Edited version of your written advice

Authorisation Number: 1013139429394

Date of advice: 14 December 2016

Ruling

Subject: GST

Question 1

Is your supply of a Recreational Marine Driver's course or Personal Watercraft course a GST-free supply of an adult and community education course (ACE) under section 38-85 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes, your supply of a Recreational Marine Driver's course or Personal Watercraft course is GST-free, EXCEPT where you provide that course:

a) to an employee at the request of their employer; or

b) to a member of an organisation at the request of the organisation (unless membership to the organisation is open to the general public); or

c) by way of private tuition to an individual.

Relevant facts and circumstances

Your status

You have an Australian Business Number (ABN) but you are not currently registered for Goods and Services Tax (GST).

You intend to register for GST when your GST turnover exceeds the threshold for mandatory registration.

You are a sole trader, and conduct a business in watercraft licensing and training.

You conduct training courses for an authorised training organisation.

The authorised training organisation is listed by the Relevant Government as an Adult and Community Education (ACE) course provider.

You are a recognised training provider.

Your courses

The overall objective of your training courses is to provide a safer marine environment and reduce boating fatalities. Your courses are also required to obtain a Recreational Marine Driver's licence and a Personal Watercraft licence. Courses relating to these licenses are delivered individually, but can be combined.

Your courses consist of a practical on water component and a theory component. The course duration is eight hours and is mandatory as stipulated by the Relevant Government. The designed course is also approved by the Relevant Government as well as the required assessment of competency.

After successful completion of the course, the individual is granted a Certificate of Competency. The certificate is a Government document and is pre-requisite for the issue of a Recreational Marine Driver's licence by the Department. The courses are primarily marketed through online Ads and the training organisation's website. Occasionally you advertise in local newspapers.

The courses are available to people over 16 in the general community who can provide a medical certificate declaring their fitness to participate. The course is not designed for a specific industry. A wide variety of people attend the courses, including but not limited to:

● High School students, as a component of classwork or extra-curricular activities such as rowing

● members of the Water Police

● bridge construction workers

● water sports coaches

● members of the Australian Coast Guard

● members of Volunteer Marine Rescue, and

● members of surf rescue organisations.

Some students use this qualification for recreational purposes and others for commercial and employment purposes (for example, towards a commercial marine qualification).

Occasionally organisations request lessons for their members/employees, rather than those individuals undertaking the course in their capacity as members of the general public.

Private tuition is rare but can be for persons from oil rigs and the like when time is restrained. Infrequently attendees may undertake refresher courses. This is being encouraged more often in the interest of safety.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 38-85,

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

A New Tax System (Goods and Services Tax) (Adult and Community Education Courses) Determination 2016 section 5.

Reasons for decision

Detailed reasoning

Introduction

A supply of an education course is GST-free under section 38-85 of the GST Act. An 'education course' is defined in section 195-1 of the GST Act and includes an adult and community education (ACE) course.

An ACE course is defined in section 195-1 of the GST Act to mean a course of study or instruction that is likely to add to the employment related skills of people undertaking the course and:

a) is of a kind determined by the Education Minister to be an ACE course and is provided by, or on behalf of, a body:

i. that is a higher education institution

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

iii. that is funded by a State or Territory on the basis that it is a provider of courses of a kind described in the determination, or

b) is determined by the Education Minister to be an ACE course.

Paragraph b) of the definition above only relates to no-profit entities and so is not relevant to you.

Accordingly, to be GST-free as an ACE course, your course(s) must meet the following three requirements:

1. the course must be a course of study or instruction that is likely to add to the employment related skills of people undertaking the course

2. the course must be of a kind determined by the Education Minister to be an ACE course, and

3. the course must be provided by, or on behalf of, a body that is either: a higher education institution; or recognised or funded by a State or Territory authority to conduct ACE courses as described in the Education Minister's Determination.

First requirement

Goods and Services Tax Ruling GSTR 2000/27 (GSTR 2000/27), discusses the meaning of the phrase 'likely to add to employment related skills'. Paragraph 15 of GSTR 2000/27 provides that the test as to whether an ACE course is likely to add to the employment related skills of people undertaking the course is an objective test and is not dependant on the subjective intentions of the course provider or of the participants.

A course is likely to add to the employment related skills of people undertaking it if the course meets all of the following requirements:

● the course is directed at people who want to add to their employment related skills

● the objectives of the course specify the employment related skills the participants will acquire in undertaking the course

● the means of imparting the skills to the participants are clearly identified prior to the commencement of the course, and

● there is a reasonable expectation that the skills being developed will be used in the course of being an employee or working in a business, occupation, profession or trade (rather than for recreational, hobby, artistic or cultural endeavours).

Providing all of the above requirements are satisfied, a course is likely to add to the employment related skills of people undertaking it. Whether an ACE course achieves its objectives and attracts its target participants depends on the nature and content of the course not on the actual prospects of individual persons undertaking the course. On the balance of probability, there must be a reasonable expectation that the course will develop skills that can be used by participants in employment, or in a business, occupation, profession or trade.

In addition to the above criteria, we will also consider evidence of how the course is marketed, whether the course is similar to an accredited vocational education and training (VET) program, and whether the majority of students gain employment relevant to skills acquired from the course.

Your course is advertised to the general public via online ads, the organisation's website and newspaper advertisements. The objectives of the course are to improve maritime safety and reduce boating related fatalities. The course description clearly outlines the modules and method of training. The courses are approved by the Department as pre-requisites to obtaining a Recreational Marine Driver's Licence and a Personal Water Craft Licence.

Participants are typically involved in marine pursuits. Many (such as members of the State Water Police, bridge construction workers, water sports coaches) are required to undertake your courses for employment related reasons (whether to increase and/or maintain safety awareness; or to obtain relevant licensing to operate various watercraft).

For these reasons, we consider there is a reasonable expectation that your courses will develop skills that can be used by participants in maritime related employment, business, occupations, professions or trades.

Second requirement

To satisfy the definition of an ACE course the course must also be of a kind determined by the Education Minister to be an ACE course. The A New Tax System (Goods and Services Tax) (Adult and Community Education Courses) Determination 2016 (the Determination) specifies the kinds of courses that are ACE courses for the purposes of the GST Act.

At paragraph 5(2) of the Determination, the Education Minister states that an ACE course must:

(a) not be a course mentioned, in paragraph (a), (b), (c), (d), (f), (h), (i), (j) or (k) of the definition of education course in section 195-1 of the Act; and

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

(c) not be a course that is provided by, or at the request of an employer to the employees of that employer; 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; and

(e) not be a course that is provided by way of private tuition to an individual.

The facts show that your courses are available to people over 16 years in the community who are medically fit. However, you have advised that occasionally you have requests from employers and organisations to provide the courses to their members or employees. As well, while private tuition is rare it can be for persons from oil rigs and the like when time is restrained. In these circumstances the courses you provide are excluded from the definition of an ACE course in the Education Minister's ACE Determination.

However, where at any time all the criteria in paragraph 5(2) of the Education Minister's ACE Determination are satisfied, then the second requirement is met.

Third requirement

Finally, the course must be provided by, or on behalf of, a body that is recognised or funded as a provider of ACE courses.

You provide courses on behalf of an organisation which is listed by the State Government as an ACE course provider. The Department recognises the organisation as an authorised training organisation, and you as a training provider. Accordingly, the third requirement is met.

Conclusion

As all of the three requirements of an ACE course are satisfied, your supply of a Recreational Marine Driver's course or Personal Water Craft course will be GST-free under section 38-85 of the GST Act. The exception to this is where you provide your course at the request of employers or organisations to employees and members (unless membership is open to the general community); and where you provide your course by way of private tuition to an individual. In these cases, your course will not be GST-free under section 38-85 of the GST Act. It will be a taxable supply if you are registered (or required to be registered for GST).