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Authorisation Number: 1012064862008

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Ruling

Subject: goods and services tax (GST) and international services.

Question 1

Are you required to be registered for GST?

Answer

No (based on the arrangement concerned).

Question 2

Is GST payable on your supplies of services to the overseas company?

Answer

No.

This ruling applies for the following periods:

The scheme commences on:

Relevant facts and circumstances

You are not registered for GST.

You have an ABN.

You are an IT consultant working remotely for an overseas company. You used to work for the same overseas company full-time in the overseas country but you requested that they allow you to move back to Australia in a certain month of a certain year and continue to work for them remotely.

The services you provide to the overseas company are project management for their overseas country based websites and team leadership for the overseas country based IT and design department as well as programming and design for the overseas country based products. All the work is knowledge based and exported to the overseas country.

The overseas company does not have an Australian presence.

You invoice the overseas company for the services you provide to it.

The overseas company tells you what work is to be done but not how and where it is to be done.

You are hired on an ongoing basis. You get paid a monthly contractor fee.

You cannot delegate or subcontract out the work.

You use your own computer to do the work.

You do not bear any risk of the costs arising out of any defect in carrying out your work.

The overseas company has the right to cancel your contract.

You may work for entities other than the overseas company while you are working for the overseas company. However, you cannot do work in the same field as the work you do for the overseas company, for other entities, while you are working for the overseas company. You cannot do work for entities other than the overseas company while you are working for the overseas company if the work for the other entities would compete with the overseas company.

The overseas company gives you annual and sick leave.

There is no uniform that staff of the overseas company are required to wear.

In a certain financial year, you will earn over $75,000.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 subsection 7-1(1)

A New Tax System (Goods and Services Tax) Act 1999 section 9-5

A New Tax System (Goods and Services Tax) Act 1999 section 9-20

A New Tax System (Goods and Services Tax) Act 1999 section 23-5

A New Tax System (Goods and Services Tax) Act 1999 section 38-190

Reasons for decisions

Question 1

Summary

You are not required to be registered for GST (based on the arrangement concerned) because you are not carrying on an enterprise. The activities of an employee are not an enterprise and you are an employee of the overseas company.

Detailed reasoning

An entity is required to be registered for GST if it satisfies the requirements of section 23-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), that is:

(a) the entity is carrying on an enterprise; and

(b) the entity's GST turnover meets the registration turnover threshold of $75,000.

Paragraph 9-20(1)(a) of the GST Act includes an activity or series of activities done in the form of a business in the definition of enterprise.

Paragraph 9-20(2)(a) of the GST Act provides that the activities of an employee are excluded from the definition of enterprise.

Considering the facts you have provided and using the Australian Taxation Office employee versus contractor decision tool, we consider that you are an employee of the overseas company.

Therefore, your activity of working for the overseas company is not an enterprise. Hence, you have not satisfied the requirement of paragraph 23-5(a) of the GST Act.

As you have not satisfied the requirements of section 23-5 of the GST Act, you are not required to be registered for GST (as a result of your activity of working for the overseas company).

Taxation Ruling TR 2005/16 provides guidance on determining whether a worker is an employee or instead a contractor.

Question 2

Summary

GST is not payable on your supplies of services to the overseas company because:

§ you do not make these supplies in the course or furtherance of an enterprise that you carry on;

§ you are not registered or required to be registered for GST; and

§ your supplies of these services are GST-free under section 38-190 of the GST Act.

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

(c) you *carry on; and

(d) the supply is *connected with Australia; and

(e) 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)

Supply made in the course or furtherance of an enterprise

You do not supply your services to the overseas company in the course or furtherance of an enterprise that you carry on. Therefore, the requirement of paragraph 9-5(b) of the GST Act is not satisfied.

Registered or required to be registered for GST

You are not registered or required to be registered for GST. Therefore, the requirement of paragraph 9-5(d) of the GST Act is not satisfied.

GST-free supplies of services

In accordance with item 2 in the table in subsection 38-190(1) of the GST Act, a supply of something other than goods or real property to a non-resident who is not in Australia when the thing supplied is done is GST-free, provided that:

(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 for GST.

Paragraph 31 of Goods and Services Tax Ruling GSTR 2004/7 provides the meaning of not in Australia. 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 41 of GSTR 2004/7 provides the meaning of in Australia in relation to the supply where the recipient of the supply is a non-resident company. It states:

41. A non-resident company is in Australia in relation to the supply if the supply is solely or partly for the purposes of the Australian presence, for example, its Australian branch. If the supply is not for the purposes of the Australian presence but that Australian presence is involved in the supply, the company is in Australia in relation to the supply, except where the only involvement is minor.

You supply services to the overseas company and services are something other than goods or real property.

You supply these services to a non-resident company. Your supply of the services is not for the purposes of an Australian presence of the overseas company. The overseas company does not have an Australian presence that is involved with your supplies of services. Therefore, the overseas company is not in Australia in relation to your supply when the thing supplied is done.

Additionally, your supply of services to the overseas company is not 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.

Therefore, you make a GST-free supply of services under item 2 in the table in subsection 38-190(1) of the GST Act in this case.

Conclusion

GST is not payable on your supplies of services to the overseas company because:

§ you do not satisfy the requirement of paragraph 9-5(b) of the GST Act;

§ you do not satisfy the requirement of paragraph 9-5(d) of the GST Act; and

§ your supplies of the services are GST-free.