Edited version of your private ruling

Authorisation Number: 1012473796331

Ruling

Subject: GST and education course

Question

Is your supply of the specified flying training course 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

Yes, your supply of the specified flying training course is a GST-free supply of an education course under section 38-85 of the GST Act.

This ruling applies for the following periods

1 July 2013 to 30 June 2015

Relevant facts and circumstances

You were established in 20XX.

You have been registered for GST from 20XX.

You have not yet commenced trading and will be trading under a specified name.

You are currently in the process of gaining approval from the CASA to conduct your flying training.

This training will consist of a course where the participant will obtain hours of experience, maintain logbooks and be assessed against units of competency.

Successful completion of all relevant units of competency is required before a pilot can take the final practical test and acquire a licence.

Your flying training course and its units of competency will be assessed in accordance with the specified Syllabus (the Syllabus).

You will not be providing all the training required to acquire a licence in accordance with the Syllabus. You will refer your students to other providers for that training.

The Civil Aviation Act 1988 (CAA) states that a licence must be held in order to work as a specified pilot. The CAA imposes a penalty where the law is contravened.

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 9-40.

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

A New Tax System (Goods and Services Tax) Act 1999 Paragraph 38-85(a).

Income Tax Assessment Act 1997 Section 995-1

Reasons for decision

Under section 9-40 of the GST Act, you must pay the GST payable on any taxable supply that you make.

Section 9-5 of the GST Act provides you make a taxable supply if:

(a) you make the supply for consideration,

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

(c) the supply is connected with Australia, and

(d) you are registered or required to be registered for GST.

A supply however is not a taxable supply to the extent that it is GST-free or input taxed.

Division 38 of the GST Act outlines supplies that are GST-free. Under paragraph 38-85(a), a supply of an 'education course' is GST-free. An education course is defined under section 195-1 to include a 'professional or trade course'. Furthermore, a professional or trade course is defined under section 195-1 to include:

a course leading to a qualification that is an essential prerequisite:

(a) for entry to a particular profession or trade in Australia; or

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

Goods and Services Tax Ruling GSTR 2003/1 Goods and services tax: supplies that are GST-free as professional or trade courses (GSTR 2003/1) includes guidelines on whether a course leads to a qualification when it is issued by a third party. Paragraph 40 states:

40. In some circumstances, you may supply a course and on its successful completion, another party may supply a qualification that is an essential prerequisite. It does not matter that you are not responsible for the assessment and the issue of the qualification. The course leads to a qualification.

Essential prerequisite is defined under section 195-1 of the GST Act as:

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

(a) by or under an industrial instrument; or

(b) if there is no industrial instrument for that particular profession or trade but there is a professional or trade association that has uniform national requirements relating to the entry to or the commencement of the practice of, the profession or trade concerned - by that association; or

(c) if neither paragraph (a) nor (b) applies but there is a professional or trade association in a State or Territory that has requirements relating to the entry to, or the commencement of the practice of, the profession or trade concerned - by that association.

An industrial instrument is defined under section 995-1 of the Income Tax Assessment Act 1997 as:

(a) an Australian law; or

(b) an award, order, determination or industrial agreement in force under an Australian law.

GSTR 2003/1 expands further regarding essential prerequisite:

48. 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.

In the context of a professional or trade course, obtaining a licence is specifically discussed in Goods and Services Tax Determination GSTD 2000/11 Goods and services tax: is the supply of commercial pilot training GST-free as an education course under section 38-85 of the A New Tax System (Goods and Services Tax Act) 1999 (the GST Act)? Paragraph 6 is relevant:

6. Where a commercial pilot course also satisfies the definition of a professional and trade course leading to an essential pre-requisite for entry into the profession of a commercial pilot, this course will be GST-free.

Based on the information provided, in order to obtain the specified licence, the units of competency outlined in the Syllabus must be successfully completed. You have applied to the CASA for approval to provide this training and testing through a flight training course. Although CASA will issue the participants undertaking this course with a licence upon application, it is accepted that where the course provides them with the requisite skills and knowledge to attain that qualification, the course will lead to a qualification. Providing that each student undertakes their external training, the training you provide will satisfy the mandatory training requirements for the specified licence. For this reason, your training will lead to a qualification.

You have also stated that to legally pilot the specified aircraft for hire or reward, a pilot must hold the specified pilot licence. The requirement to hold the specified licence is outlined within the CAA which strictly regulates entry into the piloting profession. Where a person pilots the specified aircraft for hire or reward without the specified pilot's licence, the CAA outlines sanctions that will apply. For these reasons, we consider the specified pilot's licence is an essential prerequisite to entering the piloting profession.

Therefore on the above facts, as you will be supplying flight training that will lead to a qualification and that qualification is an essential prerequisite to entering the specified piloting profession, you will be supplying a professional or trade course. As your course will meet the requirements of paragraph 38-85(a) of the GST Act, your supply of a flight training course leading to the specified pilot's licence will be GST-free.