Edited version of your written advice

Authorisation Number: 1012840323028

Date of advice: 16 July 2015

Ruling

Subject: GST and education course

Question

Will your supply of the practical component of a Certificate IV course be a supply of a GST-free education course to the students under section 38-85 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No. Your supply of the practical component of the course to the students is not GST-free.

Relevant facts and circumstances

You, are registered for GST.

You are not a Registered Training Organisation (RTO), nor a Higher Education institution.

You have entered into an arrangement (Marketing and Sales Agreement) with the Entity A which is an RTO.

The agreement sets out:

Parties

• Entity A is the provider of the course.

• You are defined as The Partner.

Recitals

• The Partner supplies marketing and sales services.

• Entity A carries on business as a RTO.

• Entity A wishes to purchase marketing and sales services to assist it with securing student enrolments for its training courses.

• The Partner and Entity A agree this agreement does not involve any aspect of partnership to deliver and assess students on behalf of the Provider.

Provision of the Marketing & Sales (M&S) Services

• The Partner must ensure that Students and prospective Students are informed that the Partner is not the RTO and the course is delivered via Entity A.

• The Partner must represent Entity A and carry out the M&S Services honestly and fairly.

• All promotional material used by the Partner in connection with the Courses must be current or otherwise be previously approved by Entity A in writing.

The Partner Relationship with Entity A and the Students

• The Partner acknowledges and agrees that:

• the Partner has no right to bind Entity A in contract or otherwise in law with the Student

• the Partner must ensure that each Application is fully completed by prospective Students in the manner required by Entity A from time to time

• each completed Application must be promptly submitted to Entity A once completed by a prospective Student.

For this trade or profession there is no industrial instrument or national or state association that has uniform requirements relating to the entry to, or the commencement of the trade or profession.

Entity A is a school, listed with an association. The Association sets the criteria for related institutions. The Association is not the only 'national body' for recognition of the profession.

The Certificate IV course is a course that Entity A is accredited to supply. It is a 'Vocational Education and Training course. (VET course).

You are an organisation that meets the criteria set by the Association to offer education in profession. You have been engaged by Entity A to supply a course you have designed which is part of the Certificate IV course provided by Entity A. Your course, has been custom designed for the students and is incorporated into the Certificate IV course. Entity A recognises and provides course credits for the modules students complete with you. The practical component is made up of three separate modules (practical component).

Students approach you and fill out an application form for the Certificate IV course and are enrolled with Entity A. Entity A supplies the theory component of the course and you supply the practical component directly to students. Although the student enrols with Entity A they pay the complete fee for the whole course to you. Currently you treat your practical component as taxable and Entity A treats their portion as GST free. Out of the complete fee you receive, you send $XX.XX (GST exclusive) to Entity A for the theory component.

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, and

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

Reasons for decision

In this reasoning, unless otherwise stated,

• all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)

• all reference materials referred to are available on the Australian Taxation Office (ATO) website www.ato.gov.au

• all legislative terms of the GST Act marked with an asterisk are defined in section 195-1 of the GST Act

Section 9 40 provides that you are liable for GST on any taxable supply that you make.

Section 9-5 of the GST Act, provides you make a taxable supply if:

(a) you make the supply for consideration

(b) the supply is made in the course or furtherance of an enterprise that you carry on

(c) the supply is connected with the indirect tax zone (Australia), and

(d) you are 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.

It is first necessary to determine who is supplying the course.

You have an arrangement with Entity A that involves students completing a theory component of the course through distance learning from Entity A and a practical component taught directly to students by your trainers. The practical and theory component together comprise the Certificate IV.

You contend that you are providing the course as an agent of Entity A and have entered into a Marketing and Sales Agreement with Entity A.

Paragraph 28 of Goods and Services Tax Ruling GSTR 2000/37 Goods and services tax: agency relationships and the application of the law provides a list of factors that may show that you are an agent under an agency relationship, and states:

Factors that indicate an agency relationship

28. In most cases, any relevant documentation about the business relationship, the description used by the parties and the conduct of the parties establish the existence of an agency relationship. Therefore, the following factors may show that you are an agent under an agency relationship, although no single factor (by itself) is determinative:

• any description of you as an agent, having authority to act for another party, in an agreement (expressed or implied) between you and the other party;

• any exercise of the authority that you are given to enter into legal relations with a third party;

• whether you bear any significant commercial risk;

• whether you act in your own name;

• whether you are remunerated for your services by way of commissions and whether you are entitled to keep any part of your remuneration secret from another party; and

• whether you decide the price of things that you might sell to third parties.

Under the Sales and Marketing Agreement you have been given the authority to enter into a relationship with the student in relation to the supply by Entity A of the theory component of the course. However, the agreement does not provide this authority in relation to the practical component.

You give the application forms to the student and receive the gross fee for the payment of the whole course. However you have undertaken under the provisions of the Agreement to advise the students that you are not the RTO and that the course is delivered via Entity A.

Although the student fills out the application form and gives it to you it is actually enrolling with Entity A. In addition, although the student pays the complete fee for the whole Certificate IV course to you, you deduct from that fee $XX in relation to the supply of the practical component and the services you supply to Entity A under the Sales Agreement. You then forward the balance to Entity A.

You created the modules delivered in the practical component. You set the fees for the practical component.

We consider you are acting as a principal in regards to the supply of services to Entity A and the supply of the modules in the practical component to the students. When supplying these modules you are not an agent of Entity A.

In summary, we conclude that under the arrangement and the Sale and Marketing Agreement between you and Entity A you are making:

• a supply of services to Entity A in relation to the marketing, sales and enrolment of students in the course, and

• a supply of the modules of the practical component of the Certificate IV course Entity A is supplying to the students.

Supply of course

Section 38-85 provides that a supply is GST-free if it is a supply of an education course.

The definition of education course in section 195-1 relevantly includes:

• a tertiary course

• a professional or trade course, or

• an adult and community education course.

We will consider each of these courses in turn.

Tertiary course

The definition of tertiary course in section 195-1 includes a course of study or instruction that is a tertiary course determined by the Education Minister under subsection 5D(1) of the Student Assistance Act 1973 for the purposes of that Act.

Subsection 10(1)(a) of Student Assistance (Education Institutions and Courses) Determination 2009 (No. 2) states that for paragraph 5D(1)(a) of the Student Assistance Act 1973, a tertiary course is a full time course specified in Column 1 of the table in Schedule 2 to this instrument that is provided by an education institution specified for that course in Column 2 of that table. Schedule 2 includes a VET course (Column 1) provided by a RTO (Column 2).

Under the definitions in the Student Assistance (Education Institutions and Courses) Determination 2009 (No. 2):

• VET course includes the modules of a VET accredited course

• VET accredited course includes a course accredited by a body under the delegation from the Australian Skills Quality Authority (such as a RTO).

Where an RTO provides training in a VET course that course will be a GST-free tertiary course as it is an education course as defined in section 195-1.

As you are not an RTO your supply of the practical component modules will not be GST free as a tertiary course.

A professional or trade course

A professional or trade course is defined in section 195-1 to mean a course leading to a qualification that is an essential prerequisite for entry to a particular profession or trade in Australia or to commence the practice of (but not maintain the practice of) a profession or trade in Australia.

Section 195-1 defines the term 'essential prerequisite as a qualification' in relation to the entry to, or the commencement of the practice of, a particular profession or trade if the qualification is imposed:

(a) by or under an industrial instrument, or

(b) if there is no industrial instrument for that profession or trade but there is a professional or trade association that has uniform national requirements relating to the entry to, or the commencement of the practice of, the profession or trade concerned - by that association, or

(c) if neither paragraph (a) nor (b) applies but there is a professional or trade association in a State or Territory that has requirements relating to the entry to, or the commencement of the practice of, the profession or trade concerned - by that association.

In your case:

• you are not supplying the course itself but a component of a course supplied by another entity, and

• there is no industrial instrument or single national or state profession or trade association that requires the completion of this course to enable a person to practice massage.

Therefore as you are not supplying the course and there is no industrial instrument or single national or state profession or trade association that requires the completion of this course your supply of the modules will not be GST free as a professional or trade course.

An adult and community education (ACE) course

An adult and community education course means a course of study or instruction that is likely to add to the employment related skills of people undertaking the course and relevantly:

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

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

The Education Minister has issued a determination which sets out a number of factors. However for the purpose of this ruling for a course to be an ACE course and therefore GST-free it must amongst other things:

(a) not be a course mentioned in paragraph (a) to (k) of the definition of education course in section 195-1

(b) be a course that is available to adults in the general community, and

(d) not be a course that is provided by, or at the request of an organisation to the members of that organisation, except an organisation for which membership is open to adults in the general community.

Although you meet paragraph (a) and (b) above in that the modules you supply are not mentioned in paragraph (a) to (k) and are available to adults in the general community, you are not a body that is recognised or funded by a State or Territory Authority as a provider of the courses described in the determination nor are you providing the course on behalf of such a body.

Therefore your supply of the practical component will not be GST-free as an ACE course.

Conclusion

As the supply of the practical component is not GST free under section 38-85 as an education course, and is not input taxed, the supply of these modules by you will be a taxable supply pursuant to section 9-5.