Edited version of private ruling

Authorisation Number: 1011749075977

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Subject: GST and education courses

Question

Are you making a GST-free supply of an education course when you deliver the specified course?

Answer

No, your delivery of the specified course is not a GST-free supply of an education course.

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 an associate of a training provider.

You are not a non-profit body.

You are not a Registered Training Organisation (RTO).

You run a college for adult students.

You deliver a specified course to students.

The course is focussed on providing employment related skills and upon successful completion of the course students will receive a specified certificate. You do not offer the course to corporate clients.

Students enrol in the course by completing an 'enrolment form and fees contract' with you. The contract states that the student applies 'for enrolment of the Student in your college and all fees are payable to your account.

The courses are conducted on premises that you share with your associate and are delivered by staff that you employ.

You assess the students and provide the records of the performance of those students to your associate. Your associate then issues the certificate to students upon successful completion of the course.

The National Training Information Services (NTIS) website confirms that your associate is an RTO. The NTIS website shows that your associate is accredited to offer the specified course within the scope of their registration as an RTO.

There are no written agreements in place between you and your associate with respect to the delivery, assessment or certification of students undertaking this course.

You do not pay any fee (or provide any other form of remuneration) to your associate for the certificates that they issue to students of this course.

Expenses/overheads relating to the premises are divided between you and your associate. You pay a specified portion of the associated costs and your associate pays the remaining portion.

You and your associate recruit and pay for your own teaching staff independently. Where staff are shared between you and your associate, then the costs are divided accordingly,

You and your associate separately report and account for your respective income and expenses. You both report your own portion of 'shared' costs.

You and your associate each employ your own administration staff, with one person employed by you and another by your associate.

Your tax agent made the following contentions:

Your associate does not offer its own certificate course.

There is one certificate course run by you.

Your relationship with the associate supports that the course is clearly run at your associate's direction. The certificate is issued by your associate to the students however the physical provision of the course is handled by you on your associate's behalf.

Clearly you are providing the course on behalf of your associate for the simple reason that your associate issues the certificate. Your relationship with the associate shows that you act on behalf of the parent company.

Reasons for decision

The supply of an education course is GST-free under section 38-85 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). The term education course is defined in section 195-1 of the GST Act and includes (among other things) a tertiary course, professional or trade course or an adult and community education (ACE) course.

In this case it is relevant to consider whether the course that you provide is a tertiary course, a professional or trade course, or an ACE course.

Tertiary courses

To meet the GST definition of a 'tertiary course': a course must satisfy the Education Ministers Determination under subsection 5D(1) of the Student Assistance Act 1973 (Education Ministers Determination No. 2002/1); or be a course of study or instruction accredited at Masters or Doctoral level and supplied by a higher education institution or a non-government higher education institution; or be any other course of study or instruction that the Education Minister has determined is a tertiary course.

Among other things, the determination provides that an education course that is both supplied by a RTO who is accredited to deliver the course within the scope of the RTO's registration with the appropriate governing body will be for the purposes of the GST Act, a tertiary course.

You are not an RTO.

As you are not an RTO, your supply of the course to students would not be a GST-free supply of a tertiary course.

However, it is not clear from the facts provided, whether you are supplying the course in your own right or whether the course is being provided by you on behalf of your associate.

Goods and Services Tax Ruling 2006/9 (GSTR 2006/9) 'supplies', examines the meaning of the term 'supply' in the GST Act. The ruling provides where a supply is made under arrangements involving more than two entities, we need to determine which entity is making the supply. The starting point is examining agreements or other reciprocal legal relationships. As there are no agreements between you and your associate, we need to look at the terms of the arrangement.

Your tax agent advised that you are providing the education course on behalf of your associate. In this event, the supply made by your associate would be GST-free as they are an RTO that is accredited to supply the course within the scope of their registration as an RTO. However, the supply that you make would not be GST-free as it is a supply of teaching services rather than the supply of an education course. This is illustrated in paragraph 168 of GSTR 2006/9.

Where you deliver the course to students on behalf of your associate, then under the general rules of agency, the supply made by your associate (as principal) is the supply of an education course. The supply that you make to your associate is one of 'teaching services' in physically delivering the course to the students on their behalf.

In summary:

Where you are supplying the education course in your own right you are making a taxable supply to the students, as you are not an RTO.

If you are delivering the course to students on behalf of your associate, then your supply of 'teaching services' to your associates would be subject to GST where all the requirements of a taxable supply are met.

Therefore, it is necessary to consider whether the courses you provide are GST-free as a professional or trade course or an ACE course.

Professional or Trade courses

To be GST-free, a professional or trade course, as defined in section 195-1 of the GST Act, must lead to a qualification that is an essential prerequisite:

(a) for entry to a particular profession or trade in Australia; or

(b) to commence the practice of (but not to maintain the practice of) a profession or trade in Australia.

The courses you supply will be a professional or trade course if:

(a) it is a course leading to a qualification, and

(b) the qualification is an essential prerequisite.

Goods and Services Tax Ruling GSTR 2003/1 (GSTR 2003/1) provides the ATO view as to what supplies are GST-free as a professional or trade course.

Paragraph 48 of GSTR 2003/1 states that a qualification is an essential prerequisite if it is mandatory for a person to have the qualification before he or she 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 qualifications.

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.

A qualification that is imposed for reasons other than for entry to, or to commence the practice of a profession or trade, is not an essential prerequisite for the purposes of a professional or trade course. A course leading to a qualification that merely enhances a recipients proficiency to undertake a wider range of activities in his or her profession or trade, is not a professional or trade course. For a specialisation to be characterised as a separate profession or trade, its attributes must be more than merely a set of additional skills or endorsements that enable a person to undertake different tasks within their profession or trade.

As the certificate in question is not an essential prerequisite for entry into, or commencement of the practice of a profession or trade, the course does not fulfil the requirements of a professional or trade course.

Adult and Community Education courses

Paragraph 11 of GSTR 2000/27 (which provides guidance on Adult and Community Education courses) provides that 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

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

· be provided by, or on behalf of, a body that is:

o a higher education institution,

o recognised or funded by the relevant State or Territory authority as a provider of ACE courses, or

o a body corporate operating on a not-for-profit basis.

First Requirement

GSTR 2000/27 discusses the meaning of 'likely to add to employment related skills'. You have advised that you are providing employment related skills whereby when students successfully complete the course they will receive a certificate. Training of this type satisfies the criteria outlined in that ruling.

Based on the information you have provided, it is accepted that the course is likely to add to the employment related skills of the participants undertaking these courses.

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 (the Education Minister's ACE Determination). At subsection 5(2) of this Determination, the Education Minister states that an adult and community education course must:

(a) not be any other education course defined in section 195-1 of the GST Act; and

(b) be available to adults in the general community; and

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

(d) 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

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

From your information, your course does not satisfy the definition of any other education course. You have also stated that your course is available to adults and school leavers in the general community and it is not provided to corporate clients. From the information you have provided, your course is not private tuition for individuals. Based on the above information it is accepted that your course satisfies the criteria outlined above.

Third Requirement

Finally, the course must be provided by, or on behalf of, a higher education institution, or a body that is recognised or funded as a provider of ACE courses or a body corporate operating on a not-for-profit basis that has not been refused recognition or disqualified by a state or territory authority as a provider to ACE courses for failing to meet or maintain the standards required by that authority. Neither you, nor your associate are a provider in accordance with the above requirements.

In order for the course to be recognised as a GST-free supply of an ACE course you must satisfy all of the three requirements of an ACE course. As you are not a higher education institution or recognised provider of ACE courses, nor are you providing the course on behalf of such providers you do not meet the third requirement. Accordingly, your delivery of the course is not the supply of an ACE course.

Summary

The course provided by you is not an education course in accordance with section 195-1 of the GST Act, therefore your supply does not meet the requirements of section 38-85 of the GST Act and is not a GST free supply of an education course.