Edited version of private ruling

Authorisation Number: 1011888024549

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Ruling

Subject: GST and Non-Accredited diploma courses supplied by a Registered Training Organisation (RTO)

Question

Is a particular Diploma Course (diploma course) delivered by a Registered Training Organisation (RTO) an 'Adult and Community Education course' (ACE) and therefore not subject to goods and services tax (GST)?

Answer

The diploma course delivered by the Registered Training Organisation (RTO) is not an ACE course and therefore is subject to GST.

However, the delivery of the accredited subjects from the accredited course that are included in the diploma course is GST-free. Please refer to the additional information provided below in our reasons for decision.

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.

Our decision is based on the following facts:

The entity is registered for GST.

The entity is a Registered Training Organisation (RTO)

The entity delivers two courses: an accredited course and a non accredited course (diploma course).

Both courses are vocational with the express purpose of training individuals for employment as professional performers in a particular entertainment industry.

The curriculum of the diploma course includes certain subjects that are delivered under the accredited course.

The diploma course is marketed as one that caters for people who wish to pursue a professional career in the entertainment industry. The message is consistently conveyed through the website and in the student handbook.

The diploma course is not for people merely interested in artistic or cultural pursuits. Every student who enrols in the course has a clearly stated desire to develop skills that will lead eventually to employment in the entertainment industry.

Whilst the course is open to all members of the community regardless of prior experience or qualifications, candidates should ideally have had some (basics) experience in the entertainment industry prior to entering the course.

All applicants are required to attend an audition and interview and the applicants from interstate or overseas are required to submit a video audition.

The entity is not funded as an ACE provider nor a body corporate operating on a not-for-profit basis.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section 38-85

A New Tax System (Goods and Services Tax) Act 1999 Section 195-1

Reasons for the decision

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

Section 38-85 of A New Tax System (Goods and Services Tax) Act 1999 (GST act) states that a supply is GST-free if it is a supply of an education course or administrative services directly related to the supply of such a course but only if they are supplied by the supplier of the course.

According to Section 195-1 of the GST Act, an adult and community education course is considered as an education course.

Adult and Community Education Courses

To be GST-free as an adult and community education (ACE) course, a course must be:

(i) likely to add to the employment related skills of people undertaking the course; and

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

(iii) provided by, or on behalf of, a body that is recognised or funded as a provider of ACE courses or a body corporate operating on a not-for-profit basis.First requirement

Goods and Services Tax Ruling GSTR 2000/27 discusses the meaning of 'likely to add to employment related skills'.

Based on the information provided by the entity it is accepted that the diploma course provided by the entity is likely to add to the employment related skills of the people undertaking them.

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 ACE Determination).

At paragraph 5(2) of his 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 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.

Based on the information the entity has provided it is the ATO's view that the non-accredited diploma course is not available to adults in the general community because of the following reasons and therefore does not satisfy the above definition of an adult and community education course.

It is the ATO's view that when determining whether a course is 'available to adults in the general community' it is necessary to consider factors such as:

· enrolment prerequisites;

· to whom the course is principally directed;

· by whom the course is conducted and

· whether the course could be considered to be continuing professional development.

'Available to adults in the general community' does not merely mean that a course exists and that a reasonable person could, if they conducted a substantial amount of research, be aware that such a course exists.

Firstly for a course to be available to adults in the general community there must be no prerequisite for a particular qualification, or a particular amount of experience required, before a person could undertake the course.

It is also necessary to determine towards whom a course is principally directed. If, for example, a course was directed towards a specific audience or profession, although theoretically any person could be permitted access to the course, the course could not be determined to be available to adults in the general community.

The diploma course is principally directed at people who wish to pursue their employment or career within the entertainment industries. This non-accredited course is not directed at an average person. This is reinforced when one examines the entry conditions to this non-accredited course that require prior experience or selection auditions.

Another indicator of the intended audience of the course is the way in which it is marketed. The entity advised that the diploma course is marketed as one that caters for people who wish to pursue a professional career in the entertainment industry. The message is consistently conveyed through the website and in the student handbook.

While the entity does engage in some general marketing, the emphasis of the marketing is still focussed towards those who have an existing and extensive knowledge and/or experience in the entertainment industry.

Furthermore, interstate and overseas applicants are required to submit a video audition. This, along with the other factors previously mentioned, reinforce the contention that the non-accredited diploma course is not available to adults in the general community. Therefore, this course fails the second requirement.

Third requirement

Finally, the course must be provided by, or on behalf of, a body that is recognised or funded as a provider of ACE courses or a body corporate operating on a not-for-profit basis.

The entity is not recognised or funded as a provider of ACE courses nor a body corporate operating on a not-for-profit basis. As such, the entity does not satisfy the third requirement and the non-accredited diploma course does not satisfy all of the requirements of an ACE course, above. Therefore, the supply of this diploma course is not GST-free as an ACE course.

Additional Information:

A tertiary course is defined as an education course under section 195-1 of the GST Act and therefore is GST-free.

The Student Assistance Act 1973 (SAA) Determination provides that an accredited vocational education and training course specified in the SAA Determination that is conducted by an RTO is a tertiary course. Based on this Determination the accredited course supplied by the entity would be considered as a tertiary course.

Goods and Services Tax Ruling GSTR 2001/1 discusses supplies of tertiary courses that are GST-free under Subdivision 38 - C of the GST act.

Paragraph 38 of GSTR 2001/11 explains that non-accredited subjects, that form part of any courses developed by an entity that comprise a combination of accredited and non-accredited subjects, will be subject to GST on an apportionment basis. This means that the subjects from the accredited course that have been integrated into the diploma course will be GST-free as they are part of a tertiary course as per SAA Determination. The remaining units from the diploma course will be subject to GST. This means that the entity will be required to use a reasonable basis to determine the portion of the course that is non-accredited and levy GST on that component.

What is 'reasonable' will depend on the facts in each case. However, the Commissioner would consider that the calculation of the taxable proportion based on the time taken for each unit would be reasonable.

A copy of GSTR 2001/1 is included with this ruling.