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Edited version of your written advice
Authorisation Number: 1013113454080
Date off advice: 25 October 2016
Subject: GST and supplies to an entity outside of Australia
Question 1
Are the supply of services, from a real-estate firm and from a legal profession, GST-free under subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), where the recipient of the supply is outside of the indirect tax zone (Australia)?
Answer
See reasons for decision.
Relevant facts and circumstances
Entity A (you) reside and work outside of Australia and are not a resident of Australia for income tax purposes. You reached settlement on an investment property you held in Australia of which was sold as vacant possession.
You purchased the property in 200X and it has been rented from 200X onwards.
You are not registered for GST.
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 9-25 and
A New Tax System (Goods and Services Tax) Act 1999 subsection 38-190(1).
Reasons for decision
A supply is taxable when section 9-5 of the GST Act is satisfied. The section provides that you make a taxable supply if:
(a) you make a supply for consideration, and
(b) the supply is made in the course or furtherance of an enterprise that you carry on; and
(c) the supply is connected with Australia; and
(d) you are registered or required to be registered.
However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.
On the facts a real estate agency and a legal profession's supply would be for consideration, the fees charged, the supplies they make would be in the course of the enterprise they carry on, the supplies would be connected with Australia as they are done in Australia, and they each would be registered for GST. Hence, their respective supply to you would be taxable to the extent they are not GST-free or input taxed.
There are no provisions that result in the supplies being input taxed, however, consideration needs to be given to whether they are GST-free under section 38-190 of the GST Act.
Of particular relevance is Item 2 in the table in subsection 38-190(1) of the GST Act (Item 2). Item 2 provides that a supply to a non-resident who 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.
As the supply of the real estate agent and legal profession would be directly connected with the sale of real property situated in Australia their supplies will not be GST-free pursuant to paragraph (a).
However, as you rented the property and an enterprise includes an activity, or series of activities done on a regular or continuous basis, in the form of a lease, licence or other grant of an interest in property, you may satisfy paragraph (b). Furthermore, the definition under section 195-1 of the GST Act of 'carry on' an enterprise includes doing anything in the course of the commencement or termination of an enterprise.
Therefore, where you are a non-resident not in Australia in relation to the supply when it is done (in this instance settlement), and you have acquired the services of the real estate agent and legal profession, in carrying on your enterprise, but are not registered or required to be registered for GST in Australia, these supplies will be GST-free to you.