Edited version of private ruling

Authorisation Number: 1011625257088

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Ruling

Subject: GST and Educational Services

Question 1

Is the government grants funding you receive to undertake your professional development program GST-free?

Answer

No

Question 2

Are your health assessments subject to GST?

Answer

No

Question 3

Are your special education courses subject to GST?

Answer

No

Question 4

Is your professional development program subject to GST?

Answer

No

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You are a not-for-profit organisation that provides educational services to students with learning difficulties.

You are an endorsed charitable institution under Division 176 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) to access GST concessions under that Act.

You receive your income from the following six sources:

Government grants to undertake your professional development program.

The Program

According to the funding agreement with the government department, you will provide the services and programs listed in the Agreement and in accordance with Departmental policies and program directions.

As per the funding agreement, your professional development program is a program that will deliver a variety of seminars, courses and workshops providing educators with the Insights and strategies they require to create an all inclusive, accessible and equal learning environment for all students.

The funding agreement states that the core objective is of equipping teachers with strategies developed on evidence-based research that has shown to be effective in enhancing the student's development.

The workshops have specifically been developed to increase educators' knowledge on the direct effects specific learning disabilities have on students' academic and social achievements and the provision of appropriate strategies to support these students. Additionally through your vast experience and knowledge the department has identified that educators are seeking information, knowledge and guidance about the ways technology can provide enhanced learning for students.

Funding and Performance Evaluation

The funding agreement provides that the funding may only be used by you for the purposes of the Program.

As per the funding agreement, you are paid an amount of funding for a period, excluding GST, that is provided by the department to you for project purposes. You will provide half-yearly progress reports to them during the funding period, which will detail the achievements under the agreement in line with the reporting arrangement specified in the agreement and a final report is to be provides to the department at the end of the period.

Performance indicators are also listed in the funding agreement and are also used to monitor the project.

Billing Clients- usually parents for an initial assessment of their child who has been affected by Learning Difficulties.

The invoice raised for this service is a single invoice in two parts. That is, you recover a booking fee and room rental (but not specifically designated as such) and recoupment of the health practitioner's fee (invoiced to and paid by you).

The Assessment process begins with an initial contact by qualified health professional, where an educational and cognitive historical overview is garnered and the staff will determine whether assessment is the best way forward and take a deposit to secure an appointment. They will send out questionnaires and consent forms for the parent or guardian to complete.

The total fee for this assessment covers administrative fess, the assessment, reports and room rental:

The Assessment Process

The testing session is usually carried out by qualified health professionals during the first half of one day or in two 2-hour sessions. The sessions include a preliminary interview, with discussion of the background information. After testing, the psychologist will present the results, as well as explain the meaning of the results. Teaching strategies to address the issues identified will also be discussed. In some instances referrals to other specialists may be considered.

A comprehensive report written by the health professional who administered the test will be provided shortly after the assessment session which will include among other things a summary of the strategies/recommendations for meeting the individual's specific needs at home, school and through your special Education course.

The Assessment Test

Your assessments consist of administering standardised cognitive and educational tests which help to determine an individual's speed of learning in an academic environment.

Billing parents whose children have received lessons in relation to their learning difficulties from teaching specialists employed/contracted by you-these lessons are conducted on your premises through your Special Education Courses.

If the client wants or has been recommended through the assessment report to receive tutoring they are enrolled in your Special Education course.

Your program aims to provide individual and paired tuition in a non-threatening atmosphere. You concentrate upon developing the student's self confidence in his/her own ability to learn. The focus is on improving their learning.

Effective learning strategies are developed and a variety of teaching approaches.

All your teachers are trained in special needs and all have an additional Post Graduate qualification in teaching people with learning difficulties. Using information taken from the assessment, an individual Learning Plan detailing long term and short term goals is prepared for each student.

The administering of pre program needs based assessment and the design and implementation of appropriate strategies is undertaken. At the end of each session parents are given lesson notes with details of what was taught and what the follow up might be. Reports are written at the end of each semester and an ongoing program evaluation with reference to student specific performance indicators is a key way to provide evidence based outcomes in relation to pupil progress.

The classes are held regularly on your premises during the normal school term and students attend for a 55 minute session each week after which the teachers provide a 5 minute plenary to the parents.

Billing teachers and parents for professional development sessions in LD conducted by specialist lecturers, with sessions conducted at your premises.

The Professional Development program (as explained in Schedule 3 and in which you receive the government grants) is a collection of conferences, seminars, workshops and courses that provide evidence based support to a variety of issues relating to learning difficulties, looking at them from many perspectives. Your Development Program has been designed to cater for teachers, parents and other professions who need to refine their skills and knowledge of learning difficulties and is, therefore, touted to these people, but is also available to adults in the general community.

Your professional development programs provide a comprehensive range of knowledge and strategies to the community on how best to support those with learning difficulties. This includes the Teacher Training Certificate Course, a comprehensive practically oriented teacher training course delivered in 10 sessions.

The sale of educational books and CDs on LD predominantly to parents of affected children.

The sale of your organisation memberships.

Question 1

Summary

The funding received by you, will not be consideration for a taxable supply because you are not making a taxable supply to the government department which has the relevant connection with the grant funding provided.

Further, the supply of the professional development program for which you receive the funding is GST-free (refer to question 4).

Detailed reasoning

Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) sets out the requirements that must be met for an entity to make a taxable supply. It states:

You make a taxable supply if:

· you make the supply for *consideration; and

· the supply is made in the course or furtherance of an *enterprise that you

· *carry on; and

· the supply is *connected with Australia; and

· you are *registered, or *required to be registered.

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

(The asterisks in this ruling indicate terms defined under section 195-1 of the GST Act).

The GST treatment of funding depends primarily on whether such a payment represents consideration that has the relevant connection with a taxable supply. Therefore, to satisfy the first requirement of a taxable supply in paragraph 9-5(a) of the GST Act, there must be a supply and consideration, and there must be a connection between the two.

There are three questions that are relevant to determining whether there is a supply for consideration:

· is there a supply;

· is there consideration; and

· does that necessary relationship exist between the supply and the consideration?

Essentially, a supply is something that passes from one entity to another. The supply may be one of particular goods, services or something else that is reflected in an agreement by one party to do something for another.

'Supply' is defined under section 9-10 of the GST Act. The definition includes 'an entry into, or release from, an obligation to do anything; or to refrain from an act; or to tolerate an act or situation' but excludes 'a supply of money unless the money is provided as consideration for a supply that is a supply of money'.

'Consideration' is defined under section 9-15 of the GST Act. The definition extends beyond payments to include such things as acts and forbearances to act. A payment will be consideration for a supply if the payment is 'in connection with', 'in response to' or 'for the inducement' of the supply.

In your situation, you receive the funds to undertake the program and under the agreement, you are required to use the grant funds only for the purposes of the program and are also required to comply with specific reporting requirements.

Goods and Services Tax Ruling GSTR 2006/9 (Supplies) states at paragraph 123:

123. The Commissioner explained in Part 2 of this Ruling at paragraphs 102 to 103 how an agreement that does not bind the parties in some way is not sufficient to establish a supply by one party to the other unless there is something else, such as goods, services, or some other thing, passing between the parties.

Under the Program, there are no goods, services or other thing passing between you and the eligible grantee, so the question is whether there is a supply by the grantee of an entry into an obligation.

The Tax Office view of the GST treatment of funding and whether the funding represents consideration that has the relevant connection with a taxable supply is discussed in GSTR 2000/11 (Grants of financial assistance).

Paragraph 32 of GSTR 2000/11 explains that an agreement between the parties to a funding arrangement may establish rights or obligations between the parties.

It is common for a grantor and grantee to enter into a grant agreement which establishes rights and obligations between the parties. Often the grant agreement will provide for the grantee to be obliged to make supplies to third parties, rather than the grantor. That obligation to make supplies to others may itself be a supply to the grantor.

A payment will be consideration for a supply if the payment is 'in connection with', 'in response to' or 'for the inducement of' a supply (see subsection 9-15(1) of the GST Act).

In relation to the question of consideration and nexus, GSTR 2000/11 at paragraph 79 of the Ruling explains that 'the test is whether there is a link or nexus that provides a substantial relation between the substance of the obligation and the grant'.

The Ruling distinguishes between things that are mere conditions of the arrangement and things which go to the core, or substance, of the arrangement and which convey to the grantor a material benefit. To determine whether consideration is in connection with, in response to, or for the inducement of a supply, regard needs to be had to the true character of the transaction.

Mere conditions, such as a repayment clause, whose purposes are to regulate disposal of granted funds and/or to maintain accountability over those funds, whilst possibly relevant in determining the legal intentions of the parties, do not possess the relevant connection with the granted funds to constitute supplies for consideration. They generally do not go to the purpose for which the funds were granted nor do they convey a material benefit to the grantor for which the funds are paid.

Under the Agreement, you agree to use the funds only for the activities specified in the agreement and also agree to the reporting and accounting requirements in relation to the funds.

The purpose of the grant is to pay for the activities undertaken by you under the program to deliver the variety of Seminars, Courses and Workshops to provide educators with the insights and strategies they require to improve the learning abilities of their students.

Based on the form and content of the Agreement, it falls short of creating binding obligations on the grantee that go to the purpose of the grant.

Whilst a number of binding obligations are entered into by the grantee under the agreements which may amount to 'supplies' for GST purposes; for example, the obligation to provide reports, none go to the purpose of the grant nor do they convey a material benefit to the grantor. Accordingly, there exists no relevant connection between the grantee's obligations and the grant itself, the purpose of which is to assist the grantees to undertake the Program activities.

Therefore, the funding is more appropriately considered to be third party consideration for supplies you make under the program.

Consequently, paragraph 9-5(a) of the GST Act will not be satisfied and the funding is not consideration for a taxable supply made to the government department. Therefore, no GST should apply to the funds which are provided for you to undertake the program.

The funding is however, third party consideration for the services provided under your professional development program. However, these services are GST-free (refer to Question 4)

Question 2

Summary

The health assessments are GST-free.

Detailed reasoning

Supplies of certain health services are GST-free where all of the requirements of subsection 38-10(1) of the GST Act are satisfied. This subsection provides that a supply is GST-free if:

· it is a service of a kind specified in the table in this subsection, or of a kind specified in the regulations

· the supplier is a recognised professional in relation to the supply of services of that kind

· the supply would generally be accepted, in the profession associated with supplying services of that kind, as being necessary for the appropriate treatment of the recipient of the supply.

The first requirement is that the service be listed in the table in subsection 38-10(1) of the GST Act. To qualify, the service must be the provision of one of those actual services listed and not just something similar to one of the services. The list of health services specified in the table in subsection 38-10(1) of the GST Act includes at item 16, the service of psychology. You are a supplying a psychological assessment which would satisfy the requirements of paragraph 38-10(1)(a) of the GST Act.

The second requirement is that the supplier is a recognised professional in relation to the supply of psychology services. Section 195-1 of the GST Act provides that a person is a recognised professional in relation to a supply of psychology services if the service is supplied in a State or Territory in which the person has a permission or approval, or is registered, under a State law or a Territory law prohibiting the supply of services of that kind without such permission, approval or registration.

Your assessments are carried about by qualified health professionals and as such satisfy the requirement of paragraph 38-10(1)(b) of the GST Act.

Paragraph 38-10(1)(c) of the GST Act, the third requirement, provides that the service must be generally accepted in the profession associated with supplying services of that kind as being necessary for the appropriate treatment of the recipient of the supply.

It is considered that for a supply to be generally accepted, the particular service being provided and the circumstances in which it is provided must be generally accepted by the psychology profession.  That is, it will be the psychology profession that ultimately determines what services will be generally accepted.

In addition, the definition requires that the service be for the appropriate treatment of the recipient. 

It is considered that appropriate treatment will be established where the recognised professional assesses the recipient's state of health and determines a process to pursue in an attempt to preserve, restore or improve the physical or psychological wellbeing of the recipient and will include subsequent supplies for the assessed process.

The recipient of the supply is the child and the assessments are carried out to determine teaching strategies to address the child's needs.

As such, paragraph 38-10(1)(c) of the GST Act is also satisfied. The supply of the assessments as invoiced is therefore considered to be GST-free.

Question 3

Summary

The Special Education courses are GST-free.

Detailed reasoning

An education course is GST-free under section 38-85 of the GST Act. Education course is defined in section 195-1 of the GST Act to include among other things a special education course.

To be GST-free as a special education course, a course must be one that is:

· a course of education; and

· a special program; and

· designed specifically for children with disabilities or students with disabilities (or both).

These criteria for Special Education Courses are addressed in Goods and Services Tax Ruling GSTR 2002/1

First requirement

In the context of a 'special education course' in section 195-1 of the GST Act, a course of education should be given a wide meaning to include a course or program of study involving systemic instruction, training or schooling in areas of scholastic and academic pursuits and personal development.

Your special education courses are aimed at improving the student's self confidence in his or her own ability to learn and on improving all areas of their literacy and as such meet this requirement.

Second and third requirements

The ATO has determined that a special program is one designed specifically to meet the needs of children or students with disabilities.

What needs to be considered is the whole of the circumstances of the creation and delivery of the program to decide whether it is designed specifically for children or students with disabilities.

Relevant matters include evidence of an intention to design the program for children or students with disabilities which may be evidenced by its marketing and the character of the program that is provided which may be established by considering its content, where it is delivered and how it will be delivered.

A special program needs to be designed specifically for students with disabilities. It is not necessary for people with disabilities to be the actual recipients of the program.

A special program that is designed specifically for children or students with disabilities may contain elements that directed at the parents or cares of those children. Provided these elements form an integral part of a special program that is designed specifically for children or students with disabilities the program will satisfy the requirements of a special education course.

A disability includes learning disabilities and specific learning difficulties.

All your teachers have qualifications in teaching children with special needs and your courses are designed to redress literacy and numeracy difficulties for students with learning difficulties, after undertaking the initial assessments.

It is considered that these courses meet the definition of a special education course under section 195-1 of the GST Act and are therefore GST-free under section 38-85 of the GST Act.

Question 4

Summary

The professional development program is GST-free as an adult and community education course.

Detailed reasoning

A supply of an education course is GST-free under section 38-85 of the GST Act. An education course is defined in section 195-1 of the GST Act to include among other things a special education course or an adult and community education course.

As per paragraph 27 of GSTR 2002/1 on special education courses, a course or program that is designed to enhance the skills or knowledge of health or education professionals who work with children or students with disabilities is not a special education course.

Therefore, the Profession Development Program is not a special education course.

An adult and community education course is defined under section 195-1 of the GST Act.

To be GST-free as an ACE course, a course must be:

· likely to add to the employment related skills of people undertaking the course; and

· of a kind determined by the Education Minister to be an adult and community education course; and

· provided by, or on behalf of, a body that is a higher education institution, recognised or funded by the State or Territory authority as a provider of ACE courses or a body corporate operating on a not-for-profit basis (that has not been refused registration, or disqualified as a provider of ACE courses).

First requirement

Goods and Services Tax Ruling GSTR 2000/27, discusses the meaning of 'likely to add to employment related skills'. The test as to whether an adult and community education course is likely to add to the employment related skills of people undertaking the course is an objective test and not dependent on the subjective intention of the providers of the course or the recipients.

We believe that the courses provided by you are likely to add to the employment related skills of the people undertaking them.

Second requirement

To satisfy the definition of an ACE course the course must also meet the requirements of the Education Minister's Determination A New Tax System (Goods and Services Tax)(Adult and Community Education Courses) Determination 2000 (ACE Determination). At paragraph 5(2) of this Determination, the Education Minister states that an adult and community education course must:

· not be any other education course defined in section 195-1 of the Act; and

· be available to adults in the general community; and

· not be provided by or at the request of an employer to employees of that employer; and

· not be provided by or at the request of an organisation to members of that organisation, except an organisation for which membership is open to adults in the general community; and

· not be a course that is provided by way of private tuition to an individual.

Based on the information given, the Professional Development Program satisfies these criteria.

Third requirement

Finally, the course must be provided by, or on behalf of, a body that is a higher education institution, or recognised or funded as a provider of adult and community education courses, or a body corporate operating on a not-for-profit basis.

You are funded to provide the program. Therefore, the third requirement is also satisfied and as such the program meets the definition of an adult and community education course and is GST-free.