Edited version of private ruling

Authorisation Number: 1011670864857

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Ruling

Subject: GST and subcontracted services performed overseas

Question

Are you making a taxable supply when you are subcontracted by an Australian resident company to provide your services to be performed overseas to another entity outside of Australia?

Answer

No, you are not making a taxable supply when you are subcontracted by an Australian resident company to provide your services to be performed overseas to another entity outside of Australia. Your supply is GST-free under item 3 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

Relevant facts and circumstances

You are registered for Goods and Services Tax (GST). You are carrying on an enterprise in Australia.

You have been subcontracted by an Australian company to provide services to be performed overseas to another entity outside of Australia.

The Australian company has been contracted by another entity outside of Australia.

You will perform your services on the entity's site location overseas which will involve videoing, editing and other work. This will be one segment of the process of making a video. Other subcontractors will be hired to do other parts of the process by the Australian company. The footage that will be done by you will be used and form part of a video that will be shown overseas by the entity overseas to the general public. The purpose is for entertainment and public awareness. The entity overseas will use it to show the public the event being held by the entity on its site overseas.

The video work that you will do is given directly to the entity overseas. The entity is a non resident who will benefit from the supply of your work.

There is no written agreement between you and the Australian company for this subcontracted work. The Australian company contacted you and requested you to go overseas to provide your services to this entity outside of Australia. Once your work was complete you invoiced the Australian company for this work. You have provided a copy of a tax invoice for work carried out overseas by you.

The nature of your work involves filming of a live show that is on site at the entity's location overseas, it is for entertainment and to give the overseas public awareness of what is happening at the overseas entity's site. Once you have completed the filming, your work is given to the post production manager which is another sub contractor of the Australian company who is onsite with you overseas. Once this is edited and revised it is given to the overseas entity. It is not sent to Australia or given to the Australian company.

You have worked in Australia for the Australian company before.

Reasons for decision

In considering whether a supply is subject to GST, regard must be had to 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 Australia; and

(d) 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.

From the information received, your supply of filming services which was provided overseas satisfies paragraphs (a) to (d) of section 9-5 of the GST Act as the supply of your filming services is for consideration, the supply is made in the course of your enterprise, the supply is connected with Australia as you carry on your enterprise in Australia (paragraph 9-25(5)(b) of the GST Act is met) and you are registered for GST.

However, your supply will not be a taxable supply to the extent that it is GST-free or input taxed. Your supply of filming services is not considered to be input taxed under the GST Act. The next step is to determine whether the supply of filming services you provided overseas is GST-free.

Is your supply of filming services provided overseas GST-free?

Under section 38-190 of the GST Act certain supplies other than supplies of goods or real property for consumption outside Australia are GST-free. As your supply of filming services which was provided overseas is not considered to be a supply of goods or real property it is appropriate to consider item 3 in the table in subsection 38-190(1) of the GST Act (item 3) in relation to your supply.

Item 3 appears as follows:

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

Item 3 applies to a supply of a thing, other than a supply of goods or real property, and requires that the recipient is not in Australia when the thing supplied is done.

A recipient, in relation to a supply, is the entity to which the supply was made. It is not a requirement of item 3 that the recipient is a non-resident.

For a supply to be GST-free under Item 3, paragraphs (a) and (b) of Item 3 must be satisfied and the supply must not be 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.

From the information provided, the supply of the filming services is not a supply of work physically performed on goods situated in Australia when the services are provided or a supply directly connected with real property situated in Australia.

You advised that you have been subcontracted by an Australian company that is in Australia in relation to the supply of the filming services. In this situation, the contractual flow of the services is to an entity in Australia. Therefore, the supply of the filming services to the Australian company does not meet the requirements of paragraph (a) in Item 3 as the recipient is in Australia when the filming services are supplied.

If a supply is made to a recipient who fails the not in Australia requirement in paragraph (a) of item 3, it is necessary to consider whether subsection 38-190(4) of the GST Act applies.

Subsection 38-190(4) of the GST Act extends the scope of item 3. The subsection provides that a supply to a recipient who is in Australia in relation to the supply is taken for the purposes of item 3, to be a supply made to a recipient who is not in Australia if:

(a)   the supply is made under an agreement entered into, whether directly or indirectly, with an Australian resident; and

(b)   the supply is provided, or the agreement requires it to be provided, to another entity outside Australia.

The expression provided to another entity in subsection 38-190(4) of the GST Act seeks to identify the entity to which the item 3 supply actually flows. If the supply is made under an agreement with an Australian resident recipient but the thing supplied is provided, or the agreement requires it to be provided to another entity located outside Australia, subsection 38-190(4) of the GST Act applies and the not in Australia requirement in item 3 is satisfied.

An example illustrating the application of subsection 38-190(4) of the GST Act (and provided in the Explanatory Memorandum for section 38-190(4) of the GST Act) is a supply of training services made to an Australian employer but provided to employees attending a training course conducted outside Australia. The Australian employer is treated as a recipient who is not in Australia in relation to the supply because the supply is provided to another entity (an employee) outside Australia.

In your case, you were subcontracted by the Australian company. You advised that the Australian company contacted you and requested you to go overseas to provide the filming services to another entity overseas. Once your work was complete you invoiced the Australian company for this work. You have provided a copy of a tax invoice for work carried out overseas by you. Although there is no written agreement, paragraph 38-190(4)(a) of the GST Act is met as the verbal agreement was made between you and the Australian supplier.

Paragraph 38-190(4)(b) of the GST Act is also met as you were required by the Australian company to provide your supply of filming services performed overseas to another entity outside Australia.

As such, subsection 38-190(4) of the GST Act applies and your supply to the Australian company, a recipient who is in Australia in relation to the supply is taken for the purposes of paragraph (a) of item 3, to be a supply made to a recipient who is not in Australia therefore the not in Australia requirement in paragraph (a) of item 3 is satisfied.

You advised that the nature of your work involves filming of a live show that is on site at the overseas entity's location overseas, it is for entertainment and to give the overseas public awareness of what is happening at the overseas entity's site. Once you have completed the filming, your work is given to the post production manager which is another sub contractor of the Australian company who is onsite with you overseas. Once this is edited and revised it is given to the overseas entity. It is not sent to Australia or given to the Australian company. In this situation, the supply will meet the requirement in paragraph (b) of Item 3 as the effective use or enjoyment of the supply takes place outside Australia.

Summary

Accordingly, your supply of filming services under subcontract arrangements with the Australian company performed overseas and provided to another entity outside Australia is GST-free under item 3 by virtue of subsection 38-190(4) of the GST Act because

· you make your supply of filming services under subcontract arrangements with an Australian resident and this supply was required to be provided to another entity outside Australia; and

· the effective use or enjoyment of your supply takes place outside Australia; and

· your 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.

For more information on item 3 please refer to the Goods and Services Tax Rulings GSTR 2003/7, GSTR 2004/7 and GSTR 2007/2 which are available from the Australian Taxation Office's website at www.ato.gov.au