Edited version of your private ruling

Authorisation Number: 1012308530829

This edited version of your ruling will be published in the public register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.

Ruling

Subject: GST and attribution of taxable supply

Question 1

Is the supply of an equipment that was imported by your customer in Australia and installed by you in Australia, a taxable supply for the purposes of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Decision 1

Yes, the supply of the equipment that was imported by your customer in Australia and installed by you in Australia is a taxable supply for the purposes of the GST Act.

Question 2

If the supply of the equipment that was imported by your customer in Australia and installed by you in Australia, a taxable supply, then when do you attribute the GST payable on this supply?

Decision 2

If the supply of equipment that was imported by your customer in Australia and installed by you in Australia, is a taxable supply, then you are required to attribute the GST payable on your supply at the earliest of any of the consideration for the supply is received or an invoice is issued.

Question 3

Should the Commissioner, consider the supply to be taxable, will the Commissioner exercise his discretion pursuant to paragraph 29-25(2)(a) of the GST Act to allow you to attribute all of your GST liability to either the month, when the tax invoice was issued to your customer, or at the earliest, when the supply just became connected with Australia?

Decision 3

No, the commissioner will not exercise his discretion pursuant to paragraph 29-25(2)(a) of the GST Act to allow you to attribute all of your GST liability to either the month, when the tax invoice was issued to your customer, or at the earliest, when the supply just became connected with Australia.

Relevant facts and circumstances

You are a non-resident entity.

You are registered for goods and services tax (GST) and account on an accrual basis for the purposes of GST.

You entered into a contract with one of your customers in Australia for the supply of equipment on a CIP (Carriage and Insurance Paid) basis.

The equipment was imported by your customer in Australia. Your customer as the importer in Australia was responsible for the completion of the customs entry formalities in their own right.

On the basis that your supply of the equipment was completed on a CIP basis and the importation of the equipment was undertaken by your customer in Australian (it being the entity responsible for entering the goods into Australia for home consumption) no GST was accounted for on the importation of the equipment by you.

You are responsible for the installation of the equipment in Australia to ensure that the goods' warranty can be maintained.

You engaged Australian subcontractors to assist with the installation of the equipment.

You received an initial down payment prior to the goods being shipped, followed by number of payments being made to meet the full consideration.

The original down payment was received prior to the written contract for the supply of the goods.

A tax invoice for the supply of the equipment to your customer in Australia was issued after commencing the installation.

You informed that pursuant to the supply contract, you transferred title to the goods to the Australian customer outside of Australia.

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 9-25,

A New Tax System (Goods and Services Tax) Act 1999 Subsection 9-25(2),

A New Tax System (Goods and Services Tax) Act 1999 Subsection 9-25(3),

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

A New Tax System (Goods and Services Tax) Act 1999 Subsection 29-5,

A New Tax System (Goods and Services Tax) Act 1999 Subsection 29-25(1)

A New Tax System (Goods and Services Tax) Act 1999 Subsection 29-25(2)

Reasons for decision

Question 1

You make a taxable supply under section 9-5 of the GST Act if you make the supply for consideration; and the supply is made in the course or furtherance of an enterprise that you carry on; and 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.

If the supply meets all the above requirements then the supply will be a taxable supply.

You made the supply of equipment for consideration and you made this supply in the course of carrying on your enterprise and you are registered for GST. The supply of equipment is neither GST-free nor input taxed under the GST Act.

What needs to be determined is whether the supply of equipment is connected with Australia.

Supplies of goods to Australia

Goods and Services Tax Ruling; GSTR 2000/31 explains that the importation of goods into Australia or the installation or assembly of the goods in Australia is a supply of goods to Australia.

Paragraphs 139, 146-148 of GSTR 2000/31 state:

Supply of goods - to Australia

139. A supply of goods is connected with Australia if that supply involves goods being brought to Australia and the supplier either:

(a) imports the goods into Australia (paragraph 9-25(3)(a)); or

(b) installs or assembles the goods in Australia (paragraph 9-25(3)(b)).

Example 15 - Goods imported into Australia by recipient and assembled in Australia by supplier

146. Aero Lite, an Australian resident, decides to buy a light aircraft manufactured by Flight UK in the UK. The light aircraft parts need to be imported into, and assembled in, Australia. Flight UK agrees to supply and assemble the aircraft in Australia on the basis that Aero Lite arranges for the importation of the aircraft parts. Aero Lite imports the goods on a FOB basis.

147. The supply of the aircraft is connected with Australia because the supply involves the aircraft parts being brought to Australia and the supplier assembling the aircraft in Australia. This is so regardless of the fact that it is the recipient who imports the parts of the aircraft into Australia.

148. Flight UK makes a taxable supply to Aero Lite and GST is payable by Flight UK on the taxable supply made to Aero Lite. The importation of the parts of the aircraft into Australia by Aero Lite is a taxable importation and Aero Lite is liable to pay GST on the importation. Aero Lite is entitled to an input tax credit for the GST payable on the importation provided the importation is a creditable importation.

Paragraph 53 of GSTR 2000/31 provides that a supplier is either an exporter from outside Australia and importer into Australia, or an exporter from outside Australia and installer or assembler in Australia.

From the information provided by you, your customer in Australia has undertaken the responsibility for the completion of the customs entry formalities in their own right in relation to the importation of the equipment. Therefore, the customer in Australia is the entity that imports the goods.

As supplier of the goods to ensure that the warranty of the goods is maintained you have undertaken the responsibility for the installation of the equipment in Australia.

Section 9-25 of the GST Act defines when a supply is connected with Australia. For the purposes of determining whether a supply is connected with Australia section 9-25 of the GST Act makes a distinction between a supply of goods, a supply of real property and a supply of anything other than goods or real property.

Subsection 9-25(3) of the GST Act specifically provides that a supply of goods is connected with Australia if the supply involves the goods being brought to Australia and the supplier either:

· imports the goods into Australia; or

· installs or assembles the goods in Australia.

According to the information provided, you as the supplier are installing the goods in Australia. Therefore, the goods are connected to Australia under paragraph 9-25(3)(b) of the GST Act.

The supply of goods by way of importation into Australia or the installation or assembly of the goods in Australia is a taxable supply made to the customer in Australia.

Therefore, the installation or assembly of the goods in Australia is a supply of goods connected with Australia and your supply is a taxable supply under section 9-5 of the GST Act.

Question 2

Registration Turnover Threshold

Under section 23-5 of the GST Act an entity that is carrying on an enterprise and which GST turnover meets the registration turnover threshold is required to register.

Currently the registration turnover threshold is $75,000; $150,000 for not for profit bodies.

To reiterate, a supply of goods that involves the goods being brought to Australia is connected with Australia if the supplier either:

(a) imports the goods into Australia; or

(b) installs or assembles the goods in Australia.

As determined above your supply and installation or assembly of the equipment is connected with Australia. Furthermore, the consideration received for the supply is greater than the GST registration turnover threshold.

Where a contract for the supply and installation of goods is made, paragraph 9-25(3)(b) of the GST Act makes the supply connected with Australia if the supplier installs (or arranges a subcontractor to install) the goods in Australia, even when the goods are imported by the recipient of the supply.

A non-resident that makes a supply (connected with Australia) valued at $75,000 or over satisfies the registration turnover threshold and therefore, is required to register for GST.

An entity is required to register for GST when its GST turnover meets the registration turnover threshold.

Where at a point in time you were carrying on an enterprise and your projected GST turnover was greater than $75 000; then, at that point in time your GST turnover met the registration turnover threshold. As such, you were required to be registered under the GST Act as at that earlier date.

If your projected GST turnover was greater than $75,000 at the time you received your down payment, then you are required to be registered for GST at that point in time of receiving the down payment.

GST Attribution rules

Section 29-5 of the GST Act provides for when a supplier will attribute their GST on their taxable supplies.

If an entity accounts for GST on an accrual basis, it will attribute all the GST payable on a taxable supply to the earlier of the tax period in which:

· any of the consideration for the supply is received; or

· an invoice for the supply is issued.

This means that an entity may have to account for GST payable on a supply before actually receiving payment for the supply.

In this case you account for GST on an accruals basis and you advised that you received a down payment for your supply. You received that initial down payment prior to the goods being shipped, followed by number of payments being made to meet the full consideration. You may have become required to register for GST at that point in time of receiving the down payment.

Therefore, according to the attribution rules you are required to attribute the GST payable on your supply at the earliest of any of the consideration for the supply is received or an invoice is issued.

Question 3

The Commissioner may, under subsection 29-25(1) of the GST Act, determine, in writing, the tax period or periods to which GST payable, input tax credits and adjustments for taxable supplies, creditable acquisitions and creditable importations of certain kinds are attributable.

Subsection 29-25(2) of the GST Act states the following:

However, the Commissioner must not make a determination under this section unless satisfied that it is necessary to prevent the provisions of this Division and Chapter 4 applying in a way that is inappropriate in circumstances involving:

· a supply or acquisition in which possession of goods passes, but title in the goods will, or may, pass at some time in the future.

In your case, the goods were imported by your customer in their own right and we have been informed that pursuant to the supply contract, title was transferred to the Australian customer outside of Australia.

As title was passed to your Australian customer outside Australia the circumstances that you have described are not contained in subsection 29-25(2) of the GST Act; consequently, paragraph 29-25(2)(a) of the GST Act does not apply. There are no other relevant circumstances outlined in subsection 29-25 (2) of the GST Act which would apply in this case.

Therefore, the Commissioner will not make a determination under section 29-25 of the GST Act to specify a different tax period to that which would otherwise apply.