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Ruling

Subject: GST and organising a delegation to an overseas meeting

Question 1

Do you make a taxable supply to an institution in return for their payment?

Answer

No

Relevant facts and circumstances

You are a not-for-profit organisation and are registered for goods and services tax (GST)

KEY ACTIVITIES

o Selecting, funding and preparing Australians to overseas meeting.

o Facilitating research and development opportunities for delegates.

o You have provided a sample letter to an institution from which you are seeking financial assistance. In the letter you outline the process and the expected activities of each party.

THE PROCESS

§ Nationally advertised competitive online application process.

§ You coordinate applications online through your website.

§ The application process itself requires applicants to confirm they meet the advertised criteria and also consists of several questions designed to allow the applicant to discuss their suitability for the meeting and to preview a possible research topic. In addition, the applicants also submit a copy of their CV/resume.

§ Once applications close, you will develop a shortlist from all eligible candidates. You will then submit a recommended candidate for each place to be filled and their full application for the acceptance of the institution from which you are seeking financial assistance. Your recent practice is to make one recommendation per place.

Research essay

§ You own the intellectual property of the essay which you publish with your branding and in-house templates. While this is not explicitly communicated to the institutions it is certainly a matter of practice. It is mutual understanding with the institution that all intellectual property developed as a part of a coordinated delegation remains your property. This includes all opinion pieces and the essays published through you written by the recommended applicants. Photos and other material will be provided by you to the institutions as is necessary to fulfil the requirements of this relationship.

§ Your policy is to distribute your applicants' essays as widely as possible. Part of this is through your website which is open to all and promoted widely by you. You also circulate the essays to key stakeholders relevant to the group. Access to the essays is and has always been free.

Funding

§ The funding is based on a flat rate per place.

§ The funding covers all domestic and international airfares; and overseas; comprehensive travel insurance; visa costs and key immunisations where required; local airport transfers and most ground transportation; any registration or accreditation costs; breakfast daily and some other meals; incidentals such as business cards and a t-shirt; and a small contribution to meet your overheads, including the attendance of at least one of your staff to manage each group.

§ In the event of the cancellation of a group for whatever reason, you will work to reallocate (for example, deferment of the place to another group) or refund to the institution an amount of recoverable funding only, potentially through travel insurance claims. Given the length of the preparatory process the same procedures will be followed in the event of a delegate withdrawal. In either event, the institution will be consulted.

§ You do not enter into any formal contract with the institutions. However, you have provided written outlines of the arrangement as stated in the Process above.

§ You have advised that you do not have an obligation or are not legally required to run a group for overseas meeting. Your approach with the institution is flexible and co- operative. If for what ever reason a group is unable to be run, you would work with the institution to ensure a suitable outcome. This would involve the transfer of deferment of the place to another group or a partial refund.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999

Section 9-5

Section 9-10

Subsection 9-17(2)

Section 9-15

Reasons for decision

Question 1

Summary

No, your do not make to an institution a supply in return for their payment.

Detailed reasoning

(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.

(The asterisks in this ruling indicate terms defined under section 195-1 of the GST Act)

You advise that you select, fund, prepare and coordinate groups to attend a variety of major international events. In order to undertake these activities you have sought financial assistance (funding) from institutions.

Goods and services tax ruling GSTR 2012/2 explains the Commissioner's view on when a financial assistance is consideration for a supply.

In the Ruling, the term 'financial assistance payment' is intended to encompass a wide range of payments. This includes payments made to provide support or aid to the payee.

An entity that receives a financial assistance payment is liable for GST in respect of that payment if the payment is consideration for a supply and all the other requirements for a taxable supply in section 9-5 of the GST Act are met

In your circumstances, we need to consider firstly whether you make a supply for consideration when you receive a payment from a university in respect of a particular delegation for the purposes of paragraph 9-5(a) of the GST Act.

Is there a supply

Subsection 9-10(1) of the GST Act defines supply as any form of supply whatsoever.

The intended scope of subsection 9-10(1) of the GST Act is more fully illustrated in subsection 9-10(2) of the GST which states that without limiting subsection 9-10(1) of the GST Act, supply includes any of these:

 (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;

(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).

A supply is something that passes from one entity to another. The supply may be one of particular goods, services or something else that is reflected in an agreement by one party to do something for another. This view is contained in Goods and Services Tax Ruling GSTR 2006/9 titled 'supplies' which sets out a number of propositions for characterising and analysing supplies.

Despite the breadth of the definition, it should not be automatically assumed that a supply exists in a transaction and that GST liabilities arise where a payment is made in the transaction.

Paragraph 116 of GSTR 2012/2 states:

In the context of financial assistance payments where the payment is made for the purpose of support or aid, there may be circumstances where no supply is made by the payee. This may be the case where the payee has done nothing in return for or in relation to the payment.

Rather, it is necessary in any case where a payment is made to determine whether anything is supplied and, if so, whether the payment has a sufficient nexus with the thing supplied.

GSTR 2006/9 examines the meaning of 'supply' in the GST Act. Part II of the Ruling looks at how to identify and characterise supplies in the context of the transactions in which they are made.

The Ruling uses ten propositions to assist in analysing a transaction to identify the supply or supplies made in that transaction. The propositions are not universal as they may have exceptions or be qualified either by the operation of particular provisions of the GST Act, or by the facts and circumstances of a transaction.

Of relevance to your circumstances is Proposition 9 - creation of expectations alone does not establish a supply.

102. The Commissioner considers that an agreement that does not bind the parties in some way is not sufficient to establish a supply by one party to the other.

108. For GST purposes you may still make a supply in the absence of enforceable obligations, provided there is something else, such as goods, services or some other thing, passing from the supplier to the recipient

Paragraph 28 of GSTR 2012/2 states:

Payment for the entry into an obligation to do or refrain from doing something

Where a supply is constituted by the payee entering into an obligation with the payer to do or refrain from doing something and the payment is made to secure that obligation, there is a sufficient nexus between the payment and the obligation. This is because the financial assistance payment is made in connection with, in response to, or for the inducement of the entry into the obligation.

From the information you have provided, we consider that you have not entered into any binding obligation to organise delegations for the following reasons:

§ You have not entered into any formal contract with the institution which as provided you with a financial assistance payment, although you have provided written outlines of your activities (as stated in the Process above) to the institution.

§ If for what ever reason a group is unable to be run, you would work with the institution to ensure a suitable outcome. This would involve the transfer of deferment of the places to another group or partial refunds.

Further we consider that you have not provided any goods or services or some other things to the institution in relation to the payment. This is so notwithstanding you provide the following information to the institution.

§ the submission of the recommendation, one per place, to the institution, a full statistical analysis of applications received from the relevant institution's members, a research essay included in the recommendation with the applicant's application

§ photos, your template media release and media hits on the delegates' as they occur, the final logistical details provided to the delegates, the delegate's final research essay and opinion piece if published, updates from your staff(s) attending the delegation including photos and a copy of a final report that includes a lengthy feedback section.

Therefore, we consider that when you organise the group, you make no supply to the institution which has provided the financial assistance payment to you.

In other words, as you do not make any taxable supply upon receiving a payment from an institution (which you use in organising a group) you have no GST liability.