Edited version of your private ruling

Authorisation Number: 1012124071347

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Subject: Goods and services tax (GST) and education

Questions

1. Are you making a supply of a GST-free education course when subcontracted under contractual agreements with two registered training organisations (RTOs) to deliver units of competencies from their accredited courses?

2. Is the cost charged to the participants for the units of competencies from accredited courses to be delivered under the contractual agreements with the RTOs subject to GST?

3. Is the cost payable to the RTOs under the contractual agreements for issuing of the credentials subject to GST?

Answers

1. No, you are not making a supply of a GST-free education course when subcontracted under contractual agreements with two RTOs to deliver units of competencies from their accredited courses. You are making a supply of training, assessment and management services to the RTOs which is a taxable supply.

2. The cost charged to the participants for the units of competencies from accredited courses to be delivered under the contractual agreements with the RTOs may be GST-free as the supply of an education course being supplied by the RTOs however as the RTOs are not a party to this ruling request, no comment can be made on the appropriate GST treatment of that particular supply.

3. The fee charged by the RTOs for issuing of the credentials to the course participants of the accredited courses under the contractual agreements may be a GST-free supply of an administrative service directly related to the supply of an education course being supplied by the RTOs however as the RTOs are not a party to this ruling request, no comment can be made on the appropriate GST treatment of that particular supply.

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 a provider of training and assessment services in a particular state and are registered for goods and services tax (GST).

Your trainer and assessor is accredited and recognised by the relevant state authority.

You are not a registered training organisation (RTO) or an education institution.

You are not a body that is recognised or funded as a provider of adult and community education courses or a body corporate operating on a not-for-profit basis.

You train and assess individuals who wish to obtain licences and certification to operate heavy machineries such as cranes and loaders. All persons wishing to operate or carry out high risk works must hold qualifications and licences.

As of the 1 January 2012 there have been some changes to the licensing requirements for operating certain heavy machineries. Under new nationally harmonised work health and safety (WHS) laws, earthmoving or particular crane (EPC) occupational classes are not required to be licensed from 1 January 2012.

You specialise in the operations of cranes, rigging, dogging and other loadshifting mobile plant and equipment. You also have extensive experience in all facets of the mining equipment sector and deliver accredited training modules to mine employees.

You deliver accredited training modules under agreements with RTOs.

The accredited training modules/units of competencies are from the accredited licensing courses/Training Package:

The units of competencies in the accredited courses will eventually be replaced by new 'licence to…' equivalents in the particular training package.

The accredited licensing courses are owned by the relevant state authority and licence agreements are only entered into with RTOs.

The licensing courses can be delivered through partnering arrangements. Acceptable partnering arrangements include contractual arrangements between the RTO and trainers or assessors with the required competency for the delivery of the courses. It is not acceptable in a situation where a trainer proposes to deliver the course under the banner of a RTO without being subject to direct control of the RTO with scope of registration.

You have a contractual agreement with an RTO to provide them with services on the terms and conditions of the agreement. You have provided a copy of this agreement.

The contractual agreement provides that the RTO has been granted Licence Agreements by the relevant state authority for the use of licensed course products relevant to the courses for national license classes.

In your relevant state the training and assessment for licensed outcomes can only be conducted by a Registered Training Organisation (RTO). This means that your work as a trainer and assessor for the units of competency listed above will be performed under the auspices of the RTO. This also means that the RTO is the party with legal responsibility for the issue of Statements of Attainment to individuals that you train and assess. For this reason, the RTO must exercise proper and diligent control over training and assessment conducted by you in its name.

Furthermore under the agreement the RTO will give you permission to use and reproduce training and assessment materials that have been established by the RTO as being Australian Quality Training Framework (AQTF) and compliant with the relevant state authority for the purpose of training and assessment conducted in the name of the RTO only.

You advised that under the agreement you manage the administration of the units of competencies from the accredited courses/training package. You find your own participants. You advertise the courses, set the course fees, take bookings and payments. The participant will enrol with the RTO. You will invoice the participant and manage the debtors within your accounting system.

You are required to adhere to the RTOs established policies and procedures for training and assessment delivery and need to seek written permission from the RTO first before making any deviation to established procedures and guidelines. Once you have delivered the training, you then package the assessments and supplementary paperwork supporting that the delivery of the training has met the national competency standard and as required under your agreement with the RTO.

On receipt of the paperwork and where correct evidence requirements have been met, the RTO will process assessments to Statement of Attainment and issue certificates you to provide to the successful participants, on payment of a fee. The RTO will also submit, on behalf of trainees the required licence application

The contractual agreement with the RTO outlines that you are able to retain the fees collected from the participants less the cost payable to the RTO for the statement of attainment and licensing processing as payment for the services you provided under the agreement.

You also advised that you may be paid a daily rate for scheduled delivery of the training courses organised by the RTO. However you said that these are very few.

You also advised that you have another contractual agreement with another RTO to provide them with services on similar terms and conditions. You advised that the financial arrangement will be similar in that you may be paid a daily rate for scheduled training organised or you are able to retain the fees collected from the participants less the cost payable to the RTO per person per course that you run for the statement of attainment and licensing processing as payment for the services you provided under the agreement.

Relevant legislative provisions

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

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

Reasons for decision

Taxable supply

A supply is subject to GST if it is a taxable supply. Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) 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 you ^*carry on; and

(c)     the supply is ^*connected with Australia; and

(d)     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 the GST Act)

All the elements of section 9-5 of the GST Act must be satisfied for a supply to be a taxable supply.

Section 38-85 of the GST Act provides:

A supply is GST-free if it is a supply of:

(a) an *education course; or

(b) administrative services directly related to the supply of such a course, but only if they are supplied by the supplier of the course.

In your case, you have entered into contractual agreements with RTOs on a subcontract basis to deliver their accredited courses; therefore, we need to determine firstly what supplies are being made under the contractual agreements and who is making the supplies.

Supplies of accredited courses under contractual agreements

Goods and Services Tax Ruling GSTR 2006/9 (which is available from the Australian Taxation Office's (ATO) website at www.ato.gov.au) discusses supplies in tripartite or multi party arrangements. In two party transactions, a thing supplied to an entity is typically also provided to that entity. In more complex arrangements involving more than two entities, which we refer to as tripartite or multi party arrangements, analysis may reveal:

· a supply made to one entity but provided to another entity

· two or more supplies made, or

· a supply made and provided to one entity and third party consideration.

Furthermore, indicators of whether you are the supplier of an education course include who controls:

· the selection of and enrols the students;

· the requirements for course content, accreditation and the issue of any qualification;

· the regulations and procedures for the conduct of the course; and

· the marketing and quality assurance of the course.

You have entered into a contractual agreement with one RTO and another contractual agreement with another RTO. Based on the terms and conditions of the respective contractual agreements between you and the respective RTO, it is the RTOs in each contractual agreement that meet all the requirements of the supplier of an education course as listed above notwithstanding that you may advertise, find the participants, manage the administration of the course and provide the physical delivery of their accredited courses. You are not the supplier of an education course.

Based on the contractual agreements between you and the RTOs and applying the ATO view in GSTR 2006/9, there are two supplies being made for GST purposes:

· a supply of services from you as the subcontractor to the respective RTO, and

· a supply from the respective RTO of a education course to the course participants.

In relation to the first supply above, we consider that you as the subcontractor are not supplying an education course but rather are supplying the RTOs with training services which in turn is provided to the course participants pursuant to the terms and conditions of contractual agreements. The RTOs supply the education course to the course participants that is provided by you.

Therefore, in the contractual agreement between you and one of the RTOs, you are supplying training, assessment and management services to the RTO. The RTO supplies the accredited courses and also supplies statements of attainment to the course participants.

Similarly, in the contractual agreement between you and the other RTO, you are supplying training, assessment and management services to the RTO. The RTO supplies the accredited courses and also supplies statements of attainment to the course participants.

As you are not supplying an education course but rather are supplying the RTOs with training, assessment and management services then this supply is not a GST-free education course, it will be a taxable supply and subject to GST if all of the relevant requirements of section 9-5 of the GST Act are met. In this case, you are making a supply to the RTOs and are receiving consideration whether in the form of an hourly rate or in the form of the retained portion of the course participants fees for that supply, the supply is made in the course of your enterprise that you carry on and is connected with Australia as the supply of the services is made through your enterprise carried on in Australia and you are registered for GST. Furthermore, the supply is not an input taxed supply nor any other GST-free supply under the GST Act. Therefore as all the requirements in section 9-5 of the GST Act are met your supplies of training, assessment and management services to the RTOs are taxable supplies and will be subject to GST.

Please note that the fee charged to the course participants of the accredited courses under the contractual agreements may be GST-free as the supply of an education course being supplied by the RTOs however as the RTOs are not a party to this ruling request, no comment can be made on the appropriate GST treatment of that particular supply.

Furthermore, the fee charged for issuing of the credentials to the course participants of the accredited courses under the contractual agreements may be a GST-free supply of an administrative service directly related to the supply of an education course being supplied by the RTOs however as the RTOs are not a party to this ruling request, no comment can be made on the appropriate GST treatment of that particular supply.

In conclusion, the money from the course fees collected by you that is not passed on to the RTOs under each contractual agreement with them is consideration for a taxable supply of training, assessment and management services by you to the RTOs in the respective agreements. Furthermore if the consideration is in the form of an hourly rate as consideration for the services supplied under the contractual agreements then this will also be a taxable supply and subject to GST. If required by the RTOs you will need to issue tax invoices for the supplies of your training, assessment and management services.

Correcting GST mistakes

If you have mistakenly treated and classified a taxable supply as not subject to GST, you will need to revise your previous BAS, or in some cases where you come within the specified time and correction limits you may be able to make a correction on a later BAS.

The ATO has issued a fact sheet about correcting GST mistakes which outlines when you may make a correction on a later BAS in relation to previous tax periods. This fact sheet titled Correcting GST Mistakes (NAT 4700) sets out the time and correction limits. A copy of this fact sheet is accessible from our website at www.ato.gov.au