Edited version of private advice

Authorisation Number: 1052131765585

Date of advice: 14 July 2023

Ruling

Subject: Residency

Question 1

Are you a resident of Australia for taxation purposes?

Answer

Yes.

Question 2

Is the source of your income Australia?

Answer

Yes.

Question 3

Is Goods and Services Tax (GST) payable on your supply of the services performed under contracts?

Answer

Your supply of the services to the extent they are performed overseas during the period of your current stay overseas is not subject to GST.

However, any work you perform in Australia is/will be subject to GST.

If your circumstances change and you meet any of the three tests in section 9-27 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) as discussed below, then the services you perform overseas subsequent to meeting any of these tests may be taxable.

This ruling applies for the following periods:

Year ending 30 June 2023

Year ending 30 June 2024

The scheme commenced on:

1 July 2022

Relevant facts and circumstances

You were born in Australia.

You are a citizen of Australia.

You are not a permanent resident of any other country.

You left Australia to go to Country Z.

You enter Country Z on a specific Visa which allows you to be in Country Z for several years.

You do not intend on applying for citizenship of Country Z.

You do not intend on leaving Australia on a permanent basis.

You have gone to Country Z for work purposes.

You have a number of contracts with different employers.

The contracts run for a specific period of time and cannot be extended.

You are involved in leading talks with global players on behalf of your Australian employers.

The work is carried out remotely in Country Z for the Australian entities.

Your spouse and a child have accompanied you to Country Z.

You rent accommodation in Country Z.

Your home in Australia is being rented out to a third party while you are in Country Z.

The property has a number of dwellings on it and a dwelling remains vacant for your use when you return to Australia and to store your household and personal items.

You have suspended your private health insurance in Australia.

You still have social and group connections in Australia with your church and as a member of another group.

You are not a resident of Country Z for taxation purposes.

You and your spouse are not eligible to contribute to the PSS or the CSS super funds.

You are paid in Australian dollars into an Australian bank account.

You were registered for GST for several years because you were operating a farm. You have been living on the farm. You continue to operate the farm to the current time. This farm is not being used for income producing purposes although it may be in years to come. As it became apparent that it was not likely to meet the ATO threshold for continuing to have GST status (without further investment and planning), the GST registration was cancelled a number of years ago.

Recently, you re-registered for GST and this GST registration remains to the current time.

You entered into concurrent contracts with a number of Australian employers. Under these contracts, you are required to provide the following services to these customers, as an independent contractor.

You will charge a fee for these services.

These customers are residents of Australia; are carrying on enterprises in Australia and are registered for Australian GST. You will provide the services in question to your customers only. The contracts do not require you to provide the services to entities other than your customers.

You worked as a sole trader in Australia a number of years ago. Otherwise, you were always an employee.

You were a full-time employee, just prior to the contract work in question, you were a full-time employee and you were approached to do the contract work in question while you were an employee.

None of the work in question is geographically bound. It may be that you will work from Australia for months at a time or another country. The work is global. It does not rely on being in any country. You began your work, in connection with the contracts in question, in Country Z. Whilst you have chosen to spend time in Country Z for now, this could change at anytime. You will spend a number of months up to a few years in Country Z pending progress of the discussions you are leading. You have travelled to Country Z on a visa. You travelled to Australia occasionally during the term of the contracts in question to report to your customers.

You will not hire staff to assist you in doing the contract work in question

You will not hire an agent (someone who has the authority to enter into contracts on your behalf) in connection with the services you are to provide under the contracts in question.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1997 section 6-5

Reasons for decision

For tax purposes, whether you are a resident of Australia is defined by subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936).

The definition has four tests to determine your residency for income tax purposes. These tests are:

•         the resides test

•         the domicile test

•         the 183-day test, and

•         the Commonwealth superannuation fund test.

It is sufficient for you to be a resident under one of these tests to be a resident for tax purposes.

Our interpretation of the law in respect of residency is set out in Taxation Ruling TR 2023/1 Income tax: residency tests for individuals.

The resides test

The resides test is the primary test of tax residency for an individual. If you reside in Australia according to the ordinary meaning of the word resides, you are considered an Australian resident for tax purposes.

Some of the factors that can be used to determine whether you reside in Australia include:

•         period of physical presence in Australia

•         intention or purpose of presence

•         behaviour while in Australia

•         family and business/employment ties

•         maintenance and location of assets

•         social and living arrangements.

No single factor is decisive, and the weight given to each factor depends on your specific circumstances.

Where an individual does not reside in Australia according to ordinary concepts, they will still be an Australian resident if they meet the conditions of one of the other tests.

The domicile test

Under the domicile test, if your domicile is in Australia, you are a resident of Australia unless the Commissioner is satisfied that your permanent place of abode is outside Australia.

Whether your domicile is Australia is determined by the Domicile Act 1982 and the common law rules on domicile. For example, you may have a domicile by origin (where you were born) or by choice (where you have changed your home with the intent of making it permanent).

Whether your permanent place of abode is outside Australia is a question of fact to be determined in light of all the facts and circumstances of each case.

Key considerations in determining whether you have your permanent place of abode outside Australia are:

•         whether you have definitely abandoned, in a permanent way, living in Australia

•         length of overseas stay

•         nature of accommodation, and

•         durability of association

The 183-day test

Under the 183-day test, if you are present in Australia for 183 days or more during the income year, you will be a resident, unless the Commissioner is satisfied that both:

•         your usual place of abode is outside Australia, and

•         you do not intend to take up residence in Australia.

The question of usual place of abode is a question of fact and generally means the abode customarily or commonly used by you when are physically in a country.

The Commonwealth superannuation test

An individual is a resident of Australia if they are either a member of the superannuation scheme established by deed under the Superannuation Act 1990 or an eligible employee for the purposes of the Superannuation Act 1976, or they are the spouse, or the child under 16, of such a person.

Application to your circumstances

We have considered each of the statutory tests listed above in relation to your particular facts and circumstances. We conclude that, for the period 19 February 2023 to 30 June 2024 you are a resident of Australia as follows.

Taking into account your individual circumstances, we have concluded that you are a resident of Australia according to ordinary concepts.

We also consider that your domicile is in Australia

We considered the following factors in forming our conclusion:

•         You have not left Australia permanently

•         You have gone to Country Z for work

•         You have a home available to you in Australia to return to

•         You are renting accommodation in Country Z

•         You will not be a resident of Country Z for taxation purposes

•         Your contracts are only for a specific period

•         You are contracted by Australian employers.

You were in Australia for more than 183 days in the relevant income year and you will not be in Australia for more than 183 days in the following income year.

The Commissioner is satisfied that you do not have a usual place of abode outside Australia and that you do intend on returning to Australia and residing in Australia as you usually do.

You do not fulfil the requirements of the Commonwealth Superannuation test and are therefore not a resident under this test.

As you have satisfied the Resides and Domicile tests, you are considered a resident of Australia for taxation purposes from 19 February 2023 to 30 June 2024.

Source of income

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. However, where you are a foreign resident, your assessable income includes only income derived from an Australian source.

In Nathan v. Federal Commissioner of Taxation 25 CLR 183 at 189-190 it was recognised that the ascertainment of the actual source of a given income is a practical, hard matter of fact.

As stated by Bowen J in Federal Commissioner of Taxation v. Efstathakis (1979) 9 ATR 867; 79 ATC 4256 (the Efstathakis Case) at ATR 870; ATC 4259, to determine source:

... the answer is not to be found in the cases, but the weighing of the relative importance of the various factors which the cases have shown to be relevant.

In the Cam, French and Efstathakis cases it was held that the source of the income was where the taxpayer performed the services:

•         Commissioner of Taxation v Cam & Sons Ltd (1936) 36 SR (NSW) 544 (the Cam Case) - concerned wages paid to seamen employed to work on trawlers. They were engaged and paid in New South Wales, but most of their services were provided outside state territorial waters. Jordan CJ, with whom Street and Bavin JJagreed in the Cam Case at 548, held that:

Where income is derived from wages or salary, again the source has several factors. Personal exertion may be involved in negotiating and obtaining the contract of employment, in performing the stipulated services, and obtaining payment for them.... [I]n the ordinary case of the employment of a seaman...

where there is nothing special, either in the circumstances of the contract of employment or in the payment, and where the work is both done and paid for in the ordinary course, the all-important factor is the doing of the work; and the contract of employment and the payment are relatively insignificant and formal elements. But this is not necessarily the case with respect to all wages or salary. In the case of an appointment to a sinecure, the engagement and the payment may be the only significant factors

Accordingly, the wages had to be apportioned based on 'working time in and out of New South Wales territorial waters.

•         Federal Commissioner of Taxation v French (1957) 98 CLR 398 (the French Case) - the taxpayer was employed as an engineer by the Australian company CSR which carried on business in New South Wales and, relevantly, New Zealand. Each year, the taxpayer spent two or three weeks in New Zealand as inspecting engineer for the company in its New Zealand business. At all other times, the taxpayer performed services for the company in New South Wales. A majority of the High Court held that the wages paid in respect of the period in New Zealand were sourced in New Zealand, because this is where the services were performed, this being the most important factor in Mr French's situation (see French Case at 411, 417 and 422).

•         However, the Court also made comments to the effect that this decision did not necessarily determine what would be most important in every personal services contract. For example Dixon CJ in the French Case at 405 in relation to a director and at 406 in relation to an accountant procured to achieve a specified result, and Kitto J at 417-418 refers to a situation where remuneration was payable regardless of service, and to a person who worked sometimes overseas who was paid while on sick leave, and to where a period of overseas service might in substance be merely incidental to Australian service.,

and

•         In the Efstathakis Case - the taxpayer was a Greek National resident in Australia who was employed by the Greek Government as a secretary/typist in the Greek embassy. She had applied for the job in Greece, and the post had been gazetted there. She performed the services in Australia. Her net pay was compiled in Greece, a cheque was drawn on a bank in Greece and then received in Australia. A condition of her employment was that she could be posted anywhere in the world, but she would probably have resigned, as she had put down roots in Sydney, having child there, buying a unit, and marrying a naturalised Greek Australian. Bowen CJ, with whom Brennan and Deane JJ agreed, held that the wages paid to the taxpayer had an Australian source. His Honour considered the above factors, but gave most weight to 'the residence of the taxpayer in Australia and the facts that the services were performed and payment received [in Australia]. The payment of remuneration depended upon actual performance of the services (the Efstatakis Case at ATR 871; ATC at 4260).

As per the above cases, cases concerning the provision of personal services are decided by weighing up the outcomes of the consideration of the following three factors (with the weighting given to each determined by their relevance to the case):

•         the place where the contract of employment is entered into,

•         the place where remuneration is payable, and

•         the place where the services are performed.

In your situation, you have contracts with an Australian entity and carry out the services in Country Z.

The contracts of engagement were formulated, prepared and is governed by the laws that apply in Australia.

Therefore, this factor significantly leans towards the source of the income being Australia.

Your remuneration is paid by Australian employers, into a bank account located in Australia in Australian dollars. Therefore, this factor leans towards the source of the income being Australia.

As mentioned above, in the Cam, French and Efstathakis cases it was held that the source of the income was where the taxpayer performed the services. However, in those cases the place where the taxpayer was located was the same as where the taxpayer did the work, where it was given effect to and where the outcome of the work occurred.

Your case is distinguished from these cases as the place where your work was given effect to and where the outcome of the work occurred was with your employer in Australia.

On the physical location of where your duties were performed alone, this would lean towards the source of the work being in Country Z.

However, your physical location is not sufficient, the other factors listed above are also relevant. Considering this, the third factor leans towards the income being sourced in Australia. This is even more so, taking into account that you were able to physically perform your work in any location in the world. Your employment duties had no relationship with Country X apart from your physical presence.

Therefore, the income you earned from your Australian contracts is regarded as being sourced in Australia.

GST is payable on a taxable supply.

You make a taxable supply if you meet 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)  the supply is made 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.

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

The indirect zone includes most of Australia and certain other places, but it excludes Australian external Territories.

In your case, you will meet the requirements of paragraphs 9-5(a) and 9-5(d) of the GST Act, as you are making your supply of services for consideration and you are registered for GST.

Enterprise is defined in section 9-20 of the GST Act to include an activity in the form of a business. Subsection 9-20(2) of the GST Act excludes activities of an employee from the definition of enterprise.

You are currently working as an independent contractor. This is a business and therefore a type of enterprise. Hence, your supply of the services in question is made in the course or furtherance of an enterprise that you carry on, and therefore, the requirement of paragraph 9-5(b) of the GST is met.

There are no provisions of the GST Act under which your supply of the services could be GST-free or input taxed.

Therefore, what remains to be determined is whether your supply of the services is connected with Australia.

Connected with Australia

Subsection 9-25(5) of the GST Act specifies when a supply of an intangible such as a service is connected with Australia. It provides that:

A supply by a resident of Australia, of something other than goods or real property is connected with the indirect tax zone if:

(a)  the thing supplied is done in the indirect tax zone; or

(b)  the thing is supplied through an enterprise that the supplier carries on in the indirect tax zone; or

(c)   the thing supplied is a right or option and certain other requirements are met; or

(d)  the purchaser of the service is an 'Australian consumer'.

Thing done in Australia rule

To the extent that you perform the services in question in Australia, your supply of the services is connected with Australia under paragraph 9-25(5)(a) of the GST Act

To the extent that you perform the services in question outside Australia, your supply of the services will not be connected with Australia under paragraph 9-25(5(a) of the GST Act.

Supply of intangible through an enterprise the supplier carries on in Australia rule

We shall now determine whether you supply the services in question through an enterprise that you carry on in Australia.

'Carrying on an enterprise in Australia' is defined in section 9-27 of the GST Act. The provision provides three tests. There are two over 183 days in Australia tests and a fixed place test. Section 9-27 of the GST Act states:

(1)  An *enterprise of an entity is carried on in the indirect tax zone if:

(a)  the enterprise is *carried on by one or more individuals covered by subsection (3) who are in the indirect tax zone and

(b)  any of the following applies:

(i)    the enterprise is carried on through a fixed place in the indirect tax zone; or

(ii)   the enterprise has been carried on through one or more places in the indirect tax zone for more than 183 days in a 12 month period

(iii)  the entity intends to carry on the enterprise through one or more places in the indirect tax zone for more than 183 days in a 12 month period;

(2) It does not matter whether

(a) the entity has exclusive use of a place; or

(b) the entity owns, leases or has any other claim or interest in relation to a place:

(3) This subsection covers the following individuals:

(a) the entity is an individual - that individual

(b) an employee or officer of the entity;

(c) an individual who is, or is employed by, an agent of the entity that:

(i) has, and habitually exercises, authority to conclude contracts on behalf of the entity; and

(ii) is not a broker, general commission agent or other agent of independent status that is acting in the ordinary course of that agent's business as such an agent.

Law Companion Ruling LCR 2016/1 provides guidance on the 'carrying on an enterprise in Australia' concept.

Paragraphs 51 to 56 of LCR 2016/1 give an example where the actual days an enterprise is carried on in Australia exceeds 183 days. It states:

Example 4 - Actual days enterprise carried on exceeds 183 days

51. Digital Co is a US resident entity, and a non-resident of Australia. It supplies software and training to its Australian clients, which are all Australian residents. Sandi works for Digital Co and is based in the USA, but travels regularly to Australia to fulfil the contracts between Digital Co and its clients.

52. Sandi works in blocks of one calendar month in Australia. Sometimes she chooses to spend additional time in Australia outside those blocks. The time she spends in Australia outside those blocks of work do not count toward the 183 day rule.

53. By contrast, when Sandi is temporarily away from work during the month-long block - on weekends, or if she takes a sick day - these days count toward the 183 day rule.

54. One weekend during a block of training in Sydney, Sandi flies to New Zealand for the weekend. Sandi's absence from Australia does not prevent the month long block from counting toward the 183 day rule in full. This is because Digital Co is considered to be carrying on its enterprise in Australia during the month long period, including Sandi's weekend away. The same result would apply if instead of going to New Zealand, Sandi enjoyed a weekend away in the Hunter Valley wine region in Australia.

55. After spending January, March, April, June, July and September delivering training, Sandi returns to the US. These months add up to 183 days in total. At that stage, Digital Co does not think they will need to provide their Australian clients with any more training for the foreseeable future. However, one of Digital Co's clients requests Sandi to return for a further two weeks in November to provide training to some new employees.

56. During Sandi's two-week block in November, the enterprise had been carried on in Australia for more than 183 days during a 12 month period. Sandi's services from days 184 to 198 were an enterprise carried on in Australia.

Paragraphs 63 and 64 of LCR 2016/1 give an example where an entity has an intention to carry on an enterprise in Australia for more than 183 days. They state:

Example 5 - Intended days that enterprise to be carried on exceeds 183 days

63. Jo Co is a computer service provider and a resident of Japan. It successfully tenders to train the employees of Smith Corp, a company resident in Australia, in a new computer system. To undertake the training, Jo Co enters into agreements with four of its employees for them to relocate to Australia for seven months. Smith Corp provides Jo Co's employees with a room in one of its Sydney offices for that time.

64. Jo Co determines that it satisfies the 'intention' limb of the 183 day test. Therefore, Jo Co carries on its enterprise in Australia for the entire time that its employees are in Sydney.

Paragraph 39 of LCR 2016/1 discusses the fixed place test. It states:

39. Given the role of the 183 day rule, the importance of the 'fixed place' test is most relevant to circumstances where an enterprise operates from a 'fixed place' for 183 days or less. The OECD Commentary on the Model Tax Convention and ATO rulings mention that there can be circumstances in which a period of less than six months is sufficient to lead to the conclusion that temporal permanence exists. Where the period in Australia is less than six months, there may still be temporal permanence where the connection with Australia is very strong. For example, the enterprise returns to a particular location in Australia on an on-going and regular basis, but for a short period each time. In such cases of recurring activity, each period of time during which the place is used needs to be considered in combination with the number of times during which that place is used (which may extend over a number of years).

Taxation Ruling TR 2002/5 provides further guidance on the fixed place concept.

Paragraphs 29 to 34 of Taxation Ruling TR 2002/5 provide that a fixed place is a place that is geographically and temporally permanent. They state:

Geographic Permanence

29. A place at or through which a person carries on any business in the context of the definition of PE in subsection 6(1) must be geographically permanent. Any area, viewed commercially and as a whole, may, in relation to the business concerned, be a place. Examples include business premises such as a factory, office, farm, mine or market. Thus a market is a place (and a place at or through which a trader carries on business) where that trader operates a stall regularly in that market. This is the case even if the stall is set up at different locations within the market at different times. It is the market which is, in relation to the trader, the distinct or discrete commercial area and it is therefore a place (and a place at or through which the trader carries on their business) within the definition of PE in subsection 6(1).

Temporal Permanence

30. The second criteria for a place at or through which a person carries on any business to exist for the purposes of the definition of PE in subsection 6(1) is temporal permanence, ie the business presence must not be of a purely temporary nature. In other words, the business must operate at that place for a period of time. Again, this has to be judged in the context of the particular business and is a question of fact and degree.

31. Permanent in this context does not mean forever. As Sheppard J said in Applegate v. FCT 78 ATC 4054 at 4060; (1978) 8 ATR 372 at 378 in discussing the meaning of permanent in the phrase permanent place of abode:

...permanent is used in the sense of something which is to be contrasted with that which is temporary or transitory. It does not mean everlasting. The question is thus one of fact and degree.

32. This is the sense in which permanence is used in this ruling.

Six months

33. Whether temporal permanence exists is a matter of fact and degree. However, as a guide, if a business operates at or through a place continuously for six months or more that place will be temporally permanent.

34. Because each case is a question of fact and degree the six month guide is not a hard and fast rule. The circumstances may for example indicate that a period of less than six months is sufficient to lead to the conclusion that temporal permanence exists. Where the period in Australia is less than six months there may still be temporal permanence where the connection with Australia is very strong. One example would be where the business returns to a particular location in Australia on an on-going and regular basis but for short periods each time. Another example would be where a place is set up in Australia with a view to carrying on business permanently in Australia at or through that place but the business ceases after a short period of time. One instance of this would be where the taxpayer dies after a short time but their intention had been to carry on business in Australia at or through a place for more than six months. This is consistent with the Commentary on the Permanent Establishment Article (Article 5) of the OECD Model Tax Convention on Income and on Capital which says at paragraph 6.3:

'If the place of business was not set up merely for a temporary purpose, it can constitute a permanent establishment, even though it existed, in practice, only for a very short period of time because of the special nature of the activity of the enterprise or because, as a consequence of special circumstances (e.g., death of the taxpayer, investment failure), it was prematurely liquidated.'

35. It is also conceivable that in some limited circumstances, a period of six months or more might not constitute temporal permanence, however the Commissioner considers this would be likely to occur in only the most extraordinary of circumstances. For example, the international travel restrictions and government-mandated lockdowns globally during the COVID-19 pandemic resulted in many businesses having employees present in Australia when they would ordinarily have been located outside of Australia, and many employees were typically required to continue their employment under 'working from home' arrangements. While temporal permanence remained a question of fact and degree in each case, the extraordinary circumstances of the COVID-19 pandemic presented some situations in which a forced presence in Australia for more than six months was considered temporary.

In Goods and Services Tax Ruling GSTR 2019/1, the concept of 'an enterprise of an entity that is carried on in Australia' is referred to as the entity's 'Australian GST presence'.

Paragraph 18 of GSTR 2019/1 provides guidance on determining whether a supply of services or some other type of intangible is made 'through' an enterprise that the supplier carries on in Australia. It states:

18. There are no specific criteria which must be satisfied to determine whether a particular supply is connected with an Australian GST presence. Each case is to be determined on an overall assessment of the individual facts and circumstances of the supply. If one or more of the following factors are established in any particular case it would be a strong indicator that the supply is connected with an Australian GST presence:

•         where the relevant individuals of the Australian GST presence

­   exercise an authority to sign, negotiate, conclude or accept contracts and purchase orders for the supply

­   make important decisions leading to the making of the supply or performance of the supply

­   perform the activities that facilitate the making of the supply

­   use equipment and/or infrastructure in performing or making the supply

•         if the supply is a service, the service is performed or delivered by the Australian GST presence

•         if the supply is the grant, creation, assignment, transfer, surrender or licence of a right, that supply is facilitated by the relevant individuals of the Australian GST presence

•         in relation to the supply, the Australian GST presence has its own accounts, and revenue for the supply is booked or recorded in those accounts.

We do not consider that your supply of the services in question is made entirely through an enterprise that you carry on in Australia given that:

•         you were working as an employee when you were approached by the two customers in question to provide services to them and you were not carrying on a business in the industry involved at that time; and working as an employee is not an enterprise; and

•         you were an employee, and not carrying on a business in that industry, immediately before the contracts in question were entered into; and

•         you began working under the contracts in question in Country Z.

You would not have been carrying on an enterprise in Australia under section 9-27 of the GST Act when you signed, negotiated or accepted the contracts and you would not be carrying on an enterprise in Australia at the current time.

For the duration of your current stay overseas, you would not be carrying on an enterprise in Australia. Your supply of the services to the extent they are performed overseas during the period of your current stay overseas is not connected with Australia under paragraph 9-25(5)(b) of the GST Act.

However, based on the information provided, it is possible that you may meet one or more of the three carrying on an enterprise in Australia tests at some later stage, but this is uncertain because you have not yet determined how much of the work you will do in Australia. If you meet any of these three tests, you will be carrying on an enterprise in Australia at some point. Under such circumstances, you will be supplying your services through an enterprise you carry on in Australia from the date that you meet one of these tests and therefore, the supply of your services performed in Australia from that date onwards will be connected with Australia under paragraph 9-25(5)(b) of the GST Act.

If, at some point subsequent to meeting any of the three carrying on an enterprise in Australia tests, you spend a further period working overseas, the supply of your services performed overseas subsequent to meeting any of these tests could potentially be connected with Australia under paragraph 9-25(5)(b) of the GST Act. See example 1 in GSTR 2019/1 below.

Example 1 - supply made through an Australian GST presence

16. Oz Research Pty Ltd, an Australian company, has an Australian GST presence and no employees based outside Australia. Oz Research Pty Ltd has patents registered globally.

17. The managing director attends a trade show in New Zealand, where he enters into a contract with an Australian customer to grant a licence to exploit one of its patents. Although the contract was entered into in New Zealand, the supply is connected with the Australian GST presence. Therefore, the supply is made through the Australian GST presence and satisfies paragraph 9-25(5)(b).

In accordance with paragraph 103 of GSTR 2019/1, a supply of a service can be partly connected with Australia in certain circumstances. Paragraphs 103 to 105 of GSTR 2019/1 state:

Supplies that are partly connected with Australia

Supplies of the one kind that are partly connected with Australia

103. A supply of intangibles may be partly connected with Australia if the thing is partly done in Australia or the supplier makes the supply partly through an enterprise that the supplier carries on in Australia. If a thing is only partly done in Australia, the supply is connected with Australia to the extent that the thing is done in Australia. However, the part of the supply that is not connected with Australia under paragraph 9-25(5)(a) may still be connected with Australia if the supply is made through an enterprise that the supplier carries on in Australia (refer to paragraph 9-25(5)(b) which is discussed at paragraphs 8 to 28 of this Ruling).

104. If doing one part of a thing may reasonably be regarded as merely incidental to doing another part of the supply, the incidental part is taken to be done where the part to which it is incidental is done.

105. Where a supplier makes a supply partly through an enterprise that the supplier carries on in Australia, the supply is connected with Australia to the extent that the supply is made through that enterprise. The part of the supply not connected with Australia under paragraph 9-25(5)(b) may still be connected with Australia if the thing is done in Australia.

Australian consumer rule

Your customers are not Australian consumers because they are registered for GST and acquiring your services in carrying on their enterprises (in accordance with subsection 9-25(7) of the GST Act). Therefore, your supply of the services is not connected with Australia under the rule in paragraph 9-25(5)(d) of the GST Act.

Conclusion

To the extent that your supply of the services in question is connected with Australia, you meet the requirements of section 9-5 of the GST Act.

You are making a 'mixed supply' pursuant to paragraph 19B of GSTR 2001/8, as:

•         your supply would be partly taxable (to the extent that the supply is connected with Australia) and partly non-taxable (to the extent that the supply is not connected with Australia); and

•         neither component (the part connected with Australia or the part not connected with Australia) would be incidental, integral or ancillary to the other part.

Therefore, under such circumstances, you will meet the requirements of section 9-5 of the GST Act.

In accordance with paragraph 29 of GSTR 2001/8, GST will be payable at 1/11th of the part of the price that is reasonably apportionable to the part/s of the service that is/are connected with Australia.

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