Edited version of your written advice

Authorisation Number: 1013135694773

Date of advice: 2 December 2016

Ruling

Subject: GST and registration

Question 1

Will the Commissioner cancel the GST registration of Entity A (you) a sole trader under subsection 25-55 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No.

Relevant facts and circumstances

You registered for GST from 20XX and your main business location is in Australia.

Until the end of 20XX, you worked for an Australia entity located in Australia. You were employed full-time by a contract agency. Your contract was renewed every year and your total Gross income was below the GST registration threshold.

From 20XX you began freelancing to a contract agency in outside of Australia, who have tended an agreement with you to do work for them but involving a non-resident entity outside of Australia, and you are now conducting work globally. The contact agency will pay you and the work will also involve you doing some in Australia.

You acknowledge that you are responsible for your own income tax payments and superannuation.

Your annual turnover will be higher than the turnover threshold.

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 9-10,

A New Tax System (Goods and Services Tax) Act 1999 subsection 38-190(1),

A New Tax System (Goods and Services Tax) Act 1999 subsection 25-55(1), and

A New Tax System (Goods and Services Tax) Act 1999 subsection 188-10.

Reasons for decision

Summary

The ATO will not cancel your GST registration as you have not been registered for at least 12 months and neither is the Commissioner satisfied that you are not required to be registered for GST.

Detailed reasoning

Cancelling GST registration

Under subsection 25-55(1) of the GST Act the Commissioner of Taxation must cancel your registration if:

(a) you have applied for cancellation of registration in the approved form; and

(b) at the time you applied for cancellation of registration, you have been registered for at least 12 months; and

(c) the Commissioner is satisfied that you are not required to be registered.

In your circumstances, you do not satisfy paragraphs 25-55(1) (b) and (c) of the GST Act. As you registered for GST from 20XX and have not been registered for at least 12 months and the Commissioner is not satisfied that you are not required to be registered.

Taxable supplies

You make a taxable supply where you satisfy section 9-5 of the GST.

This section provides 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 you carry on; and

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

(d) you are registered or required to be registered.

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

You undertake the supply and receive payment for your supply. Hence, you make a supply for consideration and paragraph 9-5(a) of the GST Act is satisfied.

Your supply is made in the course or furtherance of an enterprise you carry on, hence, paragraph 9-5(b) of the GST Act is satisfied.

The supply is connected with Australia as it is either done in Australia or done through an enterprise that you carry on in Australia and as such paragraph 9-5(c) of the GST Act is satisfied.

You are registered for GST but as you are asking about cancelling your registration we will explain when an entity is required to be registered for GST later in the advice.

Therefore, as you are registered for GST you will satisfy paragraph 9-5(d) of the GST Act and your supply will be taxable.

However, a supply is not taxable to the extent it is GST-free or input taxed. There are no provisions that would result in your supply being input taxed but consideration needs to be given to whether it is GST-free under Division 38-190 of the GST Act.

GST-free supplies

In particular, 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 of things, other than goods or real property, for consumption outside of Australia is GST-free provided the non-resident 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 is it 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.

What this means is when you contract with a non-resident, in this case, the contract agency to make a supply to other non-resident and neither are in Australia in relation to the supply when the supply is done, it will be GST-free.

Also where you are outside of Australia working, as you make your supply through a business you carry on in Australia, your supply will be connected with Australia but GST-free for the same reason as above.

Furthermore, where you enter into an agreement with a non-resident, the contract agency, to make a supply to another entity in Australia and that entity is an Australian based business recipient your supply will also be GST-free from 20XX. An Australian-based business recipient is defined under subsection 9-26(2) of the GST Act as an entity that is registered for GST, and the enterprise of the entity is carried on in Australia, and the entity's acquisition of the thing supplied is not solely of a private or domestic nature.

GST registration

Regarding the registration issue an entity is required to be registered if their GST turnover meets the turnover threshold of $75,000.

Under subsection 188-10 of the GST Act it provides;

That you have a GST turnover that meets a particular turnover threshold if:

(a) you current GST turnover is at or above the turnover threshold, and the Commissioner is not satisfied that your projected GST turnover is below the turnover threshold, or

(b) your projected GST turnover is at or above the turnover threshold.

This will mean both your taxable and GST-free supplies will go towards your GST turnover threshold. You've stated that your annual turnover is above the turnover threshold of $75,000 AUD.

Therefore, if you were not already registered you would have been required to be registered for GST.

For more information please refer to Goods and Services Tax Ruling (GSTR 2001/7) Goods and services tax: meaning of GST turnover including the effect of section 188-25 on projected GST turnover. This ruling can be found on the ATO website by Googling 'ATO and GSTR 2001/7'.