the transaction account will be GST-free when used outside Australia. You supply services and not transaction accounts.

From this information you have provided we conclude that your services are not category 1, 2 or 3 types services as discussed in GSTR 2003/8 and therefore your services are not in relation to rights.

The legal services you supply to the individual are preliminary work which consist of providing to the individual with information of the prerequisites of the overseas law regarding opening or accessing overseas bank accounts, shares in overseas companies, interest in trust estates, overseas passports and debts governed under the overseas law. You will refer the individual to an overseas lawyer if they want to pursue with the matter after considering your advice. In this instance, we consider your advice is connected with a proposal which is being contemplated by the individual and does not itself facilitate a dealing in or exercise of rights, nor is it otherwise directly connected with rights.

Similarly, when you organise the POA for the individual in Australia you are making a supply of services as your supply does not facilitate a dealing in or exercise of right and nor is it directly connected with rights.

Accordingly, since your legal services to the individual located in Australia have no direct connection with rights and your legal services do not facilitate a dealing in or exercise of rights under the preliminary work you do for the individual, item 4 does not apply to your supply.

Your supply of legal services to the individual located in Australia is a taxable supply under section 9-5 of the GST Act as:

•         You make your supply for consideration; and

•         Your supply is made in the course of an enterprise that you carry on; and

•         The supply is connected with Australia as it is made through an enterprise that you carry on in Australia and it is done in Australia; and

•         You are registered for GST; and

•         The supply is neither GST-free nor input taxed.

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