Edited version of your written advice

Authorisation Number: 1013079896528

Date of advice: 30 August 2016

Ruling

Subject: GST and supply of services to a non-resident

Question 1

Is the supply of services made by the Australian association to the non-resident company a GST-free supply under section 38-190 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Advice

No, the supply of services made by the Australian association to the non-resident company is a taxable supply under section 9-5 of the GST Act.

Relevant facts

You are an association incorporated in Australia and are registered for GST.

You have an agreement with a non-resident company incorporated outside Australia in which you agreed to supply less than five of your employees to carry on the business activity of the non-resident company in Australia in return for monthly fees.

The non-resident company does not have any specific employees and have several directors located internationally. One of the directors is located in Australia. The Australian director attends meetings by electronic means and is the treasurer of the non-resident company. As treasurer the Australian director approves invoices served on the non-resident company for payment.

The Australian director has your facilities available to them, but given that they reside in another State, they typically work from their Australian home office in that State. No income is received from the Australian director in regard to the use of your office, or for any other purpose.

X is an employee of your company and performs the duty of company secretary of the non-resident company in Australia. X provides the agreed services you have with the non-resident company and reports directly to all directors of the non-resident company.

Your other employees will report to X while carrying on the business activities of company secretary for the non-resident company in Australia. They can receive instructions from any of the directors of the non-resident company including the Australian director and the company secretary. However the employees would seek approval from X before acting on the received instructions and would report directly to the company secretary and the Australian director.

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 38-190

Reasons for decision

Note: Where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act.

Question 1

GST is payable on a taxable supply. Under section 9-5 of the GST Act, an entity makes a taxable supply if:

a) the supply is made 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 for GST.

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

Your supply of services to the non-resident company satisfies paragraphs 9-5(a) to 9-5(d) of the GST Act as:

a) you make the supply for consideration; and

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

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.

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

There is no provision under the GST Act that makes your supply of services an input taxed supply.

GST-free supply

Relevant to your supply of services to the non-resident company is item 2 in the table in subsection 38-190(1) of the GST Act (item 2).

Item 2 provides that a supply of a thing (other than goods or real property) made to a non-resident is GST-free if it is a supply that is made to a non-resident that is not in Australia when the thing supplied is done, and:

a) the supply is neither a supply of work physically performed on goods situated in Australia when the work is done, nor a supply directly connected with real property situated in Australia; or

b) the non-resident acquires the thing in carrying on the non-resident's enterprise, but is not registered or required to be registered for GST.

Precondition of item 2 - non-resident is 'not in Australia'

Goods and Services Tax Ruling GSTR 2004/7 provides guidance on when a non-resident is 'not in Australia' for the purposes of item 2.

The requirement that the non-resident in item 2 is not in Australia when the thing supplied is done is a requirement that the non-resident is not in Australia in relation to the supply when the thing supplied is done.

Under paragraph 37 in GSTR 2004/7, we consider that a non-resident company is in Australia if that company carries on business (or in the case of a company that does not carry on business, carries on its activities) in Australia:

a) at or through a fixed and definite place of its own for a sufficiently substantial period of time, or

b) through an agent at a fixed and definite place for a sufficiently substantial period of time.

We consider that it would be reasonable for a supplier to conclude that a non-resident company is in Australia if:

• the company is registered with ASIC; or

• the company has a permanent establishment in Australia for income tax purposes.

The non-resident company owning, leasing or licensing premises in Australia typically evidences such a fixed and definite place. However, it is immaterial whether the fixed place of business is owned or rented by, or is otherwise at the disposal of the non-resident company. A place of business may be situated in the business premises of another entity. This may be the case, for instance, if the non-resident company has at its constant disposal premises or part of premises owned by another entity.

Even if a company is in Australia, it may not be in Australia in relation to the supply and so can still satisfy the 'not in Australia'. To work out whether a company is in Australia in relation to the supply, it is necessary to examine the role the presence of the company in Australia plays in relation to the supply when the supply is done (that is, when the services are performed).

A non-resident company is in Australia in relation to the supply if the supply is solely or partly for the purposes of the Australian presence, for example its Australian branch, representative office or agent if it is a non-resident company, or the Australian head office if it is an Australian incorporated company, the company is in Australia in relation to the supply. There is a connection between the supply and the presence in Australia that is not a minor connection.

If the supply is not for the purposes of the Australian presence but that Australian presence is involved in the supply, the company is in Australia in relation to the supply except where the only involvement is minor.

If the involvement of the Australian presence is limited to the carrying out of simple administrative tasks on behalf of the company, as a matter of administrative convenience, that involvement is so minor. The connection between the supply and the presence is so minor in nature that it is reasonable to conclude that the presence of the company in Australia is not in relation to the supply.

Tasks of a simple administrative nature include:

• payment of, or arranging for payment of, the supplier's invoice on behalf of the company;

• passing on an e-mail to the company;

• being a point of telephone contact to pass on messages to the company;

• being a mailing address or delivery contact on behalf of the company;

• being a point of contact for a visiting representative of the company; and

• on-forwarding information to the company.

From the information received the non-resident company has two representatives in Australia (company secretary and director/treasurer) and the role of these representatives is to carry on the business activities of the non-resident in Australia. They have your facilities available to them to carry on the business activities in Australia. In this instance the non-resident company is in Australia.

The involvement of the representatives in relation to the supply made by you is not minor since they are in contact and provide instructions to your staff who are engaged to assist in carrying on the business activities of the non-resident in Australia. The engaged staff will report to them and the supply made by you is solely for the purposes of the non-resident carrying on its business activities in Australia. In this instance the non-resident is in Australia in relation to the supply made by you. The precondition of item 2 is not satisfied.

Item 2 is therefore not applicable to the supply of services since the non-resident company does not satisfy the precondition 'not to be in Australia in relation to the supply' for item 2.

The supply is a taxable supply under section 9-5 of the GST Act.