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Ruling

Subject: Goods and services tax, education and tripartite arrangements

Question 1:

Is your supply of services to Entity A under a written agreement (the Deed) subject to GST?

Answer:

Yes, your supply of services to Entity A under the Deed is subject to GST.

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 registered for goods and services tax (GST).

You provide business training and assessment of nationally recognised qualifications.

You are registered as a registered training organisation (RTO).

Entity A contracts service providers like you, under a Deed to provide various employment services.

You entered into the Deed with Entity A to provide services in accordance with the Deed.

You receive consideration from Entity A for the services you provide as specified in the Deed.

You provide a course offering eligible participants a particular qualification in small business management.

For the qualification to be issued, you ensure that all students have successfully completed all their units of competency.

The students do not pay for the training but completion of the qualification is a prerequisite for the students to receive funding for income support for the first year of their new business.

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 subsection 9-10(1)

A New Tax System (Goods and Services Tax) Act 1999 subsection 9-10(2)

Reasons for decision

Taxable supply is defined in section 9-5 of the GST Act as follows:

You make a taxable supply 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.

However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed.

(terms marked with asterisks (*) are defined in section 195-1 of the GST Act).

Subsection 9-10(1) of the GST Act defines supply as any form of supply whatsoever. The breadth of 'supply' is illustrated by subsection 9-10(2) which states that without limiting subsection (1), supply includes any of: 

(a) a supply of goods;

(b) a supply of services;

(c) a provision of advice or information;

(d) a grant, assignment or surrender of *real property;

(e) a creation, grant, transfer, assignment or surrender of any right;

(f) a *financial supply;

(g) an entry into, or release from, an obligation:

(i) to do anything; or

(ii) to refrain from an act; or

(iii) to tolerate an act or situation;

(h) any combination of any 2 or more of the matters referred to in paragraphs (a) to (g).

Goods and Services Tax Ruling GSTR 2006/9 Goods and services tax: supplies (GSTR 2006/9), considers several 'propositions' for characterising and analysing supplies.

Where there are only two parties involved, generally there is a single supply to which the GST Act applies. However, where there is a third party involved in a transaction there may be more than one supply to which the GST Act applies.

GSTR 2006/9 addresses the GST implications of multiparty arrangements commonly referred to as 'tripartite arrangements'. Under typical tripartite arrangements, a supply is made to one entity but provided to another entity, alternatively a supply is made and provided to one entity while the consideration is paid by a third entity.

To determine the GST consequences of a tripartite arrangement requires identifying the entity making a supply, the recipient of the supply, any consideration and its nexus with the supply.

Proposition 11 of GSTR 2006/9 explains that where the parties to a transaction have reduced their understanding of the transaction to writing, that documentation along with supporting documents and the surrounding facts is the logical starting point in determining the supplies that have been made.

The contractual arrangement between you and Entity A as represented by the Deed is consistent with proposition 13 of GSTR 2006/9 (paragraphs 130 to 176). Proposition 13 state:

When A has an agreement with B for B to provide a supply to C, there is a supply made by B to A (contractual flow) that B provides to C (actual flow).

Paragraphs 131 to 132 of GSTR 2006/9 explain the words 'made' and 'provide': 

131. 'Made' in the context of 'a supply made' takes its meaning from the definition of recipient in section 195-1: 

· recipient, in relation to a supply, means the entity to which the supply was made. 

132. 'Provide' is used to contrast with 'made' - it distinguishes between the contractual flow of the supply to the recipient (the entity to which the supply is made) and the actual flow of the supply to another entity (the entity to which the supply is provided).

Following on from this analysis, as you have entered into a contractual agreement (i.e. the Deed) with Entity A, you are making a supply to Entity A. This supply is not a GST-free supply of an education course because Entity A is not a student of the course and is not receiving a course of study or tuition. You are in fact making a supply, being the entry into an obligation to provide services to Entity A in order for Entity A to meet its obligations to the community.

The services you make to Entity A are to be contrasted with the education courses which you provide to eligible participants.

This principal is demonstrated in the FC of T v Department of Transport (Vic) 2010 ATC case, where a government department subsidised a taxi company for discounted fares provided to disabled passengers. The majority of the Full Federal Court held that the taxi company had made two supplies; the supply of transport to the passenger and the supply to the government department of the service of transporting the disabled passenger. This was so, notwithstanding that from the taxi company's point of view it was simply making a supply of transport to the passenger.

Where the services you make to Entity A meet the requirements of section 9-5 of the GST Act, the services will be a taxable supply.

In this case, you make a supply of services to Entity A for consideration. Your services to Entity A are in the course of furtherance of an enterprise that you carry on, the services are connected with Australia and you are registered for GST. As such, you meet all the requirements of section 9-5 of the GST Act.

Furthermore there are no provisions in the GST Act under which the supply of the services you make to Entity A would be GST-free or input taxed.

As such, your supply of services to Entity A under the Deed will be a taxable supply and is subject to GST.