Edited version of private ruling

Authorisation Number: 1011725353792

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Ruling

Subject: GST and supply of operating training courses

Question

Will the provision of the operating training courses by the Trustee of a Trust (Trust) be GST-free under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act):

Advice

Yes, the provision of the operating training courses by the Trust will be GST-free under section 38-85 of the GST Act.

Relevant facts

Company A is a Registered Training Organisation (RTO) in Australia and provides prescribed training, primarily for plant operators (that is operators of forklifts, cranes, bobcats, and so on). The operators of these machines must have a licence and be trained as per the State Legislation and State Regulation of the State in which they are located.

The RTO is currently treating the provision of these trainings and assessments as GST-free supplies because it is an essential supply of education to the operators of the machinery. For example an individual cannot work as a bobcat operator without this training and licensing.

The RTO is proposing to form a training partnership with the trustee of a trust (Trust), that is a partnership for the delivery of the training and not a partnership for tax or any other purpose. We have received a draft copy of the training partnership agreement.

It is proposed that the Trust will be the going concern business to deliver the training which the RTO is currently providing. The Trust will be supervised by the RTO in its delivery of the training. The RTO will receive a fee for this.

The RTO will issue (where appropriate) Statements of attainment to applicants recommended by the Trust. Depending on which occupation the trainee has mastered they also receive an Assessment Summary and a Form that relate to the State Legislation and Regulation. In any event the documents must always be issued by the RTO.

The topics to be offered for training by the Trust include all of the prescribed occupations, where it is illegal to operate in this capacity without a qualification or training and, there are penalties imposed by the State Legislation on this requirement.

The Trust has lodged an application to register for GST with the Australian Taxation office (ATO).

Reasons for decision

GST is payable where you make a taxable supply.

Under section 9-5 of the GST Act you make a taxable supply if:

(a) you make the supply for consideration;

(b) the supply is made in the course or furtherance of an enterprise that you carry on;

(c) the supply is connected with Australia; and

(d) you are registered or required to be registered for GST.

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

From the information received, the Trust will satisfy the conditions at paragraphs 9-5(a) to 9-5(d) of the GST Act when they conduct the operating training courses as:

(a) the Trust will supply the operating training courses for consideration;

(b) the supply will be made in the course of an enterprise (business) that the Trust carries on;

(c) the supply will be connected with Australia as the supply will be done in Australia and through a business that the Trust carries on in Australia; and

(d) the Trust will be registered for GST as they have already lodged an application to register for GST with the ATO.

However, the supplies will not be taxable supplies to the extent that they are GST-free or input taxed.

There is no provision under the GST Act that will make the provision of these supplies input taxed. Therefore, what remains to be determined is whether these supplies will be GST-free.

GST-free

Under section 38-85 of the GST Act, a supply of education course as defined in the GST Act is GST-free.

'Education course' is defined in section 195-1 of the GST Act and include 'professional or trade course'.

Goods and Services Tax Ruling GSTR 2003/1 (available at www.ato.gov.au) explains the meaning of 'professional or trade course' in section 195-1 of the GST Act.

To be a professional or trade course, the course must:

· lead to a qualification; and

· that qualification must be an essential prerequisite for entry to particular profession or trade in Australia, or to commence the practice of (but not to maintain the practice of) a profession or trade in Australia.

First requirement

GSTR 2003/1 provides that having established that you supply a course, you then need to decide whether the course leads to a qualification. We consider that the words 'leading to' require a causal connection between the course that is undertaken and the qualification that is ultimately obtained. We also consider that a causal connection exists where there is a sufficiently direct and demonstrable link or connection between the course and the qualification. The qualification must result from, and will follow successful completion of, the course.

 GSTR 2003/1 explains that documents that are qualifications or that provide evidence of a qualification include a statement of satisfactory completion, a certificate (including a degree or diploma), a licence or an accreditation. The first requirement will be satisfied where such documentation is awarded to students undertaking a course upon successful completion of all of the units or modules that make up the course. A course must provide the requisite skills and knowledge for an individual to attain the qualification at the conclusion of the course.

Second requirement

GSTR 2003/1 advises that a qualification is an essential prerequisite if it is mandatory for a person to have the qualification before they can enter into, or commence the practice of, a particular profession or trade. This necessarily requires the imposition of penalties or sanctions if a person enters into, or commences the practice of, the profession or trade without the relevant qualification. The qualification must be a legal requirement, for example a law, regulation or industrial agreement or be one imposed by a professional or trade organisation, either nationally or on a State basis.

'Trade' has a wide meaning involving the recognition of a category or body of practical vocational skills of some difficulty and some generality. The word 'trade' is applicable to any skilled handicraft. It includes the operation of particular pieces of equipment or machinery.

Whether the operation of a particular piece of equipment is considered a trade will depend on the facts such as the type of equipment and the particular skills required for operating the equipment.

Based on the information received, the Trust will satisfy both requirements as:

On successful completion of the operating training courses, the assessors will recommend the issue of Statements of attainment to the RTO who will then issue these Statements of attainment and where applicable an Assessment summary as well to the successful trainees.

Accordingly, under the proposed arrangement, it is accepted that the Trust will be supplying a course, and that this course will result in the student having the requisite skills and knowledge to attain the particular Operating Certificate of Competency for which they have applied for training. Therefore, the supplies of these courses will lead to qualifications and the first requirement is satisfied.

A Certificate of Competency relating to the operating training courses is a statutory requirement for these prescribed occupations in that State, and the State legislation imposes penalties for failure to comply with that requirement. Therefore, the Statements of attainment issued as a result of undertaking the Trust's courses is an essential prerequisite and the second requirement is satisfied.

Consequently, the operating training courses and assessment package the Trust will supply will be a professional or trade course under the GST Act. The Trust's supply of operating training courses will therefore be a GST-free supply of an education course under section 38-85 of the GST Act. Hence, GST is not payable on the supply.