Edited version of private ruling

Authorisation Number: 1011703050547

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Ruling

Subject: Goods and services tax (GST) and supply of legal services to non-resident individual who is overseas

Question 1

Is GST payable on your supply of the legal services to X?

Answer

No.

Question 2

Is GST payable where you on-charged X for services performed by third parties in relation to the legal matter?

Answer

No.

Relevant facts and circumstances

You are registered for GST.

You supplied legal services to an individual - X. You defended X in a certain court located in Australia. The proceedings against X were issued in a certain year and the proceedings related to X's previous employment in a location in Australia.

You charged X for your supply of legal services to X.

You on-charged X for services performed by third parties in relation to the legal matter. You purchased these services from the third parties.

All of your professional costs and disbursements were incurred in a location in Australia.

During the period you assumed the conduct of the proceedings, namely, a certain period, X was in an overseas country and a non-resident.

Reasons for decisions

Question 1 and 2

Summary

GST is not payable on your supply of the legal services to X, as this supply was GST-free under item 2 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

GST is not payable where you on-charged X for services performed by third parties in relation to the legal matter, as these on-charges formed part of the consideration for your supply of the legal services to X, and GST is not payable on this supply.

Detailed reasoning

GST is payable by you where you make a taxable supply.

You make a taxable supply where you satisfy 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 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.

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

In your case, you satisfied the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act. That is, you supplied the legal services to X for consideration and you made this supply in the course or furtherance of the enterprise that you carry on. Additionally, your supply of these services was connected with Australia and you are registered for GST.

There are no provisions in the GST Act under which your supply of the legal services to X was input taxed.

Therefore, what remains to be determined is whether your supply of the legal services to X was GST-free.

Item 2 in the table in subsection 38-190(1) of the GST Act provides that a supply of something other than goods or real property is GST-free where the supply is made to a non-resident who is not in Australia when the thing supplied is done; and

(a) 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; or

(b) the non-resident acquires the thing in carrying on the non-resident's enterprise, but is not registered or required to be registered.

Your supply of the legal services to X was a supply of something other than goods or real property.

You advised that X was a non-resident when the legal services were supplied. Therefore, you supplied the legal services to a non-resident.

Paragraph 31 of Goods and Services Tax Ruling GSTR 2004/7 provides the Australian Taxation Office (Tax Office) view on the meaning of not in Australia for the purposes of item 2 in the table in subsection 38-190(1) of the GST Act. It states:

31. The requirement that the non-resident in item 2, or the recipient in item 3, is not in Australia when the thing supplied is done is a requirement, in our view, that the non-resident or recipient is not in Australia in relation to the supply when the thing supplied is done.

Paragraph 35 of GSTR 2004/7 provides the Tax Office view on determining whether a non-resident individual is in Australia in relation to a supply. It states:

35. A non-resident individual is in Australia if that individual is physically in Australia. If a non-resident individual is physically in Australia and in contact (other than contact which is only of a minor nature) with the supplier, that presence is in relation to the supply.

Your supply of the legal services to X was a supply to a non-resident individual who was not physically in Australia when the thing supplied was done, that is, when the legal services were performed. Therefore, Alexander was not in Australia when the thing supplied was done, for the purposes of item 2 in the table in subsection 38-190(1) of the GST Act.

Your supply was neither a supply of work physically performed on goods situated in Australia when the work was done nor a supply directly connected with real property situated in Australia.

Hence, you satisfied the requirements of item 2 in the table in subsection 38-190(1) of the GST Act. Therefore, your supply of the legal services to X was GST-free.

As not all of the requirements of section 9-5 of the GST Act were satisfied, your supply of the legal services to X was not a taxable supply, and therefore, GST is not payable on your supply of the legal services.

Your on-charge to X for services performed by third parties formed part of the consideration for your supply of the legal services to X. Therefore, as GST is not payable on your supply of the legal services, GST is not payable where you on-charged X for services performed by third parties.