Edited version of your private ruling

Authorisation Number: 1012457845919

Ruling

Subject: GST and connection with Australia

Question 1

Is the supply of by a non-resident entity (NRE) to an Australian customer of the right to give authorised users access to online products connected with Australia pursuant to sub-section 9-25(5) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes, the supply by NRE to an Australian customer of the right to give authorised users access to online products may be connected with Australia pursuant to paragraph 9-25(5)(a) of the GST Act. That supply is not connected with Australia pursuant to either paragraph 9-25(5)(b) or paragraph 9-25(5)(c) of the GST Act.

Relevant facts and circumstances

The Parties

NRE

NRE enters into publishing agreements with authors.

NRE is the legal owner of all publishing rights of the works of the authors.

NRE has a number of branches and subsidiary companies around the world.

NRE Australia

NRE Australia is the Australian branch of NRE and is registered for GST in Australia in respect of the enterprise which NRE Australia carries on in Australia.

NRE Australia carries on the following activities through its enterprise in Australia:

§ the sale and distribution of publications in a hard-copy format in Australia; and

§ marketing and sales support for the sale of e-books online as described below:

Online Database

Online Database (ONLINE) is an enterprise carried on by NRE which involves selling e-books globally on the internet;

NRE is the party which contracts to supply electronic access to NRE 's titles. NRE Australia provides sales and marketing support in relation to those supplies and is paid a commission.

In the ruling request it was submitted that the following facts support the view that the ONLINE enterprise is carried on by NRE through an enterprise in Country X.

· The Licence Agreement (which grants the Australian customer a non-exclusive and non-transferable right to give Authorised Users access to the Online Products for the Access Period) is entered into between NRE and the Australian customer;

· The final decision on credit approval and terms rests with NRE ;

· The Licence Agreement is executed in the following NRE 's acceptance of the terms;

· The sales invoice is issued by NRE ;

· The e-book publication is downloaded/ electronically transmitted by the Australian customer in Australia;

· The sales revenue is recognised in the accounts of NRE ;

· The publishing rights for all the publications are owned by NRE ;

· The ONLINE platform and access control systems are hosted in Country X;

· All technical support relating to access and downloading of the e-books is provided from Country X ; and

· NRE Australia's activities are limited to sales negotiation and support.

Sales and fulfilment process in relation to an Australian customer:

The ruling request described the sales and fulfilment process in relation to the supply of an e-book to an Australian customer.

Submissions made in the ruling request:

It was submitted that the supply made by NRE to an Australian customer is a supply of 'anything other than goods or real property' within the meaning of subsection 9-25(5) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) and is not connected with Australian pursuant to either paragraph (a), (b) or (c) of that subsection.

In relation to paragraph 9-25(5)(a), i.e. the thing is done is Australia, it was submitted that entry into the Licence Agreement and the access to log onto the website and download the e-book are not 'done in Australia'. The ruling request referred to Goods and Services Tax Ruling GSTR 2000/31, which states (Paras 75- 76) that if a right is granted under an agreement to another person to use intellectual property the granting of that right is 'done' where the agreement is made, and to the ATO's adoption in GSTR 2000/31 of A W Dewhurst & Co. Pty Ltd v Cawrse [1960] VR 278, 282 which held that a contract is made where the last act necessary to create a binding contract is performed.

It was submitted that the Licence Agreement between NRE and an Australian customer grants a right to use intellectual property and that acceptance of the terms and conditions of the Licence Agreement is made in the by NRE via ONLINE employees.

It was further submitted that when an Australian customer downloads an e-book during the Access Period granted by the relevant Licence Agreement NRE makes a supply through the ONLINE platform in the because the relevant servers are located in the and that the supply of ongoing access to and downloading of online content and e-books is not a thing done in Australia. In support the ruling request referred to Chapter 4 of the ATO's Electronic Commerce Industry Partnership Issues Register and to the edited versions of three GST private rulings.

In relation to paragraph 9-25(5)(b) of the GST Act, i.e. the supplier makes the supply through an enterprise that the supplier carries on in Australia, the ruling request again referred to GSTR 2000/31 which states (Para 84) that for a supply to be connected with Australia under paragraph 9-25(5)(b) a connection must be established between the Australian permanent establishment and the supply.

It was submitted that there was no such connection because the ONLINE enterprise is located in Country X and the supply is not made through NRE Australia as NRE Australia does not agree to terms, does not execute the Licence Agreement on NRE 's behalf, does not hold any infrastructure or provide any technical support to the operation of the ONLINE platform, and is limited to sales and marketing support activities. Nor does NRE Australia have authority to make important decisions in relation to the supply of e-books as all such decisions are made by NRE .

In relation to paragraph 9-25(5)(c) of the GST Act, i.e. there is a supply of a thing which is a right or option to acquire another thing and the supply of that other thing would be connected with Australia, it was submitted that the supply of e-books is not a supply of a right to acquire another thing.

Further information provided:

In response to a request from the ATO for further information about how NRE enters into a Licence Agreement with an Australian customer, NRE's adviser stated:

The standard contract is sent to the customer as part of a proposal, by email or in hard copy (by post). This is the correct standard version for the type of customer and content concerned, as issued by the Legal Department in Country X.

Once the customer agrees to the terms, they sign the contract and return it for signature in Country X . All contracts must be signed by a senior member of commercial staff in County X.

Completed and signed contracts are returned direct to the customer from Country X, by electronic means (e.g. email) or hard copy (by post from the ) if the customer requires.

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

Reasons for decision

Summary

The supply by NRE to an Australian customer of the right to give authorised users access to online products may be connected with Australia pursuant to paragraph 9-25(5)(a) of the GST Act. That supply is not connected with Australia pursuant to paragraph 9-25(5)(b) or paragraph 9-25(5)(c) of the GST Act.

Detailed reasoning

Taxable supply:

A supply is a taxable supply if it meets all the requirements of section 9-5 of the GST Act.

Section 9-5 of the GST Act states that you make a taxable supply if all the following requirements are met:

(a) you make the supply for consideration

(b) the supply is made in the course or furtherance of an enterprise that you carry on

(c) the supply is connected with Australia, and

(d) 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.

In the present case the issue is whether the supply made by NRE to an Australian customer is 'connected with Australia'.

Characterisation of the supply:

For the purposes of determining whether the 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.

Pursuant to clause X of the Licence Agreement NRE grants to the Australian customer 'the non-exclusive and non-transferable right to give Authorised Users access to' the Online Products.

In our view that supply is not a supply of goods as defined in section 195-1 of the GST Act (i.e. any form of tangible personal property). Nor is there a supply of 'real property' as defined in section 195-1 (i.e. an interest in or right over land, a personal right to be granted any interest in or right over land, or a licence to occupy or other contractual right related to land). We therefore consider that the supply made to the Australian customer is a supply of 'anything other than goods or real property' to which subsection 9-25(5) of the GST Act applies.

Subsection 9-25(5):

Under subsection 9-25(5) of the GST Act, a supply of anything other than goods or real property is connected with Australia if:

(a) the thing supplied is done in Australia; or

(b) the supplier makes the supply through an enterprise that the supplier carries on in Australia; or

(c) all the following apply:

(i) neither (a) or (b) applies in respect of the thing;

(ii) the thing is a right or option to acquire another thing;

(iii) the supply of the other thing would be connected with Australia

Thing is done in Australia:

Goods and Services Tax Ruling GSTR 2000/31 (GSTR 2000/31) states:

62. 'Thing' is defined to mean anything that can be supplied or imported such as a service, advice, information or a right. It is the subject of the supply.

63. Under paragraph 9-25(5)(a) the connection with Australia requires that the 'thing' being supplied is 'done' in Australia.

64. The meaning of 'done' depends on the nature of the 'thing' being supplied. 'Done' can mean, for example, performed, executed, completed, finished etc depending on what is supplied.

Clause X of the Licence Agreement states that the 'thing' being supplied is:

…the non-exclusive and non-transferable right, throughout the world, to give Authorised Users access to the Online Product(s) via the Secure network ………. subject to the Terms and Conditions of this Agreement, and to payment of the Fee.

In clause A of the Licence Agreement the Australian customer acknowledges that the Licence Agreement does not convey any right, title or interest in the Online Products except the right to use and access the Online Products in accordance with the terms and conditions of the Licence Agreement.

GSTR 2000/31 also states:

76. If, for example, a right is granted under an agreement to another to use certain intellectual property, the granting of that right to another is done where the agreement is made. If the agreement is made²⁷ in Australia, the supply of that right is connected with Australia. If the agreement is made outside Australia, the supply is not connected with Australia under paragraph 9-25(5)(a). However, even if the agreement is made outside Australia the supply is connected with Australia under paragraph 9-25(5)(b) if the supplier makes the supply through an enterprise that the supplier carries on in Australia (refer paragraphs 78 to 89 below).

Footnote 27 in Para 76 of GSTR 2000/31 states:

A contract is made where the last act necessary to create a binding contract is performed (see W. A. Dewhurst and Co. Pty. Ltd. v. Cawrse [1960] V.R. 278 at 282.

In the present case the right is granted to the Australian customer by NRE and the Australian customer executing the Licence Agreement, clause B of which states that the Licence Agreement constitutes the entire agreement between the parties.

The ruling request referred to Dewhurst and made the following submission (p. 6):

As described within the background facts, the agreement to purchase e-books through ONLINE is made between NRE and the Australian customer and the acceptance of the terms and conditions is made by NRE and employees associated with ONLINE located in the . Accordingly, the supply by NRE of rights associated with entry into the Access Agreement is not 'done' in Australia.

The 'background facts' set out in the ruling request include (p. 2):

The contract and access terms are agreed between NRE and the Australian customer (see Appendix B for a copy of the [Licence] Agreement);

The final decision on credit approval and terms rests with NRE . The contract is executed in the following NRE 's acceptance of the terms.

and the further information provided on the particular date was as follows:

The standard contract is sent to the customer as part of a proposal, by email or in hard copy (by post). This is the correct standard version for the type of customer and content concerned, as issued by the Legal Department in the .

Once the customer agrees to the terms, they sign the contract and return it for signature in the . All contracts must be signed by a senior member of commercial staff in Country X.

Completed and signed contracts are returned direct to the customer from the , by electronic means (e.g. email) or hard copy (by post from the ) if the customer requires.

In Dewhurst a company registered and carrying on business in Victoria, issued a writ out of the Supreme Court of Victoria claiming damages for breach of contract against Cawrse who carried on business as a grazier in South Australia. Cawrse moved to stay the proceedings. The issue was whether the Supreme Court of Victoria had jurisdiction pursuant to section 11(1)(b) of the Service and Execution of Process Act 1901 (Vic) on the ground that the contract was 'made in Victoria'. Dean J stated:

[Dewhurst] has to make it appear that the contract for the sale of the meat in question was made in Victoria. This means that the offer was accepted here. It has been held recently by the Court of Appeal that the law applicable to the making of a contract by an acceptance by post or telegram is not the same as where the acceptance is by teleprinter, by telephone, or by other instantaneous means. In the case of acceptance by post the acceptance is in the usual case completed by posting the letter of acceptance, even though it never reaches the offeror. The contract is made where the letter of acceptance is posted; but where acceptance is by telephone or teleprinter there is no acceptance until it is received. See Entores Ltd v Miles Far East Corporation…a case where a contract resulted from messages transmitted instantaneously between the parties by teleprinter. At p. 332, Denning LJ said: 'When a contract is made by post it is clear law throughout the common law countries that the acceptance is complete as soon as the letter is put into the post box, and that is the place where the contract is made'. His Lordship then turned to the case of instantaneous communications and said that the rule is different. His Lordship said, at p. 334: 'The contract is only complete when the acceptance is received by the offeror and the contract is made at the place where the acceptance is received'. I need not discuss the reasons for this distinction which are carefully explained by all members of the Court.

Dean J found that Mr Dewhurst sent an invitation to treat to Mr Cawrse by letter dated 20 November 1957 asking whether Mr Cawrse could offer boneless mutton for shipment to the United States, but that there were conflicting accounts of a subsequent telephone conversation that occurred when Mr Cawrse (in Adelaide) telephoned Mr Dewhurst (in Melbourne). Mr Cawrse's evidence was that during that telephone conversation Mr Cawrse offered Mr Dewhurst up to 100 tons of mutton at a specified price and Mr Dewhurst accepted that offer. Dean J stated:

If this account is correct, it was Mr Dewhurst who accepted the defendant's offer, and so completed the contract, and the contract was made in South Australia.

Mr Dewhurst's evidence was that he could not remember the telephone conversation but that he told Mr Cawrse that W A Dewhurst could pay a certain amount per pound of mutton and Mr Cawrse accepted that offer. Dean J stated:

If that account is accepted the acceptance was by Mr Cawrse in Adelaide and the contract was made in Melbourne where it was accepted by plaintiff.

Dean J held that the plaintiff Dewhurst could not discharge the burden of satisfying the Court that the contract was made in Victoria:

Upon this evidence I do not feel satisfied even to the extent to which I am required to be satisfied that [Cawrse] was the acceptor. There is, as I think, a burden on [Dewhurst] to bring himself within s.11(1)(b), a lesser burden than on the trial of an issue, but still a definite burden. In view of the admitted uncertainty of his memory, the importance of the precise words used and their order, and in light of the evidence of [Cawrse] whose memory is slightly more reliable, I do not consider [Dewhurst] has discharged the burden upon him.

The common law rules governing formation of a contract as discussed above in Dewhurst are repeated in Bressan v Squires [1974] 2 NSWLR 460, 461 Bowen C J:

The general rule is, of course, that a contract is not concluded until acceptance of an offer is actually communicated to the offeror. To this rule there is an exception in the case of acceptance by post….It is an important exception, since it may determine not only when a contract has been made but also where it has been made.

In the present case the information supplied on the particular date indicates that an unsigned Licence Agreement is e-mailed or posted to the Australian customer as part of the proposal, that the Australian customer signs the Licence Agreement and sends it to Country X for signature by NRE , and that NRE then signs the Licence Agreement and returns it to the Australian customer by e-mail or by post if the Australian customer so requires.

This suggests that the copy of the Licence Agreement signed by the Australian customer and sent to Country X is an offer, that NRE accepts that offer by signing the Licence Agreement, and that the Australian customer and NRE contemplate that NRE 's acceptance of the Australian customer's offer will be communicated by NRE to the Australian customer by e-mail unless the Australian customer specifically requests that communication of acceptance is made by post.

As discussed in Dewhurst, the common law rules on the formation of a contract distinguish between instantaneous (including near-instantaneous) means of communication and post when determining when and where communication of acceptance occurs. In Olivaylle Pty Ltd v Flotweg GMBH & Co KGAA (No. 4) [2009] FCA 522 Logan J stated that e-mail was an instantaneous means of communication and that where the acceptance of an offer was communicated by e-mail sent from New South Wales to Victoria, the contract for supply of production line equipment was made where the acceptance was received, i.e. Victoria. (Para 25):

Having regard to the position taken by the parties in this case, it is not necessary to give detailed consideration to the point. It is enough to observe that I consider that there are analogies to be drawn with the way the law developed in relation to telex communications in an earlier era where what I have termed 'the instantaneous communication rule' came to be adopted, perhaps at the expense of scientific precision but not so in relation to common commercial understanding. Thus, by analogy with cases concerning the position with what were, or were treated as, other forms of instantaneous communication, I consider that the contract was made where acceptance was received, i.e. in Victoria: Entores Ltd v Miles Far East Corporation [1955] 2 QB 327; W A Dewhurst & Co Pty Ltd v Cawrse [1960] VR 278; Express Airways v Port Augusta Air Services [1980] Qd R 543; Reese Bros Plastics Ltd v Hamon-Sobelco Australia Pty Ltd (1988) 5 BPR 11,106.

Olivaylle Pty Ltd is cited in Contract Formation: Law and Practice (2010, OUP, Para 4.91):

Moreover, generally a contract is formed at that place where the acceptance takes effect. Thus, in the case of instantaneous modes of communication this is where acceptance is communicated or received. Examples of instantaneous communications include face-to-face communications, telephone, fax and telex. It is likely that e-mail and text messaging will be categorised as instantaneous forms of communication. (308)

Footnote 308 states:

Receipt will occur when the message is received in the offeror's server - see UNCITRAL Model Law on Electronic Commerce….for reasons of fairness and convenience, communication should be taken to have occurred at this point.

Olivaylle Pty Ltd was applied in New South Wales by the Supreme Court of New South Wales in Showtime Touring Group v Mosely Touring Inc [2010] NSWSC 974 where the issue was whether the defendants had been properly served with a statement of claim in any of the circumstances in which an originating summons may be served outside Australia, as set out in Schedule 6 to the Civil Procedure Act 2005 (NSW). Those circumstances include where the subject matter of the proceedings is a contract and the contract is 'made in New South Wales' (Schedule 6, clause (c)(i)). Hislop J stated (Paras 38 40):

The May agreement was made when the agreement signed in New South Wales was emailed back to the defendants' lawyers in New York. The contract was made in New York where the e-mail was received - Olivaylle Pty Limited v Flotweg GMBH & Co KGAA (No 4) [2009] FCA 522

The plaintiff's evidence is that the second agreement was made by sending a fax accepting the defendants' offer to the defendants' lawyer in New York. If there was an agreement distinct from the May agreement, it was made in New York where the fax was received - Reese Bros Plastics Limited v Hamon-Sobelco Australia Pty Ltd (1988) 5 BPR 11,106, Egis Consulting Australia Pty Limited v First Dynasty Mines Limited [2001] WASC 22.

Thus the agreement sued upon, whether it be regarded as a separate agreement or a variation of the May agreement was made in New York not New South Wales. Schedule 6 cl (c)(i) has no application.

Thus where NRE signs the Licence Agreement and then e-mails the signed Licence Agreement to the Australian customer (which appears to be the usual case) we do not agree with the submission made in the ruling request (p. 6) that the supply of the right to the Australian customer is not 'done' in Australia because 'the acceptance of the terms and conditions is made by NRE and employees associated with ONLINE located in Country X'. Where NRE e-mails the signed Licence Agreement to the Australian customer the last act necessary to create a binding contract occurs where that e-mail is received (i.e. in Australia) and the supply of the right by NRE to the Australian customer is connected with Australia pursuant to paragraph 9-25(5)(a) of the GST Act.

On the other hand, where NRE and the Australian customer act in a manner which shows that they contemplate communication of acceptance by post (i.e. where the Australian customer asks NRE o post the signed Licence Agreement to the Australian customer), the last act necessary to create a binding contract occurs where the letter containing the signed contract is posted (i.e. in the ) and the supply of the right by NRE to the Australian is not connected with Australia pursuant to paragraph 9-25(5)(a) of the GST Act.

The ruling request discussed separately (p. 6) the ongoing downloading of online content and e-books by the Australian customer during the Access Period and referred to the edited versions of a number of GST private rulings which state that the supply of online content is not connected with Australia. In our view this confuses the right supplied with the subsequent exercise of that right and incorrectly treats the latter as a separate supply. It is clear from clause x of the Licence Agreement that the right supplied by NRE to the Australian customer a right to give Authorised Users access to the Online Products. Clauses Y and Z of the Licence Agreement set out what the Australian customer may and may not do when exercising that right. We consider that the supply is essentially the provision of one thing - the right to give Authorised Users access to the Online Products, per Goods and Services Tax Ruling GSTR 2001/8:

55. Some supplies include parts that do not need to be separately recognised for GST purposes. We refer to these parts of a supply as being integral, ancillary or incidental. In a composite supply, the dominant part of the supply has subordinate parts that complement the dominant part. If such a supply is analysed in a commonsense way, it can be seen that the supply is essentially the provision of one thing. It need not be broken down, unbundled or dissected any further. For this reason, a composite supply may appear, at first, to have more than one part, but is treated as if it is the supply of one thing.

…

59. No single factor (by itself) will provide the sole test you use to determine whether a part of a supply is integral, ancillary or incidental to the dominant part of the supply. Having regard to all the circumstances, and taking a commonsense and practical approach, indicators that a part may be integral, ancillary or incidental include where:

you would reasonably conclude that it is a means of better enjoying the dominant thing supplied, rather than constituting for customers an aim in itself; or

 it represents a marginal proportion of the total value of the package compared to the dominant part; or

 it is necessary or contributes to the supply as a whole, but cannot be identified as the dominant part of the supply; or

 it contributes to the proper performance of the contract to supply the dominant part.

In our view the ongoing access and downloading during the Access Period is not a separate supply but is simply the means of enjoying the right supplied to the Australian customer pursuant to the Licence Agreement. We also note that GSTR 2000/31 rejects the view that where a right is exercised is relevant for the purposes of paragraph 9-25(5)(a):

207. On one view, where the thing is a right, the right is 'done' in Australia if the right is exercised/used in Australia.

208. However, we consider that this alternative view is at odds with the construction of the GST Act as a whole. For example, Division 84 is premised on the possibility that a right to use intellectual property is not connected with Australia where the right is made outside Australia. It is stated at page 213 of the Explanatory Memorandum that:

Under subsection 9-25(5) supplies of things other than goods or real property are connected with Australia if the thing is done in Australia or the supplier makes the supply through an enterprise the supplier carries on in Australia. Under these rules a supply of a thing that is not goods or real property, such as an intellectual property right, could be made from outside of Australia when the thing is for consumption in Australia, such as an intellectual property right that is to be exercised in Australia, and the supply would not be connected with Australia. The supply would not be taxable. The supply would not be taxable even if the other requirements of section 9-5 are met.

Consequently we do not consider that the edited versions of GST private rulings referred to in the ruling request are relevant.

Supply made through an enterprise carried on in Australia:

GSTR 2000/31 states (Para 76):

However, even if the agreement is made outside Australia the supply is connected with Australia under paragraph 9-25(5)(b) if the supplier makes the supply through an enterprise that the supplier carries on in Australia.

For a supply to be connected with Australia under paragraph 9-25(5)(b), a connection must be established between the Australian permanent establishment and the supply.

Paragraph 86 of GSTR 2000/31 states that there are no specific set of circumstances which must be satisfied before a supply is connected with a permanent establishment. However, some factors that will usually indicate that the supply is made through a permanent establishment include:

§ the permanent establishment has the authority to sign contracts or accept purchase orders for the supply;

§ the permanent establishment has the authority to make important decisions in respect of the supply

…

§ if the supply is the grant, creation, assignment, transfer or surrender of a right, the permanent establishment grants, creates, assigns, transfers or surrenders that right

According to the ruling request NRE Australia does not have authority to agree to terms or sign Licence Agreements on behalf of NRE and NRE Australia's activities are limited to sales and marketing support.

Accordingly, paragraph 9-25(5)(b) of the GST Act is not satisfied as the supply made by NRE to an Australian customer is not made through an enterprise that NRE carries on in Australia.

Supply of a right or option to acquire something that would be connected with Australia

Goods and Services Tax Ruling GSTR 2003/8 refers to paragraphs 3.2 to 3.5 of the Explanatory Memorandum to the Tax Laws Amendment Bill (No. 1) 2005 and states:

11C. As explained in the Explanatory Memorandum, paragraph 9-25(5)(c) was inserted to address a deficiency in the GST Act under which certain rights or options provided offshore were not subject to GST even when they were for goods, services and other things that will be consumed in Australia. This outcome is contrary to the policy intent of the GST legislation which, broadly, is to tax private consumption of most goods, services and other things in Australia, including imports.

The intended operation of paragraph 9-25(5)(c) of the GST Act is discussed in an Addendum (GSTR 2000/31A3) which inserted paragraphs 225A to 225E into GSTR 2000/31, including the following example:

Example 39A - Supply of rights or options to things connected with Australia

225B. Cuisineworld is a non-resident entity in the United Kingdom (UK) that specialises in supplying cooking classes at renowned restaurants around the world, along with accommodation and bus tours. Cuisineworld has no business operations outside of the UK. Cuisineworld acquires the Australian holiday cooking package on a GST inclusive basis from Oz Travel, a resident tour wholesaler in Sydney. The Australian holiday cooking packages are on-sold by Cuisineworld to tourists as rights or options to acquire cooking classes and accommodation at selected five star hotels and to take bus tours in Australia.

225C. The supply by Cuisineworld of rights or options to acquire accommodation in Australia, is a contractual right that is exercisable over or in relation to land in Australia. It is therefore a supply of real property that is connected with Australia under subsection 9-25(4).

225D. The supply by Cuisineworld of rights or options to acquire cooking classes (training services) and bus tours (services) is the supply of things other than goods or real property. It is therefore necessary to consider subsection 9-25(5). Neither paragraph 9-25(5)(a) nor (b) is applicable as the supply of the rights is done in the UK and Cuisineworld does not carry on an enterprise in Australia. As the rights or options are to acquire cooking classes and bus tours in Australia and those services would be connected with Australia under either paragraphs 9-25(5)(a) or (b), the supply of the rights or options to acquire those services is connected with Australia under paragraph 9-25(5)(c).

225E. The supplies of the Australian holiday cooking packages by Cuisineworld are therefore connected with Australia. However, this does not necessarily mean that Cuisineworld must register for GST in Australia. Cuisineworld, in working out if it meets the registration turnover threshold (section 23-15) disregards supplies that are connected with Australia because of paragraph 9-25(5)(c) or that are of a right or option to use commercial accommodation in Australia that are not made in Australia and are made through an enterprise that the supplier does not carry on in Australia. Assuming that Cuisineworld makes no other supplies that are connected with Australia it may choose not to register for GST. If Cuisineworld chooses not to register for GST it is not entitled to claim any input tax credits for the acquisition of the Australian holiday cooking packages from Oz Travel and it is not liable for GST on the supply of the Australian holiday cooking packages to tourists. Thus even though Cuisineworld makes supplies of holiday packages that are connected with Australia it can choose to stay outside the Australian GST system.

Paragraph 9-25(5)(c) of the GST Act is not satisfied as the supply to an Australian customer of the right to give Authorised Users access to the Online Products is not a right or option to acquire something that would be connected with Australia.