Edited version of private advice

Authorisation Number: 1012650427704

Ruling

Subject: GST and marine surveying and consultancy services

Question

Is the supply of marine surveying and consultation services made by you to NR company a GST-free supply?

Answer

Yes, your supply to NR company is a GST-free supply.

Your supply of services to NR company satisfies all the requirements of paragraphs (a) to (d) of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), as follows:

(a) You make a supply of services to NR company and in return you receive consideration by way of payments;

(b) You make the supply in the course or furtherance of your business;

(c) You make the supply through an enterprise that you carry on in Australia (and therefore the supply is connected with Australia); and

(d) You are registered for GST in Australia.

Hence, your supply of supply of services to NR company is taxable to the extent that it is not GST-free or input taxed.

Your supply of supply of services to NR company does not satisfy the input taxed provisions under the GST Act.

GST-free supply

Your supply of services to NR Company satisfies item 2 in the table in subsection 38-190(1) of the GST Act (item 2) and is GST-free because:

• Your supply meets the requirement that the recipient is not in Australia when the thing supplied is done.

• Your supply of consultancy services to a non-resident company is neither a supply of work physically performed on goods in Australia when the work is done, nor a supply directly connected with real property situated in Australia.

Limitation of item 2:

The GST-free status of your supply services to NR Company is not negated by subsection 38-190(3) of the GST Act because:

(a) it is a supply under an agreement entered into, whether directly or indirectly with a non-resident; and

(b) the actual flow of your supply is to NR Company , a non-resident entity. In addition, you neither supply nor do you have an agreement to supply your services to another entity in Australia.

In summary, your supply of services to NR Company is a GST-free supply under Item 2.

Relevant facts and circumstances

You are an Australian company registered for GST and based in Australia. Your director's qualifications include membership of the Australian institute.

You carry on an enterprise of marine surveying and consultancy services in Australian for local companies as well as a foreign company. You remit GST to the Australian Taxation Office in respect of your supplies to Australian companies.

This ruling concerns your supply to NR Company which owns vessels and carries on a business of cargo transportation. You have an oral agreement with NR Company to supply your services to NR Company's vessels docked in Australia ports.

To the best of your knowledge, NR Company is not registered with ASIC, nor does it have a permanent establishment in Australia for income tax purposes.

NR Company does not carry its own business in Australia or carry on its business through a representative (such as an employee, agent, branch office, or other subsidiary) in Australia in relation to your services, when your services are provided/performed. NR Company has an employee in Australia who facilitates the commercial side of NR Company by performing administration and marketing functions. This employee does not sign contracts on behalf of NR Company. You have no contact with the employee in relation to your services, except for an occasional phone call from them to you to enquire about the condition of a particular vessel.

You are instructed by NR Company, and you email all your survey reports to NR Company, with a copy to NR Company's Australian employee.

NR Company has agreements with various Australian companies (cargo companies) whose cargo NR Company's vessels will transport from Australia to overseas, for example, grain or aluminium cargo. The cargo companies give you guidelines as to the required cleanliness standard of the vessels' holds. You carry out your work according to the shippers' guidelines and industry standards. You ascertain whether the vessels are fit for loading cargo and make recommendations on how the cargo compartments can meet industry standards and guidelines from the cargo companies. You provide a written report to the vessel's captain and to NR Company about your findings and recommendations. After the ship's crew carry out your recommendations, you do a preload survey to ensure that the vessel is ready for cargo loading according to the guidelines.

After you indicate that the vessel has complied with the guidelines from the cargo companies, the cargo company's shipper/surveyor comes in to inspect the vessel to ensure they are satisfied with the state the vessel is in. If there is any dispute between you and the cargo company's shipper/surveyor, you negotiate with the shipper and change the recommendations to meet the cargo company's guidelines. When the vessel has met the cargo company's guidelines and industry standards, and the vessel is ready to load cargo, you invoice NR Company directly for your services and you receive payment from NR Company.

You sent us a copy of your Tax invoice, which list your work charge as "Advisory survey charge". You also sent us a copy of your survey report detailing some of the tasks you recommended to NR Company's vessel.

You do not carry out any of the above tasks yourself. You only provided the recommendations on what needs to be done. Your services do not involve work physically performed on goods situated in Australia nor are they directly connected with real property situated in Australia.

You do not provide the service under your agreement with NR Company to another entity in Australia. There is no agreement between you and NR Company which requires your consultancy service to be provided to any entity in Australia.

You contend that your consultancy services and your reports are made to NR Company and for NR Company's purposes, not to the Australian companies whose cargo is transported by NR Company's vessels. Your services agreement with NR Company does not require your services to be provided to any entity in Australia.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section 38-190.

A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-190(1).

A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-190(3).

A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-190(4).

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