Edited version of private advice

Authorisation Number: 1012651040121

Ruling

Subject: GST and supply of online course

Question

Does the goods and services tax (GST) apply to your supply of online course to individuals globally?

Advice

Where you supply the online course to an individual located in Australia, the supply of online course is a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

Where you supply the online course to an individual located outside Australia, the supply of online course is GST-free under item 3 in the table in subsection 38-190(1) of the GST Act.

Relevant fact

You are a non-profit organisation and registered for GST.

You supply an online course through your website.

You advised that the course is targeted at volunteers who assist in running sporting games, that is coaches, team managers, mums, dads and so on who are called to umpire games for no payment. It will also serve as a minimum entry level competence check for paid officials at senior competitions and these earnings do not attract any tax.

There is no brochure for the advertising of the online course.

You are not recognised or funded by the relevant State or Territory authority to conduct adult and community courses and, you are not a registered training organising (RTO).

There is no restriction to access the course. The course is available to all in the general community within Australia and to individuals globally.

The course is not provided at the request of an employer.

The course is not provided by way of a private tuition to the individual.The training is done online.

The training is theory component of potential competency based entry level Umpire Accreditation which is targeted at unpaid volunteers undertaking umpiring duties for junior competitions. It may also be also be undertaken by those wishing to become proficient in the role but currently this is not a mandatory requirement for entry into a paid officiating role.

The course is recognised by the Australian Sports Commission.

The course does not lead to an award of an Australian Qualification Framework (AQF) qualification or a statement of attainment.

The individual receives a certificate after they complete the course.

The course is not a mandatory pre-requirement before the individual can umpire the games voluntarily however, it provides a minimum standard for 'what do I need to know'.

The individual will be using the skills they have developed in the course when performing the Umpire work. The skills learnt in the course are to be used mainly for the voluntary umpire work the individual is performing. However, some individuals may progress to a role where they are paid for their services.

Officials who are paid for their services generally fall into the hobby category for taxation purposes as it is an allowance to offset their expenses.

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 38-85

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

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

Reasons for decision

GST is payable on a taxable supply. An entity makes a taxable supply under section 9-5 of the GST Act if:

a) the entity makes the supply for consideration; and

b) the supply is made in the course or furtherance of an enterprise that the entity carries on; and

c) the supply is connected with Australia; and

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

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

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

From the information received, you will satisfy paragraphs 9-5(a) and 9-5(d) of the GST Act when you supply the online course as:

a) you make the supply for consideration; and

b) the supply is made in the course of an enterprise that you carry on;

c) the supply is connected with Australia as the supply is made through an enterprise that you carry on in Australia; and

d) you are registered for GST.

There is no provision in the GST Act that makes the supply of online course input taxed.

We will now consider whether the supply of online course is GST-free.

GST-free

Relevant to the supply of online course are sections 38-85 and 38-190 of the GST Act.

Section 38-85 of the GST Act

Section 38-85 of the GST Act is about education courses. Subsection 38-85(1) of the GST Act provides that a supply of an education course is GST-free.

The term 'education course' is defined in section 195-1 of the GST Act to include amongst other things a professional or trade course and an adult and community education course (ACE course).

Professional or trade course

A course will be a professional or trade course as defined in section 195-1 of the GST Act if:

i. it is a course leading to a qualification; and

ii. the qualification is an essential prerequisite for entry to or to commence the practice of a profession or trade in Australia.

Goods and Services Tax Ruling GSTR 2003/1 is about supplies that are GST-free as professional or trade courses. Paragraph 46 to 49 of GSTR 2003/1 state:

Is the qualification an essential prerequisite?

46. Your course will only be a professional or trade course if it leads to a qualification that is an essential prerequisite for entry to, or to commence the practice of, a particular profession or trade.

47. Under the section 195-1 definition of 'essential prerequisite', the qualification must be imposed:

i. by or under an industrial instrument;

ii. if there is no industrial instrument, by a professional or trade association that operates on a national level; or

iii. if neither (i) nor (ii) applies, by a professional or trade association that operates at a State or Territory level.

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.

49. A qualification that is imposed for reasons other than for entry to, or to commence the practice of, a profession or trade, is not an essential prerequisite for the purposes of a professional or trade course. Similarly, a qualification required by an employer or group of employers, but which is not imposed by an industrial instrument, or a professional or trade association at either the national level, or State or Territory level will not be an essential prerequisite.

You advised that the online course is not a mandatory requirement for entry into a volunteer or paid umpire officiating role. Further the paid umpire will perform this role in the course of a hobby. In this instance, the online course is not a professional or trade course as the course is only imposed for reasons other than to commence volunteer or paid work as an umpire for a sporting competition.

Since the online course does not meet the requirements of a 'professional or trade course' as defined in section 195-1 of the GST Act, the online course is not a GST-free education course.

ACE course

Section 195-1 of the GST Act states that an ACE course means a course of study or instruction that is likely to add to the employment related skill of people undertaking the course and:

a) is of a kind determined by the Education Minister to be an adult and community education course and is provided by, or on behalf of, a body:

i. that is a higher education institution; or

ii. that is recognised, by a State or Territory authority, as a provider of courses of a kind described in the determination; or

iii. that is funded by a State or Territory on the basis that it is a provider of courses of a kind described in the determination; or

b) is determined by the Education Minister to be an adult and community education course.

Goods and Services Tax Ruling GSTR 2000/27 is about ACE courses. Paragraphs 11 and 15 of GSTR 2000/27 state:

11. For a course to be a GST-free adult and community course under paragraph (a), the following three requirements must be satisfied:

i. The course must be a course of study or instruction that is likely to add to the employment related skills of people undertaking the course; and

ii. The course must be of a kind determined by the Education Minister to be an adult and community education course; and

iii. The course must be provided by a body that is either a higher education institution or by a body that is recognised or funded by a State or Territory authority to conduct adult and community education courses as described in the Education Minister's determination

15. The test as to whether an adult and community education course is likely to add to the employment related skills of people undertaking the course is an objective test and not dependent on the subjective intention of the providers of the course or the recipients . However we consider a course satisfies the test if the course meets the following requirements:

(a) It is directed at people who want to add to their employment related skills; and

i. The objectives of the course specify the employment related skills that participants will acquire in undertaking the course; and

ii. The means of imparting the skills to the participants are clearly identified prior to the commencement of the course; and

iii. There is a reasonable expectation that the skills being developed will be used in the course of being an employee, or working in a business, occupation, profession or trade, rather than for recreational, hobby, artistic or cultural endeavours.

From the facts received, you are not recognised or funded by the relevant State or Territory authority to conduct ACE courses. You are also not registered as an RTO. Further the skills the individual acquires from the course are to be used for recreational and hobby purposes. In this instance all the requirements for an ACE course as defined in section 195-1 of the GST Act are not satisfied. The online course is therefore not a GST-free education course.

Section 38-190 of the GST Act

You advise that the online course is available to individuals globally. Where the online course is made to individuals located outside Australia it is relevant to consider item 3 in the table in subsection 38-190 of the GST Act (item 3).

Item 3 applies irrespective of whether the recipient is a resident or non-resident of Australia.

Under item 3, a supply of a thing other than a supply of work physically performed on goods situated in Australia when the thing supplied is done or a supply directly connected with real property situated in Australia is GST-free if:

a) the supply is made to a recipient who is not in Australia when the thing supplied is done; and

b) the effective use or enjoyment of which takes place outside Australia.

All the requirements in item 3 must be satisfied for the supply to be treated as GST-free under that item.

Paragraph (a) of item 3

The requirement that the recipient in item 3 is 'not in Australia' when the thing supplied is done is a requirement, in our view, that the non-resident is not in Australia in relation to the supply when the thing supplied is done. If the recipient is in Australia in relation to the supply the recipient does not satisfy the 'not in Australia' requirement.

A resident individual who is physically in Australia when the thing supplied is done is in Australia in relation to the supply.

A non-resident individual who is physically in Australia when the thing supplied is done is in Australia in relation to the supply to the extent that the non-resident is in contact (other than contact which is only of a minor nature) with the supplier while in Australia.

Contact is minor if it is limited to contact of a simple administrative nature, such as checking on the progress of the supply or a courtesy call on the supplier. If this is the only contact between the non-resident individual and the supplier we consider that the individual is not in Australia in relation to the supply.

Where paragraph (a) of item 3 is satisfied it is necessary to consider paragraph (b) of item 3.

For more information on paragraph (a) of item 3 refer to Goods and Services Tax Ruling GSTR 2004/7 which is available from the legal database of www.ato.gov.au

Paragraph (b) of item 3

Paragraph (b) of item 3 requires the place of effective use or enjoyment of a supply to be determined (that is, whether the place is outside Australia).

To work out whether effective use or enjoyment of a supply takes place outside Australia, we apply the following two step approach:

• Determine the entity to which the supply is provided (the providee entity);

A supply is provided to an entity if in the performance or doing of the supply, the service or thing supplied flows to that entity. For example a supply travel services is provided to the entity that undertakes the travel. The actual flow of the travel service is to that entity.

• Determine whether provision of the supply to the providee entity is outside Australia.

Effective use or enjoyment of the supply takes place outside Australia if there is provision of the supply to the providee entity outside Australia.

Supply provided to a resident individual in Australia or outside Australia

A supply is provided as and when the thing supplied is done. Therefore this is the relevant time for determining whether a supply is provided to an individual in or outside Australia.

A supply is provided to a resident individual in Australia if that individual is physically in Australia when the thing supplied is done; or is physically outside Australia when the thing supplied is done but that presence outside Australia is not integral to, but is merely coincidental with, the provision of the supply.

A supply is provided to a resident individual outside Australia if that individual is physically outside Australia when the thing supplied is done and, that presence outside Australia is integral to, as distinct from being merely coincidental with the provision of the supply.

Indicators that the presence of the individual outside Australia is integral to the provision of the supply include:

• the need for the supply arises from the resident individual's presence outside Australia, for example a supply of legal services in relation to an office committed by that individual while outside Australia; or

• the presence of the resident individual outside Australia is integral to the performance, receipt or delivery of the supply, for example training, entertainment or travel services.

Where the supply is provided to a resident individual in Australia effective use or enjoyment of the supply does not take place outside Australia. The supply is not GST-free.

Where the supply is provided to a resident individual outside Australia effective use or enjoyment of the supply takes place outside Australia. The supply is GST-free if the other requirements of item 3 are met and subsections 38-190(2) and (2A) do not apply.

Supply provided to a non-resident individual outside Australia or in Australia

A supply is provided to a non-resident individual outside Australia if that individual is physically outside Australia when the thing supplied is done or, is physically in Australia when the thing supplied is done but that presence in Australia is not integral to, but is merely coincidental with, the provision of the supply.

A supply is provided to a non-resident individual in Australia if that individual is physically in Australia when the thing supplied is done and that presence in Australia is integral to, as distinct from being merely coincidental with the provision of the supply.

Where the supply is provided to a non-resident individual in Australia effective use or enjoyment of the supply does not take place outside Australia. The supply is not GST-free.

Where the supply is provided to a non-resident individual outside Australia effective use or enjoyment of the supply takes place outside Australia. The supply is GST-free if the other requirements of item 3 are met and subsections 38-190(2) and (2A) do not apply.

Applying facts to item 3

Your supply of online course is neither a supply of work physically performed on goods situated in Australia when the thing supplied is done nor a supply directly connected with real property situated in Australia.

Further the supply of online course is done when it is delivered to the individual. The presence of the individual is therefore integral to the receipt of the online course

Accordingly, where the supply of online course is made to an individual located in Australia, the supply is a taxable under section 9-5 of the GST Act.

Where the supply of online course is made to an individual located outside Australia, the supply is GST-free under item 3 to the extent that subsections 38-190(2) and (2A) do not apply.

Based on the facts received, subsections 38-190(2) and (2A) do not apply to your supply.

For more information on paragraph (b) of item 3 please refer to Goods and Services Tax Ruling GSTR 2007/2.

Summary

Where the supply of online course is made to an individual located in Australia, the supply is a taxable under section 9-5 of the GST Act.

Where the supply of online course is made to an individual located outside Australia, the supply is GST-free under item 3.