Edited version of your private ruling

Authorisation Number: 1012482025449

Ruling

Subject: Education courses

Question 1

Are the training courses provided in the contract GST-free?

Answer

Yes

Question 2

Are the provisions of course materials by a supplier of education course to students GST-free?

Answer

Yes

Question 3

Are the provisions of administrative services by the supplier of education courses to the students GST-free?

Answer

Yes

Question 4

Are the other supplies in the contract provided to a government department GST-free?

Answer

No

Relevant facts:

You are registered for goods and services tax (GST).

You account for GST on a non-cash basis.

You entered into a contract with a government department to provide training courses to the course participants.

The training courses will be conducted at a government premise.

You are a primary contractor to the government department and you employ sub-contractors to help with the delivery of the training courses.

The subcontractors provide part of the training courses, course materials and administrative services. The subcontractors invoice their supplies to you and you invoice the government department.

You provided a copy of the training plan which sets out the training requirements.

The contract outlines the government's objectives for achieving the vocational training, education standards and delivery of the training.

You advised that the course participants will receive certificates after successful completion of the courses and the government department will record their achievements.

You are not a registered training organisation (RTO) for these training courses.

You provide training aids, equipment and courseware and support services for the training. The training aids include computers and other training facilities.

You provided a government document which sets out the Government regulatory requirements for qualifications required in a profession or trade in the government department. You advised that your training courses must comply with the government regulatory requirements.

You confirmed that the training courses will lead to qualification that complies with the Government Regulations.

You provide course materials, training aids, instructional media and training related consumables to support training courses. Course materials provided to course participants include stationery and trade oriented consumables.

You provide a document that lists your charges for training and consumables for each course participant.

You lease the training premises from the government department.

· The government department pays an upfront payment for the training courses. You apply the payments to install the training facilities and make improvements to the training premises for the delivery of the training courses.

· The training facilities include computer networks, furniture, training related fixtures and fittings for the delivery of the training courses.

· You advised that you have ownership of the facilities and improvement installed on the training premises.

· The contract requires you to transfer equipment licenses and deliverables to the government department.

Reasons for decisions

Under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), an entity makes a taxable supply if:

· it makes the supply for consideration

· the supply is made in the course or furtherance of its enterprise

· the supply is connected with Australia; and

· the entity is registered or required to be registered.

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

The supplies in the contract satisfy all the criteria in section 9-5 of the GST Act. You make the supplies for considerations in the course of your enterprise. The supplies are connected with Australia and you are registered for GST.

The supplies in the contract consist of the trainings, courses materials, administrative services, grants of licenses and other works requested the government department.

These supplies are not input taxed. Next we have to assess whether the supplies are GST-free under any of the provisions in Division 38 of the GST Act.

1. Are the training courses provided to students under the contract GST-free?

Section 38-85 of the GST Act provides that a supply of an education course is GST-free.

The meaning of education courses is defined in section 195-1 of the GST Act and it includes tertiary courses and professional or trade courses.

You advised that the course participants are trained with a number of competencies to qualify for a certificate. The graduates will be posted to technical positions in the government department. Therefore, we need to consider whether the courses are tertiary courses or professional or trade courses under the meaning of education courses.

Tertiary Courses

Goods and Services Tax Ruling GSTR 2001/1 provides the Australian Taxation Office (ATO) view on tertiary course. We enclose a copy for your reference. Paragraph 12 of GSTR 2001/1 defines a tertiary course as:

(a) a course of study or instruction that is a tertiary course determined by the Education Minister under subsection 5D(1) of the Student Assistance Act 1973 for the purposes of that Act, or

(b) any other course of study or instruction that the Education Minister has determined is a tertiary course for the purposes of this Act.

The Education Minister has made a determination under subsection 5D(1) of the Student Assistance Act 1973 (Act) which provides that an education course includes courses outlined in the determination. These courses include pre-vocational courses, vocational education and training program. However, these courses must be supplied by an RTO or Higher education institution.

We consider that the training courses are not tertiary courses because you are the supplier of the training courses and you are not an RTO or a Higher Education Institution. Further the Education Minister has not determined the training courses are tertiary course for the purposes of the Act.

Professional or trade courses

Next we have to consider whether the courses are professional or trade courses. Goods and Services Tax Ruling GSTR 2003/1 provides the ATO view on professional or trade courses. We enclose a copy for your reference.

What is a course?

Before we consider the issue of professional or trade course, we need to confirm that the trainings are courses for GST purposes. Paragraphs 22 to 32 of GSTR 2003/1 outline the meaning of a course and paragraph 22 states "… a course is a program of systematic and interactive instruction or training, for the acquisition of particular skills or knowledge…"

You provided a copy of your training plan which sets out the program of systematic and interactive instructions or training. Therefore, we consider that the trainings satisfy the meaning of course for GST purposes.

Now we have to determine whether the course is a professional or trade course. Paragraphs 8 and 9 of GSTR 2003/1 states:

8. A 'professional or trade course' is defined in section 195-1 as:

'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.'

9. For the purposes of the definition of a 'professional or trade course' the term 'essential prerequisite' is defined in section 195-1 in the following terms:

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

(a) by or under an industrial instrument;1 or

(b) …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 …

This is summarised in paragraph 14 of GSTR 2003/1 which states:

The course you supply will be a professional or trade course as defined in section 195-1 if:

· it is a course leading to a qualification …; and

· the qualification is an 'essential prerequisite' .

A course is a professional or trade course if a course participant acquires a qualification that is an "essential prerequisite" to a profession or trade. Paragraphs 42 to 45 of GSTR 2003/1 outline the meaning of qualification and paragraph 43 of GSTR 2003/1 states:

A qualification is normally acquired through study or experience and equips a person to perform a particular task or function. In the context of the definition of a professional or trade course in section 195-1, a qualification is an attribute or quality that is acquired after undertaking a course. It is evidenced by some document that indicates successful completion of the course. The document would normally be accepted by a Commonwealth, State or Territory authority, or a professional or trade association, or an employer as suitable evidence that a person has successfully completed the relevant course

You advised that the course participants will receive certificates after successful completion of the training course and the government department will record their achievement. That is the training courses will lead to a qualification that is acceptable by the government.

Next we have considered whether the qualifications acquired by the course participants are essential prerequisite to a profession or trade. Paragraphs 46 to 49 provide an explanation on the "essential prerequisite" conditions. Paragraphs 46 and 47 of GSTR 2003/1 state:

46. Your course will only be a professional or trade course if it leads to a qualification that is an essential prerequisite for entry to, or to commence the practice of, a particular profession or trade.

47. Under the section 195-1 definition of 'essential prerequisite', the qualification must be imposed:

(i) by or under an industrial instrument;

(ii) if there is no industrial instrument, by a professional or trade association that operates on a national level; or

(iii) if neither (i) nor (ii) applies, by a professional or trade association that operates at a State or Territory level.

A course is an essential prerequisite to a profession or trade if the course leads to a qualification that has been imposed by or under an industrial instrument, a professional or trade association that operates on a national level or by a professional or trade association that operates at a State or Territory level.

The definition of "Industrial Instrument" is outlined in paragraphs 50 to 52 of GSTR 2003/1 which state:

50. An 'industrial instrument' is defined in section 195-1 as having the meaning given by section 995-1 of the Income Tax Assessment Act 1997 ('ITAA 1997') which states:

'industrial instrument means:

(a) an Australian law; or

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

51. Section 995-1 of the ITAA 1997 defines 'Australian law' to mean 'a Commonwealth law, a State law or a Territory law

52. Many requirements for entry to or the commencement of the practice of, a profession or trade are contained in regulations to various Australian laws. These regulations are also industrial instruments

You provided a government department document which sets out the Government regulatory requirements for a profession or trade in the government department. You advised that your training courses comply with the government regulatory requirements and the courses will lead to qualification that will comply with the Government Regulations

We consider that the qualification achieved is an essential prerequisite condition for a profession or trade education courses in the government department. Therefore, the training courses are GST-free under section 38-85 of the GST Act as they are profession or trade education courses.

Facilities for the delivery of the training courses

You advised that the education courses will be conducted on the leased premises. You have installed facilities on the premises for the delivery of the courses. The facilities include furniture, projectors, computers and computer networks. You confirmed that you have ownership of the facilities.

The ATO view on the facilities used for the delivery of the courses is outlined in GSTR 2001/1. Paragraphs 57 to 60 of GSTR 2001/1 provide an explanation on the provision of facilities by a supplier of education courses. The paragraphs state:

57 The supply of facilities that are required for the delivery of an education course is GST-free.

58 As the supply of these facilities is part of the supply of an education course, it is irrelevant whether the amount charged for the supply of facilities is included in the fee you charge for the course or whether it is charged separately.

59 Facilities include such items as:

(a) the provision and maintenance of plant, equipment, buildings and grounds;

(b) access to libraries including the access to library books, periodicals and manuals;

(c) access to computer and science laboratories;

(d) access to computers and other on line resources including off-campus dial up Internet services.

60 Many universities levy an Amenities Fee or Miscellaneous Student Activity Fee to help fund the infrastructure of the university. Where this fee is used to make facilities available to the general student population it is GST-free. If the fee relates specifically to a taxable supply or supplies that are made to a particular student or students it is not GST-free.

We consider that the provision of the facilities is GST-free as they are for the delivery of the GST-free education courses under section 38-85 of the GST Act.

2. Are the provisions of course materials to course participants GST-free?

Section 38-95 of the GST Act provides that the supply of course materials by the supplier of a GST-free course is also GST-free. The meaning of course materials is defined in section 195-1 of the GST Act and it states:

course materials, in relation to an *education course , means materials provided by the entity supplying the course that are necessarily consumed and transformed by students undertaking the course for the purposes of the course.

You provided a document which the details your charges for educational consumables for each course participant. You advised that the course materials are stationery, trade oriented consumables, etc, and are supplied by you for training purposes.

Now, we have to determine whether your supply of course materials to the course participants satisfy section 38-95 of the GST Act for GST-free supply of course materials.

Paragraphs 81 to 108 of GSTR 2001/1 explanation on the supplies of course materials and paragraph 83 of GSTR 2001/1 list the conditions required for section 38-95 of the GST Act. The paragraph states:

Therefore, in determining whether materials or items will be considered to be course materials, all of the following requirements must be met:

(1) The materials or items are provided by you to students; and

(2) The materials are necessarily consumed or transformed by the students undertaking the course; and

(3) The materials are consumed or transformed for the purpose of the course.

In your case, the supplies of the course materials satisfy all three conditions in paragraph 83 of GSTR 2001/1. The course materials are necessary for the education courses. You supply the course materials to the course participants who would consume the material during the courses.

Therefore, the supply of the course materials is GST-free supplies under section 38-95 of the GST Act.

3. Are the provisions of administrative services to the students GST-free?

Paragraph 38-85(b) of the GST Act provides that a supply is GST-free if the supply is administrative services directly related to the supply of a GST-free education course, but only if they are provided by the supplier of the course.

Paragraphs 70 to 80 of GSTR 2001/1 provide an explanation of the supply of administrative services. The supply of the administrative services must be provided by the supplier of education courses and directly related to the supply of GST-free education courses. Paragraph 73 of GSTR 2001/1 states:

Therefore, administrative services must be in a direct line or immediately associated or connected with the supply of the education course

Paragraph 75 of GSTR 2001/1 provides some examples of administrative services that are directly related to the supply of GST-free education courses and therefore would be GST-free under paragraph 38-85(b) of the GST Act.

You make a supply of an administrative service that is directly related to the supply of the GST-free education courses, the supply will also be GST-free under paragraph 38-85(b) of the GST Act.

4. Are the other supplies in the contract provided to the government department GST-free?

In addition to the supplies of education courses, course materials and administrative services, the contract also provides for other supplies to be provided to the government department. They include granting of licences and other services.

Supplies that are provided to the government department and are not of the GST-free under any of the provisions in Division 38 of the GST Act, will be taxable under section 9-5 of the GST Act.

As you account for GST on a non-cash basis, you are required to report and attribute GST in the period when you invoice your customer for a taxable supply or receive a payment in relation to that taxable supply.