Edited version of your private ruling

Authorisation Number: 1012533450758

Ruling

Subject: GST and education course professional or trade course

Question 1

Is the Professional Training Program (PTP) conducted by you, considered to be a GST-free education course for the purposes of section 38-85 of the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act), as a professional or trade course?

Answer

No.

Relevant facts and circumstances

· You are an individual sole trader, who is registered for GST. You carry on a business.

· You are a private school and are not a registered training organisation (RTO).

· You also conduct the PTP which allows the trainee to teach the Program Method both nationally and internationally as the program is accredited by an Australian Accreditation Board (AustB). The program can be undertaken over four to five years.

· The "Accredited Training Program" means the courses or series of courses conducted by or with the authority of the Australian Association (AA) with the intention of graduating as a Practitioner.

· AustB is responsible for accrediting PTPs in Australia and other countries. Another responsibility of AustB is to review applications for and certify trainers.

· AustB is an international accrediting organisation and they ensure your PTP conforms to International Training and Accreditation Policies and meets their requirements. AustB is a nationally recognised professional association that imposes uniform requirements worldwide including this recognition within Australia.

· The AustB is a standing committee of the AA. The PTP is an essential prerequisite for entry into this association.

· The AA is the registered owner of the trademark "Program Method".

· A certificate to use the trademark as a certified user shall be granted to any person who properly graduates from an accredited training program and submits an application for certification.

· A certified user undertakes to use the trademark only in the form authorised by the AA.

· Use of the trademark is subject to the permanent control, of the AA which may take such steps as necessary to ensure the observance of requirements of their regulations and the certified user of the trademark acknowledges the AA rights to this regard.

· Use of the trademark is subject to the permanent control of the AA which may take such steps as necessary to ensure the observance of requirements of these regulations and the certified user of the trademark acknowledges the AA's rights to this regard.

· The AA will keep a Register in which will appear the names and addresses of each certified user together with the date on which the certificate was issued and the period for which the certificate will remain in force.

· There is no specific Act or legislation which legally prevents people from using the designation Practitioner.

· There is no national or state industrial instrument that requires a person to have completed the PTP as an essential prerequisite before they can commence work as a Practitioner.

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 38-85.

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

Reasons for decision

Summary

The qualification gained by undertaking the PTP is not an essential prerequisite in relation to the entry of or the commencement of the practice of a particular profession or trade, thus it is not considered to be a professional or trade course.

Accordingly, your supply of the PTP is not a GST-free supply of an education course under section 38-85 of the GST Act, and is subject to GST.

Detailed reasoning

An education course is GST-free under section 38-85 of the GST Act. The term education course is defined under section 195-1 of the GST Act. That definition includes a number of different courses such as pre-school, primary, secondary and tertiary courses. The definition also includes courses such as adult and community education courses and professional and trade courses.

In your case, the only course of relevance to your circumstances is a professional or trade course.

Professional or trade course

As well as providing the Australian Taxation Office (ATO) view on what constitutes a professional or trade course, the public ruling Goods and Services Tax Ruling GSTR 2003/1 also provides at paragraph 22 general indicators of what constitutes a course and includes (but is not limited to):

§ delivery of educational instruction through an instructor or teacher

§ ongoing support and guidance, for example, being available to answer questions

§ assessment of the individual's progress

§ monitoring or supervision

§ provision of feedback concerning the individual, and

§ assessment of competency or satisfactory completion at the end of the program of instruction.

In your case, the PTP incorporates all of the above indicators and consequently, we consider that the PTP is a supply of a course for GST purposes.

It is now necessary to consider whether the supply of a PTP is GST-free as a professional or trade course.

Section 195-1 of the GST Act provides that for a course to be GST-free as a professional or trade course, the course must lead to a qualification that is an essential prerequisite:

§ for entry to a particular profession or trade in Australia, or

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

Qualification

Paragraph 42 of GSTR 2003/1 explains the meaning of qualification and states:

'Qualification' is not defined in the GST Act. The term therefore takes its ordinary meaning. The Macquarie Dictionary defines 'qualification' as 'a quality, accomplishment, etc., which fits for some function, office, etc.'

Paragraph 44 of GSTR 2003/1 indicates that a certificate or licence would satisfy the definition of a qualification and states:

A relevant authority or professional or trade association may issue a licence or a certificate that qualifies a person to do certain things. For example, a licence to drive a particular class of heavy road vehicle, or a practising certificate. Where this is the case, the certificate or licence is a qualification for the purposes of the section 195-1 [GST Act] definition of a professional or trade course.

In your case, upon completion of the PTP, a participant may apply to the AA for a certificate to use the trademark "Program Method". The AA will keep a Register in which will appear the names and addresses of each certified user together with the date on which the certificate was issued and the period for which the certificate will remain in force.

Paragraph 40 of GSTR 2003/1 allows a third party such as the AA to issue the certificate. Therefore it is accepted that the PTP leads to a qualification and this satisfies the qualification requirement of section 195-1 of the GST Act in relation to a professional or trade course.

Essential prerequisite for entry to a particular profession or trade in Australia 

Section 195-1 of the GST Act defines essential prerequisite, which provides that:

a qualification is an essential prerequisite in relation to the entry to, or commencement of the 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 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) or (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.

Under paragraph 48 of GSTR 2003/1, the Commissioner is of the view that a qualification is an essential prerequisite if it is mandatory for a person to have the qualification before he/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.

Further paragraph 49 of GSTR 2003/1 provides that a qualification that is imposed for reasons other than for entry to, or to commence the practice of a profession or trade, is not an essential prerequisite for the purposes of a professional or trade course. Similarly, a qualification required by an employer or group of employers, but which is not imposed by an industrial instrument, or a professional or trade association at either the national level, or State or Territory level will not be an essential prerequisite.

The qualification must be a legal requirement, for example a law, regulation or industrial agreement or be one imposed by a professional or trade organisation, either nationally or on a state basis. In addition, the qualification must be obtained before a person can enter, or commence the practice of a profession or trade in Australia. In effect, it would be impossible for a person to earn his/her livelihood in this profession or trade without this qualification.

Example 10 in paragraph 97 of GSTR 2003/1 provides an example of the ATO view about whether a course that fulfils a legal requirement in relation to a task is an essential prerequisite.

Example 10:

The Workplace Safety Act of a State requires that a person be appointed as a health and safety officer in a workplace of more than thirty people. Any person, including the employer, may perform this role if he or she is approved to do so. The individual performs their normal duties in the workplace and the role as a safety officer is merely an additional task. The legislation places the obligation on the employer to satisfy this requirement. The legal constraint does not relate to a person entering a profession or trade. A course you run to train a person to perform such a role is not a professional or trade course.

In your case, you are supplying the PTP leading to a qualification to enable students to apply for certification with the AA to use the trademark "Program Method". There is no legislative instrument that regulates the completion of the PTP as a prerequisite to commence the practice as a Practitioner. There is no particular State or Territory professional or trade association that imposes requirements relating to the profession or trade and no penalties or sanctions if an instructor has not completed this particular course.

Further, paragraphs 59, 60 and 61 of GSTR 2003/1 provide that a professional or trade association's ability to impose membership requirements and impose sanctions for the use of the trademark is not conclusive evidence of that association's ability to impose a qualification that is an essential prerequisite. The AA cannot prevent someone from commencing work as a Practitioner as this would require some threat of legal sanction or penalty. The AA can impose sanctions or penalties on anyone using the trademark "Program Method" if they are not a certified user.

The qualification gained by undertaking the PTP is not an essential prerequisite in relation to the entry of or the commencement of the practice of a particular profession or trade, thus it is not considered to be a professional or trade course.

In conclusion, although your course complies with the first requirement, it fails to meet the second requirement as outlined above, therefore it does not satisfy the definition of a professional or trade course. Further, on the basis of the facts provided your course does not satisfy the other GST-free education courses as defined in section 195-1 of the GST Act. Accordingly, your supply of the PTP is not a GST-free supply of an education course under section 38-85 of the GST Act, and is subject to GST as all the requirements of section 9-5 of the GST Act are satisfied.