Edited version of private advice

Authorisation Number: 1052367282462

Date of advice: 28 March 2025

Ruling

Subject: Registration and supply of GST-free services

Question 1

Are you required to be registered for GST pursuant to Division 188 of the GST Act and, if so, from when?

Answer 1

Yes, you are required to be registered for GST, from 1 July 20XX.

Question 2

If the answer to Question One is 'yes', are the supplies being made to XYZ by you GST-free pursuant to section 38-190 of the GST Act?

Answer 2

Yes, your supplies to XYZ are GST-free pursuant to section 38-190.

This ruling applies for the following period:

1 July 20XX to 30 June 20XX

The scheme commenced on:

xx xxx 20XX

Relevant facts and circumstances

As of the date of this Ruling, you are not registered for GST.

On xx xxx 20XX, you entered into a contract with XYZ whereby you agreed to provide consulting services to XYZ (the Contract).

You have advised us that XYZ is a company incorporated and resident outside of Australia, with no physical presence in Australia. According to the copy of the Contract you provided us, XYZ's address is outside of Australia.

You advised us that XYZ designs and markets products sold by a third-party company, which sells those products in Australia, in return for commission on sales.

The Contract, states that you were engaged to provide XYZ with consulting services. You advised us that you are not authorised to sign off any sales orders of customers and that, instead, you are simply facilitating the sales by creating relationships with customers and answering queries they may have.

The Contract also includes the following relevant terms and conditions of your services:

1.       erm of the Contract commenced on xx xxx 20XX and will remain in full force and effect indefinitely until terminated as provided for by the Contract (Clause 3).

2.       nation of the Contract by either you or XYZ can be executed by the giving of XX days' written notice (Clause 4) or by mutual agreement (Clause 6).

3.       nation can also be executed immediately by either you or XYZ in the event the other party materially breaches a term of the Contract (Clause 5).

4.       fee for your services to XYZ is AUD XX per month, beginning xx xxx 20XX, and is to be invoiced on a monthly basis (Clauses 10 and 11).

5.       ill also be reimbursed, on a pre-approval basis, for reasonable and necessary expenses incurred by you in the performance of your services (Clauses 14 and 15).

6.        expressly agreed between yourself and XYZ that in performing your services you are acting as an independent contractor and not as an employee of XYZ, that the Contract does not create a partnership or joint venture between you and XYZ and is exclusively a contract for service (Clause 26).

7.       ave the discretion to engage a third-party subcontractor to perform some or all of your obligations under the terms of the Contract (Clause 27). Any such engagement by you is at your cost and your consulting fee will remain payable by XYZ (Clause 28).

8.       ave full control over working time, methods, and decision making in relation to the provision of your services to XYZ. You work autonomously and not at the direction of XYZ. However, you will be responsive to the reasonable needs and concerns of XYZ (Clause 29).

You conduct your services in Australia, from your home.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 - section 9-20

A New Tax System (Goods and Services Tax) Act 1999 - section 9-25

A New Tax System (Goods and Services Tax) Act 1999 - section 23-5

A New Tax System (Goods and Services Tax) Act 1999 - section 23-15

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

A New Tax System (Goods and Services Tax) Act 1999 - section 188-10

A New Tax System (Goods and Services Tax) Act 1999 - section 188-15

A New Tax System (Goods and Services Tax) Act 1999 - section 188-20

A New Tax System (Goods and Services Tax) Regulations 2019 - section 23-15.01

Reasons for decision

Question 1

Are you required to be registered for GST pursuant to Division 188 of the GST Act and, if so, from when?

Answer 1

Yes, you are required to be registered for GST, from 1 July 2024

Detailed reasoning

You are required to be registered for GST if:

a)       you are carrying on an enterprise; and

b)       your GST turnover meets the registration turnover threshold.

This test is stipulated by section 23-5 of the GST Act. Each component of the test is discussed in turn below.

Are you carrying on an enterprise?

Relevantly to you, an enterprise is defined by subsection 9-20(1) of the GST Act to be an activity, or series of activities, done in the form of a business or in the form of an adventure or concern in the nature of trade.

We are satisfied you are carrying on enterprise by virtue of performing your services under the Contract.

Does your GST turnover meet the registration turnover threshold?

In your circumstances, the registration turnover threshold is $XX, as per paragraph 23-15(1)(b) of the GST Act and section 23-15.01 of the A New Tax System (Goods and Services Tax) Regulations 2019.

Thus, if your GST turnover equals or exceeds $XX you are required to be registered.

That test will be satisfied if either your current GST turnover or your projected GST turnover equals or exceeds the $XX threshold, per section 188-10 of the GST Act.

At any point in time during a particular month:

a)       your current GST turnover is the sum of the values of all the supplies you have made, or are likely to make, during the 12-month period ending at the end of that month (per section 188-15); and

b)       your projected GST turnover is the sum of the values of all the supplies that you have made, or are likely to make, during that month and the next 11 months (per section 188-20).

For the purposes of each of those calculations, the following types of supplies are excluded:

a)       input taxed supplies;

b)       supplies that are not made for consideration; and

c)       ies that are not made in the connection with your enterprise.

For the sake of completeness, we do not consider that any of those exclusions apply to your circumstances.

Also excluded from each of those calculations are any supplies that are not connected with Australia (per subsections 188-15(3) and 188-20(3), respectively). Whether or not a supply of services is connected with Australia is determined by subsection 9-25(5). In your circumstances, since your services are performed in Australia, their supply is connected with Australia, and therefore this exclusion also does not apply.

The essential nature of the 'projected GST turnover' test is that it operates on a 'look forward' basis. Its importance is that even though your current, that is, if your historical, turnover in the current and previous 11 months does not meet or exceed the registration turnover threshold, you will still be required to be registered for GST if, looking forward, if it is likely your turnover in the current month plus the next 11 months does meet or exceed the threshold.

In looking forward, it is our view that the expression 'likely to be made' means that on the balance of probabilities, it can be predicated that the supply is more likely than not to be made. We expressed that view at paragraph 23 of GSTR 2001/7 - Goods and services tax: meaning of GST turnover, including the effect of section 188-25 on projected GST turnover.

It is our view, therefore, that when you entered into the contract with XYZ, it was at that time more likely than not that you would be making supplies within that month and the next 11 months to the value of more than $XX.

As a consequence, you were required to be registered for GST from the beginning of the month in which you entered into the contract, being 1 July 20XX.

Question 2

If the answer to Question One is 'yes', are the supplies being made to XYZ by you GST-free pursuant to section 38-190 of the GST Act?

Answer 2

Yes, your supplies to XYZ are GST-free pursuant to section 38-190.

Detailed reasoning

Section 38-190 of the GST Act has the effect of treating certain supplies of things, other than goods or real property, for consumption outside Australia as being GST-free.

A table in subsection 38-190(1) list several types of these supplies. Relevantly to your circumstances are Items 2 and 3 of that table, which provide that the following supplies are GST-free:

a)       a supply that is made to a non-resident who is not in Australia when the thing supplied is done and the supply is neither a supply of work physically performed on goods situated in Australia when the work is done nor a supply directly connected with real property situated in Australia (Item 2(a)); and

b)       a supply:

                 i.         is made to a recipient who is not in Australia when the thing supplied is done; and

                bsp;         the effective use or enjoyment of which takes place outside Australia (Item 3).

For section 38-190 to apply to your circumstances only one of the above need apply. We are of the view that (a) above is the most relevant. That is, XYZ is a non-resident of Australia, you are making your supply of your services to XYZ, and those services do not involve any work physically performed on goods in Australia and are not connected with real property in Australia.

Therefore, your services to XYZ are GST-free.

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