Edited version of private advice

Authorisation Number: 1012622402460

Ruling

Subject: GST and supply of an educational program

Question 1

Is the supply of the specified education program (the program) by you and another teacher (the other teacher) a GST-free supply of an education course under Division 38-C of the A New Tax System Goods and Services Act 1999?

Answer

No.

Question 2

Are you required to be registered for GST?

Answer

You are not required to be registered for GST if you are carrying on your teaching activities as a sole trader and your GST turnover is less than $75,000.

However, if the teaching enterprise is carried on by you and the other teacher in a partnership, then the partnership is required to be registered for GST as the partnership's GST turnover meets the registration turnover threshold of $75,000.

Relevant facts and circumstances

The program is an educational program for gifted primary and secondary students in a specified State/Territory. You have not incorporated the program, but the intention is to become an incorporated body within the next few months.

The program was initiated by you a number of years ago. For a number of years the program was supported by a specified education institution (the education institution).

Initially the program was supplied to the students for no fees. When fees were introduced, the education institution made a fortnightly payment to you and issued a payment summary to you at the end of each financial year. A few years later the education institution decided to withdraw its sponsorship.

The program was transferred to another education institution.

The program is designed for gifted primary and secondary students. The intention is to provide stimulating and challenging experiences needed by students at this stage of their intellectual development.

There are a number of levels within the program. Some of the levels were devised and refined by you. The other levels are national programs from a specified organisation.

The students come from government and non-government schools throughout the metropolitan area in the State/Territory.

The program is a year-long. The students are in a number of classes depending on their levels. Depending on the level, the classes meet every fortnight or every week.

The income for the current financial is over $75,000, made up of $X grant from a specified sponsor (the sponsor) and $Y in fees paid by parents.

The sponsor pays the funds to a specified incorporated body (the incorporated body) as it is a requirement that the funding is paid to an incorporated body.

You provided a copy of the sponsorship agreement. The agreement is entered into between the sponsor and the incorporated body. Under the agreement it is the incorporated body that is obliged to comply with the terms and conditions of the agreement in order to receive the grant of $X. The sponsorship funds are paid to the incorporated body.

The incorporated body handles the sending out of correspondence to parents and students. Students are enrolled with the incorporated body. The incorporated body's on-line system is used by parents to register students into the program and to pay the registration fees. The incorporated body collects the enrolment fees and issues tax invoices to the students/parents for the supply of the course. The incorporated body issues the certificates to the students.

You provided a sample of a tax invoice issued by the incorporated body to a student. The incorporated body has included GST in the price of the supply.

There are four terms in a year and you and the other teacher both generate a separate invoice for $Z per term for your teaching services that is submitted to the incorporated body for payment.

A representative of the incorporated body advised that the incorporated body is currently charging GST on all the courses that it supplies including the program. The incorporated body is not a registered training organisation (RTO).

The representative of the incorporated body also advised that the incorporated body was treating you and the other teacher as consultants and not employees.

You are not registered for GST as a sole trader. You and the other teacher are not registered for GST as a partnership.

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 9-10.

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

A New Tax System (Goods and Services Tax) Act 1999 Section 38-90.

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

Reasons for decision

Question 1

Section 38-85 Education course

Section 38-85 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states:

A supply is GST-free if it is a supply of:

(a) an *education course; or

(b) a supply of administrative services directly related to the supply of such a course but only if they are supplied by the supplier of the course.

The term 'education course' is defined in section 195-1 of the GST Act to include:

(b) a *primary course: or

(c) a *secondary course;

Section 195 of the GST Act defines 'primary course' as:

(a) a course of study or instruction that is delivered:

(i) in accordance with a primary curriculum recognised by the education authority of the State or Territory in which the course is delivered; and

(ii) by a *school that is recognised as a primary school under the law of the State or Territory; or

(b) any other course of study or instruction that the *Education Minister has determined is a primary course for the purposes of this Act.

Section 195 of the GST Act defines 'Education Minister' as the Minister administering the Student Assistance Act 1973.

The program is not a primary course as it does not meet the requirements of a primary course in paragraph (a) of the definition of a primary course nor has the Commonwealth Education Minister determined that the program is a primary course for the purposes of the GST Act.

Section 195 of the GST Act defines 'secondary course' as:

(a) a course of study or instruction that is a secondary course determined by the *Education Minister under subsection 5D(1) of the Student Assistance Act 1973 for the purposes of that Act; or

(b) any other course of study or instruction that the *Education Minister has determined is a secondary course for the purposes of this Act.

Student Assistance Act 1973

Section 5D of the Student Assistance Act 1973 establishes how the Minister would make a determination. It states:

Minister may determine secondary and tertiary courses etc.

(1) The Minister may, for the purposes of this Act, determine in writing that:

(a) a course of study or instruction is a secondary course, or a tertiary course; or

(b) a part of a course of study or instruction is a part of a secondary course, or a part of a tertiary course.

(2) For the purposes of this section, a determination that:

(a) was made under paragraph 7(1)(c) as in force before the day on which this section commences; and

(b) was in force immediately before that day;

is taken to be a determination under subsection (1) of this section and may be amended or repealed accordingly.

(3) A determination under subsection (1) is a legislative instrument.

The Student Assistance Act 1973 states:

education institution means:

(a) a higher education institution; or

(b) a technical and 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.

secondary school means an educational institution in Australia that, in accordance with a determination by the Minister, is to be regarded as a secondary school for the purposes of this Act.

The Commonwealth Education Minister has made a determination under subsection 5D(1) of the Student Assistance Act 1973 for the purposes of that Act, being the Student Assistance (Education Institutions and Courses) Determination 2009 (No. 2) (Determination 2009).

Determination 2009, states the following in relation to secondary courses:

Secondary courses

For paragraph 5D(1)(a) of the Act, a secondary course is a course:

(a) specified in Column 1 of the table in Schedule 1 to this instrument that is provided by an education institution specified for that course in Column 2 of that table; or

(b) provided by a secondary school, a registered training organisation or a higher education institution that leads to an accredited secondary course qualification involving:

(i) accredited secondary course subjects; or

(ii) a VET course.

The program is not a secondary course as it does not meet the requirements of a secondary course outlined in Determination 2009 nor has the Commonwealth Education Minister determined that the program is a secondary course for the purposes of the GST Act.

Section 38-90 Excursions or field trips

Subsection 38-90(1) of the GST Act states:

38-90 Excursions or field trips

(1) A supply is GST-free if it is a supply of an excursion or field trip, but only if the excursion or field trip:

(a) is directly related to the curriculum of an *education course; and

(b) is not predominantly recreational.

In Goods and Services Tax Ruling GSTR 2001/1 the Commissioner considers the meaning of the phrase 'directly related' when considering paragraph 38-85(b) of the GST Act which requires the administrative services to be 'directly related' to the supply of the education course for it to be GST-free. Paragraphs 71 to 74 of GSTR 2001/1 state:

What is the meaning of 'directly related' to the supply of an education course?

71. 'Directly related' is not defined in the Act and therefore, takes on its ordinary meaning. The Macquarie Dictionary defines 'directly' to mean 'in a direct line, way or manner; immediately; absolutely'. The term 'related' means 'associated; connected or allied by nature'.

72. The phrase 'directly related' was considered in the context of being 'directly related to employment' for income tax purposes in FC of T v . Dixon (1952) 86 CLR 540, at 553-554:

'A direct relation may be regarded as one where the employment is the proximate cause of the payment, an indirect relation as one where the employment is a cause less proximate, or, indeed, only one contributory cause'.

73. Therefore, administrative services must be in a direct line or immediately associated or connected with the supply of the education course.

74. Administrative services provided by an entity other than the supplier of the course will be subject to GST.

As stated in paragraph 74 of GSTR 2001/1, where an entity other than the supplier of the education course provides the administrative services the supply is not considered to be directly related to the education course.

The above view is also confirmed in Goods and Services Tax Ruling GSTR 2000/30. Paragraphs 105 to 120 of GSTR 2000/30 discuss when a supply of an excursion or field trip is GST-free.

Paragraph 105 of GSTR 2000/30 states:

105. If you supply to students excursions or field trips that are directly related to your curriculum and are not predominantly recreational in nature, the supply is GST-free, ...

Further, paragraph 108 of GSTR 2000/30 states:

108. It is administratively difficult for a third party to determine whether an activity is directly related to the school curriculum. Only you as the provider of the course can make that decision. Consequently, where a third party supplies any part of the excursion or field trip directly to students and/or staff, this supply is a taxable supply.

Third party in paragraph 108 refers to an entity that is not the entity that provides the education course.

The Example in paragraphs 118 to 120 also confirms that the ATO view is that an excursion or field trip must be supplied by the supplier of the education course.

Example - taxable supply by a third party of an excursion to a swimming carnival

118. The staff and students of a girls' college attend an inter-school swimming carnival to participate in the carnival and support the school team. The transport is supplied by a private bus company - it packages the transport and entry to the pool. The students and staff pay the company directly for the excursion.

119. Although the sport of swimming and participation in inter-school sport are directly related to the school curriculum, the supplier of the education course does not supply the excursion. For this reason, the supply of the excursion is not GST-free to the students. The supply of the excursion to staff is not GST-free.

120. However, had the girls' college engaged the bus company to supply the packaged excursion, the supply to students and staff would have been GST-free.

In your case you are not the supplier of an 'education course' as defined in the GST Act, and the program is not directly related to the curriculum of an 'education course' that is supplied by you. Hence you are not making a GST-free supply under section 38-90 of the GST Act.

Further based on the information and documentations provided, it is the incorporated body that is supplying the program to the students.

Question 2

Section 23-5 of the GST Act provides that an entity is required to be registered for GST if it is carrying on an enterprise, and its GST turnover is $75,000 or more.

Based on the information provided, you are supplying teaching services to the incorporated body.

You advised that you receive less than $75,000 from the incorporated body for delivering the program to the students.

If you are carrying on your teaching enterprise as a sole trader, and the income that you receive from the incorporated body is your only income as a sole trader, then you are not required to be registered for GST. However, if you receive income from other activities that you carry on as a sole trader you will be required to be registered for GST if your total income from these activities amounts to $75,000 or more.

If you and the other teacher are carrying on an enterprise in a partnership, then the partnership is the entity that is supplying the teaching services to the incorporated body and is required to be registered for GST as its GST turnover is $75,000 or more.

We cannot advise which structure you should choose. You may need to seek independent advice from a specialist in regard to this matter.