Edited version of your private ruling

Authorisation Number: 1012611829928

Ruling

Subject: GST and acquisition of membership subscription by a non-resident

Question

Is the acquisition of the annual membership subscription by an individual (you) from an Australian organisation (AusO) GST-free, for the purposes of determining your input tax credit entitlement (if any)?

Answer

Yes, your acquisition of the annual membership subscription from the AusO is GST-free, and therefore you are not entitled to claim an input tax credit on this acquisition.

Relevant facts and circumstances

An individual (you) is a non-resident of Australia, who lives an overseas country. You lived in Australia until 20XX but now reside exclusively in the overseas country.

You are neither registered nor required to be registered for goods and services tax (GST) in Australia, as you work solely in the overseas country.

You have a professional membership subscription with an Australian organisation (AusO). You pay an annual fee to the AusO for this membership subscription.

The benefits of membership subscription include: access to members only website, newsletters, access to specific journals, and ability to use certain titles (Fellow of the AusO).

As you reside overseas, the membership subscription does not involve you receiving the benefits/supply in Australia.

You may attend an annual meeting/conference occasionally in Australia but an extra and separate fee is paid for this, with GST included.

The AusO has included GST on its current invoice for the annual membership subscription issued to you.

You are not present in Australia at any time, aside from vacations or conference visits from time to time. You have no interactions in Australia with the AusO, aside from attending a conference occasionally in Australia - which requires an additional conference fee on which you pay GST.

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

Reasons for decision

Summary

You are not making a creditable acquisition because the supply of the annual membership subscription to you would be GST-free.

Detailed reasoning

You are entitled to claim an input tax credit on a creditable acquisition if you satisfy all the requirements under section 11-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), which states:

You make a creditable acquisition if:

(a) you acquire anything solely or partly for a *creditable purpose; and

(b) the supply of the thing to you is a *taxable supply; and

(c) you provide, or are liable to provide, *consideration for the supply; and

(d) you are *registered, or * required to be registered.

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

An entity acquires a thing for a creditable purpose to the extent that it acquires it in carrying on its enterprise (for example, business). It does not acquire the thing for a creditable purpose to the extent that the acquisition relates to making supplies that would be input taxed, or the acquisition is of a private or domestic nature.

One of the requirements of a creditable acquisition under paragraph 11-5(b) of the GST Act is that the supply of the thing to you is a taxable supply.

Is the supply of the membership subscription to you a taxable supply?

GST is payable on a taxable supply. Section 9-5 of the GST Act 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.

(Note that the 'you' in section 9-5 of the GST Act refers to the supplier)

All the requirements of section 9-5 of the GST Act must be satisfied for there to be a taxable supply.

We first characterise the supply of the membership subscription to you. Goods and Services Tax Ruling GSTR 2003/8 discusses membership subscriptions at paragraphs 101 to 106, and generally provide that the supply is characterised as a supply of services and not a supply that is made in relation to rights. Although there are incidental components of goods and rights, the dominant part of the composite supply is the supply of services. This is the supply for consideration.

The supply of the annual membership subscription services to you will satisfy the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act if:

(a) the supplier makes the supply to you for consideration (such as payments),

(b) the supplier makes the supply in the course or furtherance of its enterprise (business),

(c) the supply is connected with Australia when the services are provided/performed in Australia or made through the business in Australia, and

(d) the supplier is registered (or required to be) registered for GST.

Where the supplier satisfy the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act above, the supply of the membership subscription services to you will be taxable unless the supply is GST-free or input taxed.

From the facts given, the supply of the membership subscription services to you is not an input taxed supply. We take into consideration the GST-free provisions.

Subsection 38-190(1) of the GST Act specifies circumstances in which a supply of things other than goods or real property for consumption outside Australia is GST-free. Of most relevance to the supply of the membership subscription services to you (a non-resident) is item 2 in the table in subsection 38-190(1) of the GST Act (Item 2).

Under item 2 in the table in subsection 38-190(1) of the GST Act (Item 2), a supply is GST-free where:

a supply that is made to a *non-resident who is not in Australia when the thing supplied is done; and

(a) the supply is neither a supply of work physically performed on goods situated in Australia when the work is done nor a supply directly connected with *real property situated in Australia; or

(b) the *non-resident acquires the thing in *carrying on the non-residents *enterprise, but is not "registered or "required to be registered.

Goods and Services Tax Rulings GSTR 2004/7 and GSTR 2005/6 discuss Item 2.

The precondition that the recipient is not in Australia at the relevant time requires that neither the recipient, nor a representative acting on behalf of the recipient if the recipient is a company, is in Australia in relation to the supply.

In addition, subsection 38-190(3) of the GST Act provides that a supply is not GST-free if it is made 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.

The facts indicate that the supply of the annual membership subscription services is made to you (a non-resident individual). You reside and work in the overseas country. You do not receive the benefits of the membership subscription in Australia as you are not present in Australia. You are not in Australia when the supply is done (provided/performed) and have no interactions with AusO in Australia (aside from vacations or conference visits from time to time). However, the supply of the conference is separate (for additional consideration) to the membership subscription. The supply of the membership subscription services is neither a supply of work physically performed on goods situated in Australia when the work is done, nor a supply directly connected with real property situated in Australia. Therefore, the supply of the annual membership subscription services to you is GST-free under paragraph (a) of Item 2.

Furthermore, if you acquire the annual membership subscription services in carrying on your enterprise (business) and you are neither registered nor required to be registered for GST, the supply is also GST-free under paragraph (b) of Item 2.

The supply of the annual membership subscription services is not provided, and there is no agreement to provide, the supply to another entity in Australia. Therefore, subsection 38-190(3) of the GST Act does not negate the supply from being GST-free.

Accordingly, on the basis of the facts provided, the supply of the annual membership subscription services to you is GST-free.

As the supply to you is not a taxable supply, the requirement of paragraph 9-5(c) of the GST Act is not satisfied and you are not making a creditable acquisition. We also note that you are not making a creditable acquisition if you are neither registered nor required to be registered for GST.