Edited version of your private ruling

Authorisation Number: 1012580152849

Ruling

Subject: Promotion and administration of examinations and supply of preparation courses

Question 1

Is the promotion and administration by A of the examinations specified in the Agreement between A and C a GST-free supply pursuant to section 38-110 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes, the promotion and administration by A of the examinations specified in the Agreement is a GST-free supply pursuant to section 38-110 of the GST Act.

Question 2

Is the supply by A of a ten week preparation course for two of the examinations and a five week preparation course for a third examination a GST-free supply pursuant to section 38-85(a) of the GST Act?

Answer

Yes, the supply by A of a ten week preparation course for two of the examinations and a five week preparation course for a third examination is a GST-free supply pursuant to section 38-85(a) of the GST Act.

Relevant facts and circumstances

Applicant

A was formed by a series of amalgamations of institutions and established and continued by State legislation.

Agreement:

A entered into an Agreement with C.

The Agreement recites that A has applied to C to act as a centre to offer certain examinations and that C authorises A to promote and administer those examinations.

The Agreement sets out A's obligations, i.e. A will abide by the terms and conditions set out in the registration booklet; A will make a minimum number of candidate entries each calendar year; A will administer the examinations to certain standards; A will meet all costs for the local delivery of the examinations in return for collecting a reasonable local fee per candidate.

The Agreement also sets out C's obligations, i.e. C will provide A with quality assessments; C will promptly process candidate entries; C will arrange for timely dispatch of materials; C will issue results and certificates; C will provide A with an official authorisation certificate and publish A's details on C's website.

The Agreement also states that C grants A a non-exclusive non-transferable licence to use the materials and software provided by C for the purpose of performing A's obligations under the Agreement.

The Agreement obliges A to pay a fee for initial authorisation and an annual non-refundable administrative fee for administrative services and support and states:

Nothing contained in this Agreement shall be construed to imply a joint venture, partnership or principal and agent relations, or employer and employee relation ship between [C] and [A], and neither party shall have the right, power or authority to create any obligation express or implied on behalf of the other. [A] should make clear in all dealings that it is not acting as agent for [C].

Establishment of centre:

As a result of entering into the Agreement A has established an examination centre and proposes to promote and administer paper-based examinations plus one online examination pursuant to the Agreement.

It was stated in the ruling request that the examinations which A has been authorised to promote and administer are internationally recognised language examinations which may be used to demonstrate English language proficiency for the purposes of employment or enrolling in university courses in either Australia or Country X.

Supply of preparation courses:

A proposes to offer a ten week preparation course for each of the paper-based examinations and a five week preparation course for the online examination.

Information on C's Website:

C's Website describes the first paper-based examination as an English language examination which can be used to help a person study in English, work in an English-speaking environment or live independently in an English-speaking country. The Website also states that that examination is accepted as a qualification in English by thousands of leading businesses and educational institutions around the world, including universities.

The Website further states that the second paper-based examination is accepted around the world as proof of high-level achievement.

The Website describes the online examination as a multilingual set of workplace language assessment, training and benchmarking tools which are used internationally for business and industry recruitment, admission to study business-related courses, identifying and delivering training, and assessing the effectiveness of language courses

Information on A's Website:

A's Website describes the 'C exam preparation' course as follows:

This course is for students preparing to sit the C English exam. It is offered at a specific level. You will develop the reading, writing, listening, speaking, grammar and vocabulary skills necessary to undertake the C exam.

The course will help you:

· Improve your general level of English proficiency

· Become familiar with the exam format

· Improve your exam taking strategies

In relation to accreditation, A's website states:

A is a member of English Australia. We are an authorised C exam centre and our courses are accredited by a national scheme.

A is listed on the Commonwealth Register of Institutions and Courses for Overseas Students (CRICOS).

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 38-110 and section 38-85.

Reasons for decision

Question 1

Summary

The supply of an examination referred to in the ruling request is 'the assessment…of qualifications' within the meaning of subsection 38-110(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) and is for the purpose of either access to education or employment. The requirement in paragraph 38-110(2)(b) that the supply is carried out by an education institution is also satisfied. Consequently that supply is GST-free pursuant to section 38-110 of the GST Act.

Detailed reasoning

Section 9-5 of the GST Act states that an entity makes a taxable supply if the entity makes that supply for consideration, in the course or furtherance of an enterprise carried on by that entity, the supply is connected with Australia, and the entity is either registered for GST or required to be so registered. Section 9-5 further states that such a supply is not a taxable supply to the extent that it is GST-free or input taxed.

Section 195-1 states that 'GST-free' has the meaning given to it by subsection 9-30(1) and Division 38 of the GST Act and subsection 9-30(1) states that a supply is GST-free if it is GST-free under Division 38 of the GST Act or under a provision of another Act. Division 38 of the GST Act includes subsection 38-110(1):

A supply is GST-free if the supply is the assessment or issue of qualifications for the purpose of:

(a) access to education; or

(b) membership of a professional or trade association; or

(c) registration or licensing for a particular occupation; or

(d) employment.

However, a supply is not GST-free under subsection (1) unless the supply is carried out by:

(a) a professional or trade association; or

(b) an education institution; or

(c) an entity that is registered by a training recognition authority of a State or Territory in accordance with the Australian Recognition Framework to provide skill recognition (assessment only) services; or

(d) an authority of the Commonwealth or of a State or Territory; or

(e) a local government body.

Subsection 38-110(1):

Subsection 38-110(1) states that the supply of the assessment or issue of qualifications is GST-free if that assessment or issue is for the purpose of, inter alia, access to education or employment.

The GST Act provides no guidance as to the meaning of 'assessment' and 'issue'. The Macquarie Dictionary defines 'assessment' as 'the act of assessing' and defines 'assessing' as 'to measure or evaluate'. Subsection 38-110(1) refers to a supply which 'is the assessment…of qualifications'.

Pursuant to the Agreement C appoints A 'to promote and administer' the examinations and A is obliged to administer the examinations in accordance with the current handbook, act as registration and administration point, arrange receipt and secure storage of exam materials, set local exam dates and fees, and manage recruitment of examiners. We therefore consider that the supply made pursuant to the Agreement is 'the assessment…of qualifications' within the meaning of subsection 38-110(1).

Subsection 38-110(1) further requires that the qualifications are for the purpose of either access to education, membership of a professional or trade association, registration or licensing for a particular occupation, or employment. It was stated in the ruling request that the examinations which A proposes to administer are internationally-recognised language examinations which can be used to demonstrate English language proficiency for employment and enrolling in university courses in Australia and Country X.

The ATO considers that 'access to education' is not restricted to mean only entry into a particular course or programme of education - it also applies to credit towards or exemption from some aspects of a course. A's Website describes one paper-based examination as 'an upper-intermediate level qualification which proves that the candidate can use everyday written and spoken English for work or study purposes'; states that the other paper-based examination 'can be used for university and student visa applications in Country X and Australia'; and recommends the online examination 'for anyone who needs to demonstrate their Business English skills when job seeking or moving into a new role'.

Based on the statement on A's Website that the first paper-based examination can be used for university applications, we consider that that examination is for the purpose of access to education.

The position is less clear in relation to the second paper-based examination as C's Website merely states that it 'can be used to help a person study in English at a foundation or pathway level' and A's Website states that it is a pathway to the English for Academic Purposes (EAP) course, i.e. a university or TAFE preparation course designed for students who want to gain entry to an Australian TAFE, undergraduate course or graduate course. The requirement in paragraph 38-110(1)(a), however, is that the examination is 'for the purpose of…access to education' rather than, for example 'enables entry into an education course' or 'is a prerequisite for entry into an education course'. On the basis of the less stringent test in subsection 38-110(1), we consider that the second paper-based examination is for the purpose of access to education.

C's Website describes the online examination as an assessment used internationally for business and industry recruitment. We therefore consider that that examination is for the purpose of employment within the meaning of paragraph 38-110(d) of the GST Act.

For the reasons set out above we consider that the further requirement in subsection 38-110(1) is satisfied in relation to the examinations referred to in the ruling request.

Subsection 38-110(2):

Subsection 38-110(2) requires the supply made pursuant to subsection 38-110(1) to be made by either a professional or trade association or an education institution etc.

The first issue is to identify the entity which supplies the examinations. As noted above, the Agreement states that C authorises A to promote and administer the examinations. This could indicate that C is the entity which makes the relevant supply for the purposes of subsection 38-110(1) and that A merely makes a supply to C of the services of promoting and administering the examinations. However the extensive obligations undertaken by A pursuant to the Agreement suggest that it is A which makes the relevant supply, albeit in accordance with the current quality standards and guidelines set by C. In addition, the Agreement states that nothing in the Agreement shall be construed to imply principal and agent relations or employer and employee relationship between C and A. We therefore consider that A makes the supply referred to in subsection 38-110(1).

'Education institution' is defined in section 195-1 of the GST Act as having the meaning given by subsection 3(1) of the Student Assistance Act 1973 (Cth), i.e.

(a) a 'higher education institution'; or

(b) a 'technical further education institution'; or

(c) a 'secondary school'; or

(d) any other institution (including an educational institution), authority or body, that is in Australia and that, in accordance with a determination by the Minister, is to be regarded as an 'education institution' for the purposes of this Act.

Subsection 3(1) of the Student Assistance Act 1973 defines 'higher education institution' as an educational institution in Australia that, in accordance with a determination made by the Minister, is to be regarded as a higher education institution for the purposes of that Act. Clause 5 of the Student Assistance (Education Institutions and Courses) Determination 2009 (No. 2) (Determination) states that, for the definition of 'higher education institution' in subsection 3 (1) of the Student Assistance Act 1973, an institution that is established as a higher education institution by a law of the Commonwealth, a State, or a Territory is to be regarded as a higher education institution for the purposes of the Student Assistance Act 1973.

The relevant State legislation states that A is declared to have been established and that A's objects include:

· to provide and maintain a teaching and learning environment of excellent quality offering higher education at an international standard;

· to provide vocational education and training, further education and other forms of education to support and complement the provision of higher education…

We consider that 'carried out' in subsection 38-110(2) means that the assessment must be conducted by the education institution etc. It is clear from the obligations imposed on A by the Agreement (e.g. administering the examinations, acting as a registration and administration point) that the examinations referred to in the ruling request are carried out by A.

For the reasons set out above we consider that the requirement in paragraph 38-110(2)(b) that the supply to which subsection 38-110(1) applies is carried out by an education institution is satisfied.

Question 2

Summary

The supply by A of a preparation course for the examinations may be the supply of either a 'tertiary course' or an 'English language course for overseas students' and therefore the supply of an 'education course' which is GST-free pursuant to paragraph 38-85(a) of the GST Act.

Detailed reasoning

Meaning of 'education course'

Paragraph 38-85(a) of the GST Act states that a supply is GST-free if it is a supply of an 'education course'.

Section 195-1 of the GST Act defines 'education course' to mean a 'pre-school course', a 'primary course', a 'secondary course', a 'tertiary course', a 'special education course', an 'adult and community education course', an 'English language course for overseas students', a 'first aid or life saving course', a 'professional or trade course', or a 'tertiary residential college course', each of which is also defined in section 195-1 of the GST Act.

Of the courses included in the definition of 'education course', a 'tertiary course' or an 'English language course for overseas students' appear to be the courses most likely to cover the preparation courses for the examinations.

Tertiary course:

'Tertiary course' is defined in section 195-1 of the GST Act 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

(aa) a course of study or instruction accredited at Masters or Doctoral level and supplied by a higher education institution or a non-government higher education institution; 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.

Subsection 10(1) of the Student Assistance (Education Institutions and Courses ) Determination 2009 (No.2) (Determination) states that a 'tertiary course' is a full time course specified in Column 1 of the table in Schedule 2 to the Determination that is provided by an education institution specified for that course in Column 2 of that table.

The list of tertiary courses in Column 1 of Schedule 2 of the Determination includes an 'ESL Course' which is provided by a higher education institution. 'ESL course' is defined in section 4 of the Determination as 'a course of instruction in English as a second language'. It is clear from the information on C's Website that the examinations involve instruction in English as a second or other language (ESOL).

Goods and Services Tax Ruling GSTR 2001/1 deals with supplies that are GST-free for tertiary education courses and states:

13. A tertiary course includes all tertiary courses covered by the determination issued by the Education Minister under the Student Assistance Act 1973. This determination is also used to identify those courses that students must be undertaking to be eligible for income support as full-time students. The determination lists the type of course and types of educational institutions that can deliver the course. The eligibility of courses for the Student Assistance Act 1973 is reviewed periodically by the Education Minister.

14. In determining whether an education course is an approved tertiary course, it does not matter to whom the course is delivered. For example, an education course specified as an approved tertiary course under the Education Minister's determination will be GST-free regardless of whether it is delivered to resident students or non-resident students studying in Australia.

GSTR 2001/1 also discusses whether the fee for the supply of an education course must be apportioned. In the present case A's Website indicates that the student pays and enrolment fee and a weekly fee. GSTR 2001/1 states that where an enrolment fee creates a right for a student to receive a free education course, the enrolment fee is GST-free (Para 111).

We therefore consider that the preparation courses fall within paragraph (a) of the 'tertiary course' definition in section 195-1 of the GST Act.

English language course for overseas students:

'English language course for overseas students' is defined in section 195-1 of the GST Act as

…a course of study or education supplied to overseas students that:

(a) includes study or education in the English language; and

(b) is supplied by an entity that is accredited to provide such courses by a State or Territory authority responsible for their accreditation.

In relation to the requirement that the course is supplied to overseas students, an overseas student is a student who is part of Australia's overseas student program and holds the relevant student visa issued by the Department of Immigration and Indigenous Affairs. Section 5 of the Education Services for Overseas Students Act 2000 (Cth) defines 'overseas student' as a person who holds a 'student visa' and the Services for Overseas Students Regulations 2001 (Cth) state that 'student visa' means a visa described in the Migration Regulations 1994 as a subclass 560, 562, 563, 570, 571, 572, 573, 574, 575 or 576 visa, whenever granted.

A person will be granted such a visa only if that person has either enrolled in a registered course or received an offer for such a course which the person will complete on a full-time basis. A registered course is one covered by the Education Services for Overseas Students Act 2000 (Cth) which requires every provider which seeks to recruit, enrol or teach an overseas student must be registered with the Commonwealth Register of Institutions and Courses for Overseas Students (CRICOS). A person who is in Australia on a tourist visa, working holiday visa or other type of visa and who decides to undertake a course is not an 'overseas student' for the purposes of the 'English language course for overseas students' definition.

A will have to determine on a case by case basis whether a preparation course for the examination is supplied to an 'overseas student'.

The second requirement of the 'English language course for overseas students' definition is that the course includes study or education in the English language. The descriptions of the examination preparation courses on A's Website indicate that this requirement is satisfied, although in addition to referring to improving a student's general level of English proficiency, the courses include familiarity with the format of the examinations and strategies for undertaking the examinations.

In relation to the third requirement of the 'English language course for overseas students' definition, i.e. that A is accredited by State or Territory legislation to provide the course, we have confirmed that A is listed on the Commonwealth Register of Institutions and Courses for Overseas Students (CRICOS), although not yet in respect of the preparation courses that are the subject of the ruling request. In addition, A's Website states, that A is a member of English Australia and that A's courses are accredited by a national scheme.

For the reasons set out above we consider that the supply of a preparation course for any of the examinations may, depending on the circumstances, be the supply of either a 'tertiary course' or an 'English language course for overseas students' and therefore the supply of an 'education course' which is GST-free pursuant to paragraph 38-85(a) of the GST Act.