Edited version of your private ruling

Authorisation Number: 1012224963006

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Ruling

Subject: GST and professional or trade education course

Question 1

Is the supply of a Diploma A (DA) course by a not for profit society (you) to graduates who hold a bachelor degree a GST-free supply of an education course under section 38-85 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No, the supply of a DA course by you to graduates who hold a bachelor degree is not a GST-free supply of an education course under section 38-85 of the GST Act. On the facts provided, the supply of the DA course is a taxable supply.

Question 2

Is the supply of a Diploma B (DB) course by you to specialist practitioners a GST-free supply of an education course under section 38-85 of the GST Act?

Answer

No, the supply of a DB course by you to specialist practitioners is not a GST-free supply of an education course under section 38-85 of the GST Act. On the facts provided, the supply of the DB course is a taxable supply.

Question 3

Is the supply of a Certificate C (CC) course by you to practitioners a GST-free supply of an education course under section 38-85 of the GST Act?

Answer

No, the supply of a CC course by you to graduates who hold a bachelor degree is not a GST-free supply of an education course under section 38-85 of the GST Act. On the facts provided, the supply of the CC course is a taxable supply.

Relevant facts and circumstances

You carry on an enterprise which involves supplying a number of training courses to candidates wishing to gain various qualifications (DA, DB or CC) in a particular field.

You are a not for profit society that is registered for goods and services tax (GST).

You describe the three training courses you supply as follows:

The DA, DB and CC courses are modular courses with both a face to face component of systematic and interactive learning and self directed learning. All the courses provide instruction, support, assessment, supervision and feedback. Self directed learning involves candidates working on those skills taught during the classes and extends that learning with reading and written assignments to prepare for the examinations.

The DA course:

The DA is the qualification awarded by you to an appropriately qualified candidate who successfully undertakes training, completes the DA course and achieves a pass in each assessment.

The DA is accredited and represents your standard of professional competence.

The prerequisite educational qualifications for admission to the DA assessment include a three year degree or current registration in Australia or foreign country.

The DA course involves self directed learning using the available syllabus and reading lists from your website. The course is divided into two parts with each part consisting of:

· part 1: two written exams

· part 2: written, oral & practical exams, supervisor assessment & case based assignments and a log book requirement.

The DA is offered with endorsements in several specialist modalities.

Candidates must complete the DA within the prescribed time limits.

The DB course:

The DB is the qualification awarded by you to appropriately qualified candidates who:

· are registered as practitioners in Australia or NZ

· have undergone training and

· who have achieved a pass in each of the assessments.

Applicants must have a degree recognised in Australia or foreign country and registration as a practitioner with the relevant Board or Council of a State or Territory of Australia or foreign country.

The DB involves self directed learning using the available syllabus and reading lists from your website and assessment by your board of examiners.

The DB is divided into the following 3 modules:

· Module 1 is self paced using a wide range of learning materials. On completion of module 1 there is a summative assessment.

· Module 2 (competence) involves access to a high quality practice relevant to the chosen DB for a period. The module 2 assessment consists of two formative case studies, two formative supervisor assessments, three summative case studies, three summative supervisor assessments, a logbook and the completion of a number of years experience.

· Module 3 (advanced practice) in which the candidate is required to pass two cumulative assessments:

To successfully complete the DB, pass grades must be achieved in all sections of module 1, module 2 and module 3 within the prescribed time limits.

The DB qualification must be successfully completed within the prescribed time limit from the original enrolment.

The CC course:

The CC is a credential awarded by you to registered practitioners who are not specialists but who use the training in their practice.

You accredit external training provider courses that meet CC syllabus standards.

Where a candidate has completed your accredited course the candidate can apply for the CC. A CC certificate may be awarded to a practitioner who, as one of your members, enrolled in the CC and fulfilled certain requirements

The CC may be jointly awarded with endorsement from another association or society.

You contend that each of the DA, DB or CC courses leads to a qualification, which is accepted by the Australian and foreign country governments the accreditation registry and others as suitable evidence that a person has successfully completed a qualification.

The accreditation registry (AR) provides an accreditation framework for education programs provided by various organisations in Australia and maintains a register of accredited persons and student and monitors their continuing professional development (CPD).

For admission to the (AR) register a person must hold an accredited qualification in the profession. The AR does not have the ability to prevent a person from practicing.

You have confirmed that unlike the DA neither the DB nor the CC are accredited qualifications and that holder's of the DB or the CC are not at this time regulated. You contend that the DB and CC demonstrate an additional skill set and are not deemed a prerequisite, as registered practitioners can practice without those qualifications.

You are not a registered training organisation (RTO) or higher education institution as specified in the Education Minister's Student Assistance (Education Institutions and Courses) Determination 2009 (No.2) (Determination 2009) for the purposes of subsections 3(1) and 5D(1) of the Student Assistance Act 1973.

You are not a charitable institution, a trustee of a charitable fund, a gift deductible entity or a government school for the purposes of section 38-250 of the GST Act.

To date you have treated the supply of each of the training courses (DA, DB and CC) provided by you as a taxable supply on which GST is payable.

You have confirmed that none of the DA, DB or CC is imposed by or under an industrial instrument nor is the practice a profession included on the National Registration and Accreditation Scheme (NRAS).

You contend that you are a national professional association for the profession or trade in question. However, you confirm that there is no penalty or sanction imposed where a person enters into or commences the practice of the profession or trade without relevant qualifications such as the DA, DB or CC. You contend that all professionals and students need to be registered with the AR prior to gaining employment, as government agencies will only pay full rebates for services performed by persons on the registry.

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 38-85

A New Tax System (Goods and Services Tax) Act 1999 38-250 and

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

Reasons for decision

Section 9-5 of the 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.

The circumstances in which a supply is GST-free or input taxed are found in Divisions 38 and Division 40 of the GST Act respectively. On the facts provided you are registered for GST and you make supplies of training courses in the furtherance of an enterprise you carry on. The supplies of training courses and assessments you make are connected to Australia and are not input taxed supplies under Division 40 of the GST Act.

GST-free supply

In the present case consideration is given to whether the supplies of the DA, DB and CC training courses may be GST-free under section 38-250 or section 38-85 of the GST Act.

Supplies may be GST-free under section 38-250 of the GST Act where they are provided by a charitable institution, a trustee of a charitable fund, a gift-deductible entity or a government school. As you have confirmed you are not a charitable institution, a trustee of a charitable fund, a gift-deductible entity or a government school section 38-250 of the GST Act does not apply in your circumstances not withstanding you are a not for profit organisation.

Supplies of an education course may be GST-free under section 38-85 of the GST Act. Section 195-1 of the GST Act defines an education course as:

Education course means:

· a *pre-school course; or

· a *primary course; or

· a secondary course; or

· a *tertiary course; or

(Repealed by No 143 of 2007)

· a* special education course; or

· an adult and community education course; or

· an *English language course for overseas students; or

· a* first aid or life saving course; or

· a professional or trade course; or

· a *tertiary residential college course.

(* asterisked terms are defined in the Dictionary in section 195-1).

In deciding whether the DA, DB and CC courses supplied by you satisfy the requirements of an education course, we have considered whether each of the courses satisfy the definition of a tertiary course, an adult and community education (ACE) course or a professional or trade course.

Tertiary course

Section 195-1 of the GST Act defines a tertiary course as:

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

· a course of study or instructions accredited at Masters or Doctoral level and supplied by a higher education institution or a non-government higher education institution; or

· any other course of study or instruction that the Education Minister has determined is a tertiary course for the purposes of this Act.

The term 'tertiary course' includes a course of study or instructions that is determined to be a tertiary course by the Education Minister under subsection 5D(1) of the Student Assistance Act 1973.

The Education Minister has determined in Determination 2009 that a course specified in Column 1 of Schedule 2 in Determination 2009 and conducted by an education institution specified for that course in Column 2 of Schedule 2 in Determination 2009 is a tertiary course.

In particular Schedule 2 in Determination 2009 refers to (amongst others) an undergraduate or postgraduate accredited higher education course which is at the level of diploma or graduate certificate or graduate diploma that is conducted by a higher education institution or a registered training organisation (RTO).

Determination 2009 regards a higher education institution for the purposes of the Student Assistance Act 1973 to be:

· an institution that is established by a law of the Commonwealth, a State or a Territory as a higher education institution;

· an institution registered by the relevant State or Territory higher education recognition authority as a higher education institution.

An RTO is defined in Determination 2009 as an organisation that is registered by the relevant State or Territory training recognition authority in accordance with the Australian Quality Training Framework to provide one or more vocational education and training programs.

On the facts provided, you are not a higher education institution or an RTO for the purposes of Determination 2009, the courses are not accredited at Masters or Doctoral level nor are they other courses of study or instruction that the Education Minister has determined is a tertiary course. It follows that the supplies of the DA, the DB or the CC courses do not satisfy the definition of a tertiary course notwithstanding that they are training courses that are at the level of diploma or graduate certificate.

ACE course

Section 195-1 of the GST Act relevantly defines an ACE course as a course of study or instruction that is likely to add to the employment related skills of people undertaking the course and:

· is of a kind determined by the Education Minister to be an adult and community education course and is provided by, or on behalf of, a body:

· that is a higher education institution; or

· that is recognised, by a State or Territory authority, as a provider of courses of a kind described in the determination; or

· that is funded by a State or Territory on the basis that it is a provider of courses of a kind described in the determination; or

· is determined by the Education Minister to be an adult and community education course.

To satisfy the definition of an ACE course the course must satisfy a number of requirements including those requirements set out in the Education Minister's Determination: A New Tax System (Goods and Services Tax) (Adult and Community Education Courses) Determination 2000 (Determination 2000).

Paragraph 5(2) of Determination 2000 states that the course of study or instruction must:

· not be a course mentioned in paragraphs (a), (b), (c), (d), (e) (f), (i), (j) or (k) of the definition of education course in section 195-1 of the Act; and

· be a course that is available to adults in the general community; and

· not be course that is provided by, or at the request of an employer to the employees of that employer; and

· not be a course that is provided by, or at the request of an organisation to the members of that organisation, except an organisation for which membership is open to adults in the general community; and

· not be a course that is provided by way of private tuition to an individual.

In addition to being of the kind described in subsection (2) above, the course of study or instructions must be a course of study or instruction that is likely to add to the employment related skills of people undertaking the course and provided by, or on behalf of, a body that:

· is a higher education institution or

· is recognised, by a State or Territory on the basis that it is a provider of courses of the kind described in subsection (2) or

· is funded by a State or Territory on the basis that it is a provider of courses of the kind described in subsection (2).

On the facts provided, the DA, DB and CC courses do not satisfy the requirement that the course is made available to adults in the general community. The DA is available to graduates with a bachelor degree and the DB and CC are available to registered practitioners. There are prerequisites by way of necessary levels of knowledge or skill, or of completion of prior training, required by participants to undertake or gain benefit from the courses in question. On that basis, each of the DA, DB and CC courses do not satisfy the definition of an ACE course.

Professional or trade course

Section 195-1 of the GST Act defines a professional or trade course as a course leading to a qualification that is an essential prerequisite:

· for entry to a particular profession or trade in Australia; or

· to commence the practice of (but not to maintain the practice of) a profession or trade in Australia.

It is not necessary for the course to be provided by a recognised education provider. For example, courses offered by the relevant professional or trade association itself may qualify. However, the exemption only applies to the course provider. It does not apply to third parties who may be contracted by the course provider to provide instruction services.

The ATO explains the meaning of a professional or trade course in Goods and Services Tax Ruling GSTR 2003/1: supplies that are GST-free as professional or trade courses.

That ruling explains that to determine whether a particular course you supply is a professional or trade course consideration must be given to a number of questions in relation to the definition of profession or trade course and essential prerequisite.

Is the DA, DB or CC a course?

Whether you supply a course is a question of fact. In the context of the definition of a professional or trade course, a course is a program of systematic and interactive instruction or training for the acquisition of particular skills and knowledge. The mere supply of things such as self paced software program without any instruction, support, assessment, supervision or feedback is not the supply of a course. Although these things may be used as learning tools, they do not satisfy the requirements of a course because they lack the elements of interactive learning.

On the facts you have provided, each of the DA, DB and CC courses appear to have a character of a program of systematic and interactive instructions and training, notwithstanding that the DA, DB and CC are self directed courses. Each course, you confirm, provides instruction, support, assessment, supervision and feedback. There are assessments at the end of each part or module comprising the courses. A syllabus and suggested reading list is provided and interaction does appear to take place between the candidate and supervisors during placement. On that basis, the DA, DB and CC constitute the supply of a course in the context of the definition of a professional or trade course.

Do the courses lead to a qualification?

Having established that you supply a course, the issue becomes whether the course leads to a qualification.

GSTR 2003/1 explains that the words 'leading to' require a causal connection between the course that is undertaken and the qualification that is ultimately obtained. A qualification is normally acquired through study or experience and equips a person to perform a particular task or function. In the present case you issue:

· candidates undertaking the DA course with a Diploma

· candidates undertaking the DB course with a Diploma and

· candidates undertaking the CC course with a Certificate.

Each qualification certifies that candidates have undertaken and successfully completed training in the relevant field. There is a causal connection between the course and the assessments and the DA, DB or CC awarded such that each of the courses leads to a qualification that equips a person to perform a particular task or function.

Is the DA an essential prerequisite?

The courses in question will only be a professional or trade course if the courses lead to a qualification that is an essential prerequisite for entry to or to commence the practice of, a particular profession or trade.

A qualification is an essential prerequisite in relation to the entry to, or the commencement of the practice of, a particular profession or trade if the qualification is imposed:

· by or under an industrial instrument;

· if there is no industrial instrument, by a professional or trade association that operates on a national level; or

· if neither of the above applies by a professional or trade association that operates at a State or Territory level.

You have advised that the qualifications for entry to or to commence the practice of the profession or trade concerned are not imposed under an industrial instrument.

Paragraphs 54 to 55 of GSTR 2001/3 explain that were there is no industrial instrument that relates to the entry to, or commencement of the practice of a profession or trade, there is a need to determine whether a qualification is imposed by a professional or trade association that has uniform national requirements relating to entry to, or to commence the practice of the profession or trade concerned.

A qualification that is an essential prerequisite can be imposed by only one professional or trade association at the national level.

You have advised that you are a professional association in relation to the profession or trade concerned that operates at a national level. We note that other associations also operate in relation to the professionals concerned.

We further note that the AR does not have the ability to prevent a professional in question from practicing and that the profession concerned has not gained entry into the National Registration and Accreditation Scheme (NRAS).

This suggests that there is no one professional or trade association at the national level that can impose any particular qualification as an essential prerequisite for the purposes of the definition of a professional or trade course in section 195-1 of the GST Act.

Paragraph 48 of GSTR 2003/1 explains that a qualification is an essential prerequisite if it is mandatory for a person to have the qualification before he or she can enter into, or commence the practice of, a particular profession or trade. This necessarily requires the imposition of penalties or sanctions if a person enters into or commences the practice of, the profession or trade without the relevant qualification.

You contend that the DA is a requirement for the entry to or the commencement of the practice as a professional. You refer to the requirement that all professionals and students must be registered with the accreditation registry prior to gaining employment, as government agencies will only pay full rebates for those services performed by persons on the accreditation registry.

However, you advise there are no penalties or sanctions imposed where a person enters into or commences the practice of the profession or trade in question without the relevant qualification such as the DA, DB or CC.

If that is the case the DA courses do not lead to qualifications that are an 'essential prerequisite' to commence the practice of the profession or trade in question. As such the DA courses are not a professional or trade course as defined.

Are the DB or CC an essential prerequisite?

Paragraph 92 of GSTR 2003/1 explains that for the purposes of the definition of a professional or trade course in section 195-1 of the GST Act, a distinction must be drawn between a course that provides a qualification to enter into a profession or trade and one that is undertaken to acquire specialist or additional skills within that profession or trade.

Paragraph 94 of GSTR 2003/1 explains that for a specialisation to be characterised as a separate profession or trade, its attributes must be more than merely a set of additional skills or endorsements that enable a person to undertake different tasks within their profession or trade. The DB or CC lead to qualifications that are not more than the mere enhancement of a practitioner's or specialist practitioner's proficiency to undertake a wider range of activities in his or her profession.

You confirm this yourself when you explained that the DB and CC demonstrate an additional skill and are not deemed a prerequisite as practitioners can practice without them. As noted above there are not penalties or sanctions imposed where a person enters into or commences the practice of the profession or trade in question without the relevant qualification such as the DA, DB or CC.

Accordingly, the DA, DB or CC courses do not come within the definition of a professional or trade course or of any of the other courses that comes within the definition of an education course that is GST-free under section 38-85 of the GST Act. On the facts provided, the supply of each of the courses in question satisfies the requirements of a taxable supply under section 9-5 of the GST Act on which GST is payable.