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Ruling

Subject: GST and tutoring service

Question 1

Is GST payable on the supply of your services to the students?

Answer

Yes.

Question 2

What are you required to do regarding the GST payable for the previous tax periods?

Answer

You are liable to pay the GST on the taxable supplies that you have made.

Question 3

Can the GST payable for the above period be waived?

Answer

No.

This ruling applies for the following period

The scheme commenced on

Relevant facts

You operate a tutoring business that caters for students from Grade Prep to Year 12 at a number of separate locations in a particular State. You registered for GST.

Your curriculum is supplementary to the standard State primary and secondary school course work. You provide term reports, but you do not provide a standardised assessment of the student's abilities.

The nature of the tutoring is that you primarily answer questions that students are having with their school work. In the event that a student has no questions about their schoolwork, you proceed with teaching their school material in advance. You also assist students with any help they need with school projects, assignments, tests and exams.

Tutoring is provided directly and individually to each student using a variety of resources including the student's school textbooks, your own textbooks, workbooks, and self generated worksheets. The material is customised for each student depending on their individual needs. Where necessary and appropriate to assist the student, you provide them with photocopies of textbooks or workbooks.

You employ tutors who are either currently attending university or have recently graduated and who have achieved exceptional results.

You are not a primary school, a secondary school, a registered training organisation, a higher education institution or a special school. However, you assist students engaged in each of these education systems.

You are a member of the Australian Tutoring Association which is the only association of its kind for supplementary educational services.

Prior to commencing trading, you obtained phone advice from the ATO regarding registering for GST and the GST status of your supply of services to the students. At that time, you were doubtful that you would reach the registration turnover threshold. However, you decided to register for GST. You stated that you were advised that you were not liable to pay GST on the supply of your services as it is 'exempt' as an education course. Relying on this advice, you did not include GST in the fees you charged the students for the previous tax periods.

To date you have submitted a number of activity statements showing no GST on sales but claiming GST on purchases.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section 9-5.
A New Tax System (Goods and Services Tax) Act 1999 Section 9-40.
A New Tax System (Goods and Services Tax) Act 1999 Section 23-5.
A New Tax System (Goods and Services Tax) Act 1999 Section 23-10.
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 decision

Question 1

GST is payable on any taxable supply that you make.

Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that you make a taxable supply if:

· you make the supply for consideration

· the supply is made in the course or furtherance of an enterprise that you carry on

· the supply is connected with Australia and

· 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.

Based on the information provided, you satisfy the requirements of paragraphs 9-5(a) to 9-5(c) of the GST Act because:

· you supply your services for consideration

· the supply of your services is in the course or furtherance of your enterprise

· the supply of your services is connected with Australia as the services are done in Australia.

Paragraph 9-5(d) of the GST Act is satisfied if an entity is either registered or required to be registered for GST.

Section 23-5 of the GST Act provides that you are required to be registered for GST if:

· you are carrying on an enterprise, and

· your GST turnover meets or exceeds the registration turnover threshold of $75,000 (or $150,000 if you are a non-profit body).

· Your turnover meets the registration turnover threshold when:

· your current GST turnover is at or above the turnover threshold, and the Commissioner is not satisfied that your projected GST turnover is below the turnover threshold; or

· your projected GST turnover is at or above the turnover threshold.

Although the current and projected GST turnovers may be capable of being determined on every day during a month, there is no requirement for continuous recalculation. However, under the GST Act there are obligations if you meet or exceed a particular threshold and there is an opportunity for you to make certain elections if you do not exceed a particular threshold. Therefore, you should be aware of the relevant thresholds likely to affect you and consider whether your turnover may be sufficiently close to the relevant thresholds to make a review prudent.

Section 23-10 of the GST Act provides that if you are not required to be registered because your turnover is less than the registration turnover threshold, you may choose to register for GST.

You advised that when you commenced trading you were doubtful that you will reach the registration turnover threshold. However, after speaking to an ATO officer you decided to register for GST. As you are registered for GST, you satisfy the requirement of paragraph 9-5(d) of the GST Act.

The supply of your services is not input taxed. It remains to be determined whether the supply is GST-free.

An education course is GST-free under section 38-85 of the GST Act. The definition of an education course includes, amongst other things, a primary course and a secondary course.

Goods and Services Tax Ruling GSTR 2000/30 helps you work out which supplies of pre-school, primary and secondary courses are GST-free.

Paragraphs 19 to 22 of the GSTR 2000/30 deal with primary courses.

A primary course is:

(i) a course of study or instruction that is delivered:

(i) in accordance with a primary curriculum recognised by the education authority of the State or Territory in which the course is delivered; and

(ii) by a school that is recognised as a primary school under the law of the State or Territory; or

(ii) any other course of study or instruction that the Education Minister has determined is a primary course for the purposes of this Act.

Paragraphs 23 to 27 of the GSTR 2000/30 deal with secondary courses.

A secondary course is:

(a) a course of study or instruction that is a secondary course determined by the Education Minister under subsection 5D(1) of the Student Assistance Act 1973 for the purposes of that Act; or

(b) any other course of study or instruction that the Education Minister has determined is a secondary course for the purposes of this Act.

The services you provide do not satisfy the definition of an education course applicable to primary and secondary courses.

You do not provide an education course with a curriculum recognised nor supply a course that is determined to be an education course. You are not a school that provides primary or secondary courses but merely tutor students on the education supplied by their respective educational institutions.

The services you provide do not satisfy the definition of 'education course' in the GST Act. Hence, the supply of your services is not GST-free under section 38-85 of the GST Act.

The supply of your services is not GST-free under any other provisions of the GST Act or another Act. Therefore, as all the requirements of section 9-5 of the GST Act are satisfied, you are making a taxable supply when you supply your services to your students.

GST equally to 1/11^th of the price you charge for your services is the GST you must pay to the ATO.

Questions 2 and 3

GST is a broad-based tax on most supplies of goods and services consumed in Australia. The consumer bears the cost of GST, not the business providing the goods and services. However, under section 9-40 of the GST Act, the liability to pay GST to the ATO rests on the supplier of the goods and services, not on their customer. In other words, even if the supplier does not include GST in their price, the supplier is still liable to pay it to the ATO where the supplier has made a taxable supply.

The price that a supplier charges for the supply is a contractual matter to be negotiated between the supplier and the recipient.

As outlined in question 1 above, the supply of your services is a taxable supply. Therefore, 1/11^th of the consideration received for that supply is GST that must be remitted to the ATO. As the liability to account for GST rests with you as the supplier of the taxable supply even if you have not included GST in the fees you charge for your services, you are still liable to remit GST to the ATO. Whether you increase your price to cover the GST component that you are liable for is a business decision for you to make.

You should note that there is no authority for the Commissioner in the administration of the GST Act to overlook the incorrect GST treatment of transactions.

Where you have not previously remitted GST to the ATO in respect of amounts received by you for the supply of your services that are taxable, you will need to amend the relevant Business activity statement to reflect the GST payable. Refer to the publication Correcting GST mistakes for further information.

The publications referred to above are available from our website www.ato.gov.au