Edited version of your private ruling

Authorisation Number: 1012486591773

Ruling

Subject: GST and supply of software and conference tickets

Questions

1. Are the payments that you receive including the profits you retain for the sale of the software consideration for a GST-free supply for the goods and services tax (GST) purposes?

2. Are the payments that you receive including the profits you retain for the sale of the conference tickets consideration for a GST-free supply for GST purposes?

Advice

1. Based on the information received, you make a supply of software to Australian residents and non-resident individuals when you receive payments from the individuals for the sale of the software.

Your supply of software to Australian individuals is a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). The payments (including the profits you retain for the sale of the software) are therefore consideration for taxable supplies that you have made. In this instance you are liable for GST on the payments you receive from the Australian individuals for these supplies.

Your supply of software to non-resident individuals is GST-free under paragraph (a) of item 2 in the table in subsection 38-190(1) of the GST Act. The payments which include the profits you retain for the sale of the software are therefore consideration for GST-free supplies that you have made. In this instance, you are not liable for GST on the payments you receive from the non-resident customers for these supplies.

2. Based on the information received, your supply of conference tickets to individuals who are residents and non-residents of Australia is GST-free under item 4 in the table in subsection 38-190(1) of the GST Act when you sell the conference tickets worldwide.

The payments which include the profits you retain for the sale of the conference tickets are therefore consideration for GST-free supplies that you have made. In this instance, you are not liable for GST on the payments you receive from the Australian residents and non-resident individuals for these supplies.

Relevant facts

You are a distributor of products supplied by Company ABC an overseas company and you are registered for GST. Company ABC has no subsidiary company, branch or representative in Australia and is neither registered nor required to be registered for GST.

You advertise and market Company ABC's products online with the opportunity to sell them to potential individual customers located worldwide. The products you advertise and market are software and conference tickets for international events and you sell the products as per set retail price recommended by Company ABC.

You act in your own name when you do the marketing and collect the payments from the customers in regard to the sales of the products. You derive your business income from the sale of the products.

The software is a web-based home study program that contains education curriculum. The software is not developed for a specific customer and the customer does not own the copyright of the program.

The conference tickets that you promote and sell are for events to be held outside Australia.

The customers are individuals and can be Australian residents and non-residents of Australia, The individuals are located in their residing country at the time of the supply of the products to them.

The potential customer responds to your advertisement by either entering their details into your marketing website, emailing you or calls you directly. You have a brief conversation over the phone with the customer regarding their reason for enquiry and present them with information about the product.

If the customer decides to purchase the product, you provide them with the steps to do the purchase. The customer signed up on Company ABC's website and agreed to Company ABC's terms and conditions when ordering their software online. The customer does not make any payment at the time of the order.

Company ABC generates an order confirmation invoice on receipt of the customer's order. You and the customer receive a copy of the order confirmation invoice and the overseas office receives a notification.

On receipt of the invoice, you contact the customer and collect payment from them. If the customer is in Australia you provide them with a GST tax invoice.

You keep the retail profit and forward the remaining funds to the overseas office as per Company ABC's guideline.

When the overseas office receives the funds they send an email to the customer with access to the online program.

You are the first point of call for the customer if it is a question relating to the running of the software system. This assistance is a requirement as per the agreement you have with Company ABC and you do not receive any payment for this assistance. All enquiries and concerns related to the software itself are directed back to Company ABC.

The process for customers to acquire live conferences tickets is similar to the acquisition of the software. However, for the conference tickets once they are sold and received by the customer you do not have any contact with the customers. All ticket sales are non-refundable and it is the responsibility of the customer to register online for the upcoming events with Company ABC.

You have provided us with a copy of the written agreement you have with Company ABC and the guideline.

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 38-190

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

Reasons for decisions

Question 1

Characterisation of supply

Before considering the GST status of the payments you receive from the sale of the software that is delivered online to the customers by Company ABC, we need to determine the character of the supply you are making in return for these payments and to whom the supply is made.

A supply of software can be characterised as a supply of right, a supply of software (as intangible property), a supply of a service or a supply of goods.

In regard to software being supplied in an intangible form, for example by downloading it from the Internet, our view is the supply of the software in this form is not a supply of goods as there is no tangible property supplied.

Further, we consider that where the software downloaded is a standard or 'off-the-shelf' software, what is supplied is the computer program, subject to restrictions on its use. If the essential nature of the transaction is the supply of the computer program, subject to restrictions on its use, the fact that a 'licence' relating to the supply of the software is couched in terms of a licence 'to use' the software will not in itself mean that the substance of the supply is a supply of a right to use the software.

For more information on the characterisation of software please refer to Goods and Services Tax Ruling GSTR 2003/8 which is available at www.ato.gov.au

From the facts given, the software is a web-based home study program that contains education curriculum. The software is not developed for a specific customer where the customer owns the copyright. In this instance, we consider when you sell the software you are making a supply of software (as intangible property) and not a supply of a right to the customers.

Where a supply contains a dominant part and the supply also includes something that is integral, ancillary or incidental, the supply is a composite supply. The composite supply is treated as a single supply (for more information on composite supply refer to Goods and Services Tax Ruling GSTR 2001/8 available at www.ato.gov.au)

Based on the information received, we consider you are making a supply of software in your own right to individuals who are located world wide and the consideration for these supplies is the retail price of the products which you collect from them.

The advertising and marketing of the software are merely integral or incidental to the supplies of the software to the individuals as the advertising and marketing are necessary and contribute to your sale of the softwares to individuals worldwide.

The next step is to determine the GST status of your supplies of software to the individuals worldwide.

GST status of software sold worldwide

GST is payable on a taxable supply. To be a taxable supply, the supply must meet the conditions under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). This section provides that you make a taxable supply if:

(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 for GST.

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

Supply to Australian individuals

From the information received, you satisfy paragraphs 9-5(a) to 9-5(d) of the GST Act when you sell the software and conference tickets as:

(a) you make the supply for consideration; and

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

(c) the supply of the software is connected with Australia as you are making the supply through a business that you carry on in Australia since you act under your name when selling the software and issuing the invoice to the customers; and

(d) you are registered for GST.

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

Your supply of software to the Australian individuals is neither input taxed nor GST-free under any provision in the GST Act. Accordingly, based on the information received, your supply of software to Australian resident individuals is a taxable supply under section 9-5 of the GST Act and you are liable to pay GST on the payments you received from the individuals.

Supply to non-resident individuals

Your supply to the non-resident individuals satisfies paragraphs 9-5(a) to 9-5(d) of the GST Act as you receive consideration for the supply and the supply is made through a business that you carry on. Further the supply is connected with Australia as it is made through a business that you carry on in Australia and you are registered for GST.

However your supply of software is not a taxable supply to the extent that it is GST-free or input taxed.

Your supply of software is not input taxed under any provision in the GST Act. The next step is to consider whether the supply is GST-free.

GST-free

Under section 38-190 of the GST Act certain supplies other than supplies of goods or real property for consumption outside Australia are GST-free.

Of particular relevance to the supply of software is item 2 in the table in subsection 38-190(1) of the GST Act (Item 2). Item 2 appears as follows:

(* denotes a defined term under section 195-1 of the GST Act)

For a supply to be within the scope of Item 2, the supply must be made to a non-resident who is not in Australia when the thing supplied is done. The expression 'not in Australia' requires that the non-resident is not in Australia in relation to the supply.

Not in Australia in relation to the supply

In the case of supplies made to an individual, we consider the physical location of the individual establishes whether that individual is in Australia when the thing supplied is done.

An individual is in Australia if that individual is physically in Australia. An individual is in Australia in relation to the supply if the individual is involved with the supply while in Australia.

A non-resident individual is in Australia in relation to the supply if the non-resident individual is involved with the supply while in Australia. A non-resident individual is involved with the supply where the non-resident is in contact with the supplier while in Australia and that contact is not minor (for example courtesy call or checking on the progress of the supply).

If a non-resident individual is in Australia for a purpose that is not related to the supply, for example the individual is on holiday in Australia and has no contact with the supplier or only has minor contact, the non-resident individual is not considered to be involved with the supply and is therefore not in Australia in relation to the supply.

Application of facts to item 2

From the facts given, you supply the software to non-resident individuals who are not in Australia at the time of supply. In this instance your supply of software is GST-free under paragraph (a) of Item 2 as:

· the individual is a non-resident and is not in Australia in relation to the supply when the supply is made; and

· the supply is neither a supply of work physically performed on goods situated in Australia nor a supply directly connected with real property situated in Australia.

Further, your supply of software may also be GST-free under paragraph (b) of Item 2 if the individuals acquire your software for their business purposes and are not registered or required to be registered for GST.

Subsection 38-190(3) of the GST Act

However, the scope of Item 2 is limited by subsection 38-190(3) of the GST Act which provides that a supply covered by Item 2 is not GST-free if:

· it is a supply under an agreement entered into, whether directly or indirectly with a non-resident; and

· the supply is provided or the agreement requires it to be provided, to another entity in Australia.

Based on the information received, subsection 38-190(3) of the GST Act is not applicable as the non-resident individuals are not requesting you to provide your supply of software to another entity in Australia.

Accordingly, your supply of software to the non-resident individuals is GST-free under paragraph (a) of item 2.

For more information on Item 2 and subsection 38-190(3) of the GST Act please refer to the Goods and Services Tax Rulings GSTR 2003/7, 2004/7 and 2005/6 which are available at www.ato.gov.au

Summary

Based on the information received, your supply of software to Australian individuals is a taxable supply under section 9-5 of the GST Act. You are liable for GST on the payments you receive from the Australian individuals for these supplies.

Further based on the information received, your supply of software to non-resident individuals is GST-free under paragraph (a) of item 2 in the table in subsection 38-190(1) of the GST Act. You are not liable for GST on the payments you receive from the non-resident individuals for these supplies.

Question 2

Characterisation of supply

A supply of conference ticket can be characterised either as a supply of a right or a supply of a service for GST purposes.

From the information received, when you sell the conference tickets to individuals worldwide, you are supplying the individuals with a right to attend the conference since the individuals will have to register online for the upcoming event. In this instance you are making a supply of a right to attend the conference when selling the conference tickets to the individuals and receive payments from them.

The advertising and marketing of the conference tickets are merely integral or incidental to your supply of the right to attend the conference which you make to the individuals as the advertising and marketing are necessary and contribute to your sale of the conference tickets to the individuals worldwide.

The next step is to determine the GST status of your supplies of right to attend the conference when selling the conference tickets to the individuals worldwide.

GST status of supply of right to attend a conference

GST is payable on a taxable supply. To be a taxable supply, the supply must meet the conditions under section 9-5 of the GST Act (refer to question 1 for more information on section 9-5).

From the information received, you satisfy paragraphs 9-5(a) to 9-5(d) of the GST Act when you supply the right to attend a conference to individuals worldwide as:

(a) you make the supply for consideration; and

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

(c) the supply of the right to attend a conference is connected with Australia as you are making the supply through a business that you carry on in Australia since you act under your name when selling the conference tickets and issuing the invoice to the individuals; and

(d) you are registered for GST.

However, the supply of the right to attend a conference is not a taxable supply to the extent that it is GST-free or input taxed.

Your supply of the right to attend a conference is not input taxed under any provision in the GST Act. The next step is to consider whether the supply is GST-free.

GST-free

Under section 38-190 of the GST Act certain supplies other than supplies of goods or real property for consumption outside Australia are GST-free.

Of particular relevance to the supply of right to attend a conference is item 4 in the table in subsection 38-190(1) of the GST Act (Item 4).

Item 4 appears as follows:

Applying of facts to item 4

When you supply the right to attend a conference to Australian individuals by selling the conference tickets to them, your supply of the right to attend the conference satisfies paragraph (a) of item 4 as the rights to attend the conference are for use outside Australia since the conference is held outside Australia.

When you supply the right to attend a conference to non-resident individuals by selling the conference tickets to them, your supply of the right to attend the conference satisfies paragraphs (a) and (b) of item 4 as:

· the rights to attend the conference are for use outside Australia;

· the individuals are not Australian residents and they are outside Australia when the supply is done.

Summary

Based on the information received, your supply of the right to attend a conference to individuals who are residents and non-residents of Australia is GST-free under item 4 in the table in subsection 38-190(1) of the GST Act. You are not liable for GST on the payments you receive from the resident and non-resident individuals when you sell the conference tickets to them.