Edited version of your private ruling

Authorisation Number: 1012596438790

Ruling

Subject: GST and education courses

Question

Are you making a GST-free supply of an education course under section 38-85 of the A New Tax System (Goods and Services Tax) Act 1999, as a professional or trade course when you deliver your course?

Answer

No.

Relevant facts and circumstances

You are registered for GST.

You are a private school.

You are not a registered training organisation.

You provide a specific identified course (the Course).

The Course is delivered by numerous teachers. Students have access to the teachers throughout the Course. Homework and assignments are marked and feedback is given. Students must assist in casual classes.

The progress of students in the Course is assessed by:

• written homework assignments for most modules, marked either satisfactory or not, with re-submits required until they are marked satisfactory

• a number of major assignments spread throughout the year

• practical teaching assessments

• satisfactory attendance of lectures, and

• final end of year written exam.

Feedback is provided to students on all written and practical assignments and assessments.

To successfully complete the course students must:

• Satisfactorily complete all homework and assignment pieces.

• Satisfactorily complete practical assessments.

• Satisfy the minimum attendance requirement.

• Pass the final exam with a minimum mark of 50%.

The payment of course fees does not guarantee a qualification and you have students that did not receive their qualification as they did not pass.

On successful completion of the course students are awarded a Diploma. The profession or trade that the qualification leads to is a teacher in the specified vocation.

The Diploma is issued by you with a notation that it is accredited by Entity A.

Entity A is the peak national body for registration and representation of such teachers in Australia.

You cannot gain membership to Entity A without completing an accredited teacher training course.

Without membership of Entity A, prospective teachers cannot obtain professional insurance which is a prerequisite for such teachings.

Entity A can refuse membership to people who have not completed an accredited teacher training program. They can refer prospective applicants to accredited teaching providers to complete further study and training before they reconsider their application and grant membership.

Other national teaching organisations are Entity B and Entity C. You have had students that have completed Entity B's courses, been rejected for membership of Entity A, and been sent to you for further training and mentoring before Entity A will recognise them.

The Teacher qualification is not imposed under an Australian law, or an award, order, determination or industrial agreement in force under an Australian law.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section 38-85

A New Tax System (Goods and Services Tax) Act 1999 Section 9-5

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

Reasons for decision

In this ruling, please note:

• All legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) unless stated otherwise.

• All terms marked by an asterisk are a defined term in the GST Act unless stated otherwise.

You must pay the GST payable on any taxable supply that you make.

Section 9-5 states:

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.

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

In your case, you will make a supply of the Course in Australia for consideration in the course of your teaching enterprise and you are registered for GST. Therefore you satisfy paragraphs 9-5(a), (b) (c) and (d).

Further, the input tax provisions do not apply in your circumstances.

However, the relevant issue to be determined here is whether the GST-free provisions apply in your circumstances, specifically whether there is a GST-free supply of an education course.

Education course

An 'education course' is GST-free under section 38-85.

The term 'education course' is defined in section 195-1 as follows:

education course means:

(a) a *pre-school course; or

(b) a *primary course; or

(c) a *secondary course; or

(d) a *tertiary course; or

(e) (Repealed by No 143 of 2007)

(f) a *special education course; or

(g) an *adult and community education course; or

(h) an *English language course for overseas students; or

(i) a *first aid or life saving course; or

(j) a *professional or trade course; or

(k) a *tertiary residential college course.

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

Professional or trade course

The term 'professional or trade course' is defined in section 195-1 as follows:

professional or trade course means 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) provides guidance on the meaning of 'professional or trade course'.

Paragraph 22 of GSTR 2003/1 provides general indicators of what constitutes a course and includes (but is not limited to) the following:

• 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 Course incorporates all of the above indicators and we consider the supply of the Course is a supply of a course for GST purposes.

We must now establish if the supply of the Course leads to a qualification that is an essential prerequisite for entry to the profession or trade of teaching.

Qualification

The meaning of 'qualification' is explained in paragraph 42 of GSTR 2003/1, which states:

42. '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 explains that a certificate or license would satisfy the definition of a qualification, and states:

44. 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 definition of a professional or trade course.

In your case, upon successful completion of the Course a certificate is issued by you with a notation that it is accredited by Entity A.

Therefore, we accept that the Course leads to a 'qualification' and satisfies the 'qualification' requirement in the definition of a 'profession or trade course' above.

We must now establish if the qualification is an essential prerequisite for entry to the profession or trade of teaching.

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

The term 'essential prerequisite' is defined in section 195-1 as follows:

essential prerequisite : 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; 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) 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.

Paragraph 48 of GSTR 2003/1 explains that a qualification must be mandatory (with risk of penalties or sanctions) to enter into, or commence the practice of the profession or trade, and states:

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 summary, the qualification must be a legal requirement, for example an Australian law, regulation, award, order, determination or industrial agreement, or imposed by a professional or trade association either on a national or state basis. In addition, the qualification must be obtained before the person can enter, or commence the practice of the profession or trade. In effect, it would be impossible for a person to earn their livelihood in the particular profession or trade without the qualification.

In your case, there is no legal requirement (industrial instrument) imposing the qualification. Therefore, it will be necessary for the qualification to be imposed by a professional or trade association.

The meaning of 'professional or trade association' is explained in paragraph 63 of GSTR 2003/1, which states:

63. The term 'professional or trade association' is not defined in the GST Act. The Macquarie Dictionary^… defines 'association' as 'an organisation of people with a common purpose and having a formal structure.' Whether a body of persons constitutes a professional or trade association is a matter of fact and degree.

You contend that Entity A is the peak national body for registration and representation of such teachers in Australia.

A qualification that is an essential prerequisite can be imposed by only one professional or trade association. This is further explained in paragraphs 59 and 60 of GSTR 2003/1, which state:

59. A professional or trade association's ability to impose membership requirements is not conclusive evidence of that association's ability to impose a qualification that is an essential prerequisite.

60. If more than one professional or trade association, either at the national level or for a particular State or Territory, has requirements relating to the entry to, or the commencement of the practice of, the profession or trade concerned, no qualification, set by any of the associations as a requirement for entry or commencement, would be an 'essential prerequisite'. None of the associations can prevent someone entering that profession or trade through one of the other associations.

In your case, you are supplying the Course leading to a qualification that enables a person to apply for membership with Entity A. Entity A is not the only association offering registration and accreditation of such teachers. Entity A cannot prevent someone from becoming a teacher through another association.

Therefore, your Course does not satisfy the definition of professional or trade course as it is not an essential prerequisite. As the supply of your course is not a GST-free supply of an education course, it will be subject to GST as all the requirements of a taxable supply are satisfied.