Edited version of private advice

Authorisation Number: 1052363112352

Date of advice: 21 February 2025

Ruling

Subject: GST - supply of services

Question

Is your supply of services a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax Act) 1999?

Answer

No.

This ruling applies for the following period:

DD MM 20YY to DD MM 20YY

The scheme commenced on:

DD MM 20YY

Relevant facts and circumstances

You are an overseas company.

You are registered for an ABN but are not registered for GST in Australia.

You only provide services to one entity in Australia.

You entered into a contract (contract) on DD MM 20YY.

Your services under the contract will be supplied by:

•                     personnel employed directly in your country of residence.

-                    these employees may occasionally visit Australia but will not do so for a period greater than 183 days in a single calendar year.

•                     personnel in Australia, engaged as consultants through an employer-of-record.

•                     personnel in another country, engaged as consultants through an employer-of-record.

Personnel employed directly by you and in another country engaged as consultants will:

•                     visit Australia to attend industry events such as conferences or meetings with stakeholders.

•                     stay in hotels and any work undertaken by them will be done either in or from the hotel they will be staying at.

•                     visit Australia 1 to 2 times a year and will be in Australia between 2 to 5 days on each visit.

Personnel in Australia will:

•                     have no authority or agency to conclude agreements on your behalf.

•                     generally, deal directly with you.

•                     generally, only meet with your client in Australia when invited by and in the company of your supervisors.

Reports and briefings completed by personnel in Australia will be approved by your supervisors before they are issued to your client.

You will not supply goods or real property and will retain legal and equitable title to all your pre-existing intellectual property and to all materials that you develop or supply in the performance of your contractual obligations.

You have entered into a Master Services Agreement with an Employer of Record.

You supervise the personnel in Australia, provide tasks and personnel account directly to you. You will exercise line management/supervisory authority by issuing equipment, scheduling patterns of work and authorising absences, assigning tasks, approving reports, monitoring performance, providing feedback and addressing concerns.

Personnel engaged in Australia will work from home. You will not be sourcing any location in Australia to serve as a base of operation or reimburse expenses incurred by them.

The employer of record is responsible for running payroll and fulfilling all employment-related obligations in the capacity of an employer.

Each consultant has entered into an "Employment Agreement" with the employer of record which provides all the conditions of employment.

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 subsection 9-25(5)

A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-25(5)(a)

A New Tax System (Goods and Services Tax) Act 1999 subsection 9-26(1)

A New Tax System (Goods and Services Tax) Act 1999 subsection 9-26(2)

A New Tax System (Goods and Services Tax) Act 1999 section 9-27

A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-27(1)(a)

A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-27(1)(b)

A New Tax System (Goods and Services Tax) Act 1999 subsection 9-27(3)

A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-27(3)(b)

A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-27(3)(c)

A New Tax System (Goods and Services Tax) Act 1999 section 9-40

Reasons for decision

Section 9-40 of the A New Tax System (Goods and Services Tax Act) 1999 (GST Act) provides that you must pay GST on any taxable supply that you make.

Section 9-5 of the GST Act states:

You make a taxable supply if:

(a)           you make a 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 a *taxable to supply to the extent that it is *GST-free or *input taxed.

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

You satisfy the requirements in paragraphs subsection 9-5(a) and 9-5(b) of the GST Act as you make the supply for consideration and the supply is made in the course of an enterprise being carried on by you.

What needs to be considered in this case is whether the supply you make is connected with the indirect tax zone (Australia).

Connected with Australia

Under subsection 9-25(5) of the GST Act, a supply of services is connected with Australia if:

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

(b)           the supplier makes the supply through an *enterprise that the supplier *carries on in the indirect tax zone; or

(c)           all of the following apply:

(i)            neither paragraph (a) or (b) applies in respect of the thing;

(ii)            the thing is a right or option to acquire another thing;

(iii)            the supply of the other thing would be connected with the indirect tax zone; or

(d)           the *recipient of the supply is an *Australian consumer.

The thing is done in Australia

Goods and services tax ruling, GSTR 2019/1, Goods and services tax: supply of anything other than goods or real property connected with the indirect tax zone (Australia),provides the following:

Where the thing is 'done'

34. Once the relevant supply is identified, the next step is to determine where the thing that is supplied is 'done'.

35. The term 'done' is not defined in the GST Act and takes its ordinary meaning. Where a thing is 'done' depends on the nature of the thing being supplied. Depending on what is supplied, 'done' can mean various things including performed, executed, completed or finished.

36. This Ruling explains when the thing is 'done' in Australia for supplies of services, advice, information and rights. For supplies of other intangibles, whether the thing is 'done' in Australia depends on the individual nature of the thing being supplied.

Supply of a service

37. If the 'thing' being supplied is a service, the service is typically done where it is performed. If the service is performed in Australia, the service is done in Australia and the supply of that service satisfies paragraph 9-25(5)(a) even if the recipient of the supply is outside Australia.

Given what you supply is a service and it is performed in Australia, it is our view that the thing (the supply) is done in Australia. Accordingly, it is a supply that is connected with Australia under paragraph 9-25(5)(a) of the GST Act. However, it needs to be considered in this case whether your supply satisfies the requirements of section 9-26 of the GST Act and therefore is 'disconnected' from Australia.

Supplies by non-residents that are not connected with Australia

Under section 9-26 of the GST Act, the supply of anything other than goods or real property by a non-resident would not be connected with Australia even if the thing is done in the indirect tax zone provided the requirements in the provision are satisfied.

Subsection 9-26(1) of the GST Act provides the following:

A supply is not connected with the indirect tax zone if:

(a)          the supplier is a *non-resident; and

(b)          the supplier does not make the supply through an *enterprise that the supplier *carries on in the indirect tax zone; and

(c)          the supply is covered by an item in the table.

Item 1 in the table provides that a supply of anything other than goods or real property (an intangible) is not connected with Australia if:

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

(b)          the recipient is an Australian-based business recipient of the supply.

The following is a discussion of the requirements of subsection 9-26(1) of the GST Act.

the supplier is a non-resident

You are non-resident of Australia>.

the supplier does not make the supply through an enterprise the supplier carries on in Australia

You carry on an enterprise.What needs to be considered for the purpose of subsection 9-26(1) of the GST Act is whether you are making the relevant supplies 'through' an enterprise carried on in Australia.

Subsection 9-27(1) of the GST Act provides when enterprises are carried on in Australia as follows:

An *enterprise 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:

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

(v)           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;

(vi)          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.

Subsection 9-27(3) of the GST Act states:

This subsection covers the following individuals:

(a)           if 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 the agent ' s business as such an agent.

Paragraph 9-27(1)(a) of the GST Act

To satisfy paragraph 9-27(1)(a) of the GST Act, your enterprise must be carried on by one or more individuals covered by subsection 9-27(3) of the GST Act who are in the indirect tax zone. It is our view that you do not satisfy any of the requirements of subsection 9-27(3) of the GST Act for the following reasons:

•                     You do not satisfy paragraph 9-27(3)(a) of the GST Act because you are not an individual.

•                     Your tasks in Australia are carried out through 3 different employee/consultant categories; therefore it is necessary to consider whether each of their services come within paragraphs 9-27(3)(b) or 9-27(3)(c) of the GST Act.

1.            Personnel employed directly by you in your home country who visit Australia on an ad-hoc basis for less than 183 days.

2.            These employees come within paragraph 9-27(3)(b) of the GST Act as they are your employees.

3.            Personnel in Australia, engaged as consultants through an employer-of-record.

4.            The personnel based in Australia who are carrying on the tasks are not your employees. They are employed through an employer of record. As such they do not come under paragraph 9-27(3)(b) of the GST Act.

5.            Further, whilst you have a contract authorising the employer of record to act as your agent, neither them nor their employees have authority to conclude contracts on behalf of you. As such you do not satisfy paragraph 9-27(3)(c) of the GST Act for this category of individuals.

6.            Personnel in another country, engaged as consultants through an employer of record.

Given these personnel too are not your employees, similar to the personnel in Australia discussed above, their services do not meet the requirements of either paragraphs 9-27(3)(b) or 9-27(3)(c) of the GST Act.

Paragraph 9-27(1)(b) of the GST Act

This requirement is only required to be considered for work undertaken by personnel directly employed by you who visit Australia on an ad-hoc basis. This is because the other two categories of personnel (i.e.. personnel in Australia and the other country) do not meet one of the requirements of subsection 9-27(1) of the GST Act (being paragraph 9-27(1)(a)) and as such the other requirements of subsection 9-27(1) are not required to be considered in relation to them.

Law Companion Ruling LCR 2016/1, GST and carrying on an enterprise in the indirect tax zone (Australia) (LCR 2016/1) explains when a supplier carries on an enterprise in Australia, within the meaning of section 9-27 of the GST Act.

LCR 2016/1 provides:

When is an enterprise carried on in a fixed place?

37. One of the factors that may determine whether an entity has a GST enterprise presence is whether the enterprise is carried on through a 'fixed place'.14 The term 'fixed place' is not defined in the GST Act. Given the context of the Tax and Superannuation Laws Amendment (2016 Measures No. 1) Bill 2016 (the Bill), it is interpreted consistently with the term 'fixed place' in the permanent establishment articles in Australia's tax treaties and the similar term used in the definition of 'permanent establishment' in subsection 6(1) of the ITAA 1936, as explained in TR 2002/5.

38. Applying that interpretation, the place must have an element of permanence, both geographic and temporal. The term 'fixed' requires a stable or continual connection between the enterprise and the place that is more than temporary or transitory in nature. However, the term 'fixed' does not imply 'everlasting or forever'.

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).

Example 2 - Enterprise carried on in a fixed place

40. A non-resident enterprise has seasonal access to a ski resort in Australia over a five year period. The ski resort is used by the enterprise for four months each year to run a ski school.

41. As skiing is a seasonal sport, the enterprise employs instructors to be based at the ski resort in Australia for four months each year.

42. The recurring nature of the activities, where skiing lessons are provided during four months of each year for a five year period, at the same ski resort, supports both a geographic and temporal permanence.

43. Therefore, the non-resident's enterprise of providing skiing lessons is carried on through a fixed place in Australia.

Example 3 - Enterprise not carried on in a fixed place

44. Neil is a professional golfer and a resident of Namibia. He visits Australia to compete in an Australian golf tournament. The event is played at a prominent course in a major Australian city and takes four days. Neil is in Australia for a total of two weeks (including practice days and rest days). The question is whether the golf course is a fixed place through which Neil carries on his enterprise.

45. For the golf course to be a fixed place through which Neil carries on his enterprise, his activities as a professional golfer in Australia would need to be both geographically and temporally permanent. While Neil plays at a single location, and the course itself is geographically permanent, he plays at the course for only seven days (including practice days). As a result, sufficient temporal permanence does not exist and the golf course is therefore not a fixed place through which Neil carries on his enterprise in Australia.

Your employees will not conduct business activities in Australia at one or more places for more than 183 days in any given twelve-month period. Subparagraphs 9-27(1)(b)(ii) and 9-27(1)(b)(iii) of the GST Act do not apply.

You do not have a fixed place in Australia, your employees and consultants visit Australia once or twice a year and stay in a hotel for between 2 and 5 days. Your situation is reflected by Example 3 above.

While a particular place in Australia may meet the permanence test in the context of section 9-27 of the GST Act where an enterprise operates at that place for a period of less than 6 continuous months (in unusual circumstances), your enterprise is not linked to a particular place in Australia through which you habitually pursue your business activities when your employees visit. In your case the nature of your enterprise activities does not have a sufficient element of permanence at any particular place in Australia. Your enterprise activities at the various locations in Australia are more transitory in nature.

Since sufficient permanence does not exist, you do not carry on your enterprise through a fixed place in Australia for the purposes of subparagraph 9-27(1)(b)(i) of the GST Act through the employees directly employed by you who visit Australia on an ad-hoc basis.

Accordingly, given you do not satisfy subsection 9-27(1) of the GST Act in relation to any of the tasks conducted by the three categories of personnel, you do not make the relevant supplies through an enterprise carried on in the indirect tax zone.

The supply is covered by an item in the table

The relevant item in the table to consider in this case is item 1 which reads as follows:

A supply of anything other than goods or real property (an intangible) is not connected with Australia if:

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

(b)           the recipient is an Australian-based business recipient of the supply.

The thing is done in the indirect tax zone

As explained above, the services are supplied in Australia and as such are done in Australia.

Recipient is an Australian based business recipient.

An Australian based business recipient is defined in sub-section 9-26(2) of the GST Act as follows:

An entity is an Australian-based business recipient of a supply made to the entity if:

(a)           the entity is *registered; and

(b)           an *enterprise of the entity is *carried on in the indirect tax zone; and

(c)           the entity's acquisition of the thing supplied is not solely of a private or domestic nature.

The recipient of your supplies meets this definition.

Given the supply comes within item 1 in the table in subsection 9-26(a) of the GST Act, paragraph 9-26(1)(c) is also satisfied.

Conclusion

Your supply satisfies the requirements of section 9-26 of the GST Act. Therefore, the supply is not connected with Australia and as such the supply does not meet the requirements of a taxable supply under section 9-5 of the GST Act.

You are not liable to remit GST on this supply.

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