Edited version of private ruling

Authorisation Number: 1011774037627

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Ruling

Subject: Is your supply of resource materials GST-free?

Question

If you register for GST or are required to be for registered for GST purposes would you be making a GST-free supply when you supply your early childhood resources to schools?

Advice/Answer

No, your supply of the early childhood resources would not be GST-free. If you register for GST or are required to be for registered for GST purposes you would be making a taxable supply when you supply your early childhood resources to pre-schools.

Relevant facts

You are not currently registered for GST.

As an entity you trade under more than one business name. You supply early childhood resources to schools on a sale or hire basis.

Your early childhood resource product is described as a themed education course in a box. The box comes with a manual for teachers on how to use the resources, discussion ideas etcetera.

Your method of operation includes the hiring out of the box to (for example) a school for a specified period. The school then returns it for a box themed on a different subject.

Current themes are listed on your website.

Your website also provides the following:

§ Mission statement:

The resource material is not presented by you as an education course, this is left to the school teacher. You merely supply the resource material for use by the school with recommendations on its use.

You are not a registered training organisation (RTO).

You advise that the Products/Packages offered by you can help childcare centres with maintaining the National Childcare Accreditation Council requirements.

You also sell other items.

Detailed reasoning

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). A supply related to such an education course is GST-free where it is one covered by section 38-95 of the GST Act.

Section 38-95 of the GST Act provides that a supply of course materials for a subject undertaken in an education course is GST-free.

Course materials are materials provided by the entity supplying the course that are necessarily consumed or transformed by the students undertaking the course for the purposes of the course (section 195-1 of the GST Act). As you are not the entity supplying the course the supply of the resource material by you will not come within this definition and therefore not meet the requirements of section 38-95 of the GST Act to be a GST-free supply

We include the following explanation for your information.

Goods and Services Tax Ruling GSTR 2000/30 which is about supplies that are GST-free for pre-school, primary and secondary education courses provides that course materials also have to be necessarily consumed or transformed by the students undertaking the education course, for the purposes of the course. This requirement means that the materials must be essential or fundamental for the student to use up or convert in undertaking the course. (Paragraphs 70-82 of GSTR 2000/30 refer - this ruling can be found on our website at www.ato.gov.au)

Examples of things that may be GST-free when supplied by the educational institution are photocopied or printed educational materials that specifically relate to the course, course notes for a particular course, unexposed film and developing chemicals, art supplies and ingredients used in a cooking class. Examples of things that would not be course materials if they were supplied by an educational institution because they are not necessarily used or consumed by the student are, textbooks, musical instruments, computers, calculators and sporting equipment.

Further, the supply by way of lease or hire of curriculum related goods to a student by the supplier of a pre-school, primary or secondary course is only GST-free where the goods are hired or leased by the provider of a pre-school, primary or secondary course and provided the supplier of the course retains ownership in those goods. (Paragraphs 88-89 of GSTR 2000/30 refer)

In the present case you supply your resource material by way of hire to schools. It follows that since the materials are supplied by a third person (in this case you) rather than by the entity supplying the education course it will not come within the definition of course materials and is not GST-free. Furthermore, the resource material would not be necessarily consumed or transformed by the students undertaking the education course even if they were supplied by the education course provider as the complete resource is returned to you after the hire period.

Therefore, you are not supplying course materials that are GST-free under section 38-95 of the GST Act. There are no other provisions in Division 38 of the GST Act that make the supply of your resource material GST-free.

You are making the supply of the resource material to Australian schools for consideration in the course of your enterprise. If you choose to register for GST or are required to be registered for GST purposes you would be making a taxable supply under section 9-5 of the GST Act when you supply these resource materials.

Further information - Requirement to register for GST

If you carry on a business, you must register for GST if your GST turnover is at, or above the GST turnover threshold, that is, it is $75,000 or more ($150,000 or more for non-profit organisations).

You register only once for GST, even if you operate more than one business. For example, the company ABC Pty Ltd operates two businesses, ABC Building and Hardware Supplies, and ABC Plumbers. ABC Pty Ltd registers once for GST. This registration covers the company's two businesses.

Your GST turnover is your gross business income (not your profit), excluding any:

§ GST included in sales to your customers

§ sales that are not for payment and are not taxable supplies (for example, some supplies to associates)

§ sales not connected with a business that you carry on

§ input taxed sales you make

§ sales not connected with Australia.

If you are not registered for GST, you must check each month to see whether you have reached the GST turnover threshold. If you reach the threshold, you must register for GST within 21 days.

You reach the GST turnover threshold if either:

§ your turnover for the current month and the previous 11 months is $75,000 ($150,000) or more - current GST turnover, or

§ your turnover for the current month and the next 11 months is likely to be $75,000 ($150,000) or more - projected GST turnover.

Please refer to our publication GST for small business NAT 3014 which is available on our website for further information in relation to small business GST obligations.