Edited version of your written advice

Authorisation Number: 1012684082428

Ruling

Subject: GST and service agreements to provide training

Question 1

Does the partner, under the service agreement, need to remit GST to the Tax Office for teaching services provided?

Answer

Yes, the partner under the service agreement needs to remit GST to the Tax Office for teaching services provided.

Relevant facts and circumstances

• You are registered for goods and services tax (GST)

• You are an approved registered training organisation (RTO) and provide certificates to trainees on completion of the courses within your scope.

• You entered into a service agreement with a partner

• Under the service agreement the partner commits to the provision of high quality service delivery of VET training, assessment and recognition services that meet all the requirements of the Australian VET quality Framework(VQF) and or equivalent and if applicable any State or Territory Training Authority.

• There is no partnership in law between you and the partner and the partner is not an RTO

• Under the service agreement:

• the partner provides a training delivery service to your trainee.

• You provide the trainees with nationally recognised certificates and qualifications.

• You approve and accept the enrolment of each trainee enrolling for the qualification

• You receive funding from the government when you undertake this training.

• You pay a 'service fee' to the partner to deliver training.

• The 'services fee' paid to the partner is for sending trainees to the partner and utilising their operating space.

• The service agreement lists the service fees payable by you to the partner.

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

Student Assistance Act 1973 subsection 5D(1).

Reasons for decision

An education course is GST-free under section 38-85 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). The definition of an education course includes, amongst other things, a tertiary course. To be GST-free as a tertiary course, a course must satisfy the Education Minister's determination under subsection 5D(1) of the Student Assistance Act 1973 (determination).

The determination provides that an accredited vocational education and training program conducted by a Registered Training Organisation (RTO) within whose scope of registration the program is encompassed, is a tertiary course.

The supply of teaching services provided by another entity to you is not GST-free. This is illustrated in paragraph 165 -170 of Goods and Services Tax Ruling GSTR 2006/9 Goods and services tax: supplies (GSTR 2006/9) it states:

Example 6: teaching services

165. A, a supplier of teaching services, enters into a contract with B, a course provider, to provide teaching services to B's students.

166. B conducts professional or trade courses that are GST-free under section 38-85. Students enrol with, and pay fees directly to, B. When a student completes the course, B is authorised by the relevant State or Territory authority to conduct a test. If a student passes the test, B facilitates the issuing of the qualification/licence by the relevant State or Territory authority.

167. A has no contractual relationship with the students.

168. A makes a supply of the teaching services to B and A provides this supply to the students. A's supply is not a GST-free supply of a professional or trade course.

A---♦ Supply of teaching services B-♦ Supply of GST- free course

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Provision of teaching services

169. However, B does make a GST-free supply of a professional or trade course to the students. The students enter into contractual arrangements with B for the supply of the professional or trade course. B makes a supply of the course to the students. It does not matter whether B's employees do the actual teaching or B subcontracts the teaching to another entity (in this case A).

170. Based upon these contractual arrangements, the students are the recipients of the supply of the professional or trade course made by B, and B is the recipient of the supply of teaching services made by A

The partner under the service agreement has no contractual relationship with the trainees. In this case, the partner is registered for goods and services tax (GST) and will be supplying teaching services, where they satisfy all the conditions of section 9-5 of the GST Act, they will be making a taxable supply to you. In the above example, you are the recipient of the teaching services.

Under section 9-5 of the GST Act an entity makes a taxable supply if the supply is made for consideration, the supply is made in the course or furtherance of an enterprise which is carried on by the supplier, the supply is connected with Australia, and the supplier is registered or required to be registered for GST.

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

The supply of training services by your partner to you is not regarded as the supply of a GST-free education course. Where the requirements under section 9-5 of the GST Act are satisfied your partner will be making a taxable supply of teaching services and will need to remit the GST collected on their taxable supply to the Tax Office.