Edited version of your written advice

Authorisation Number: 1013141059104

Date of advice: 20 December 2016

Ruling

Subject: GST and supply of services to dismantle plant and equipment for a non-resident company

Question:

Is the supply of services to dismantle the plant and equipment (the 'plant') by an Australian entity (you) to a non-resident company (NRCo) GST-free?

Answer:

Yes. Your supply of services to dismantle the plant to NRCo is GST-free.

Relevant facts and circumstances

You are a sole trader who is registered for goods and services tax (GST).

You are supplying services to NRCo. NRCo is incorporated in and existing under the laws of an overseas country. NRCo is headquartered overseas and does not have a presence in Australia. NRCo's business includes the supply of equipment for use in certain industries. NRCo is neither registered nor required to be registered for GST in Australia.

You are providing services (and employing some staff) to facilitate the dismantling of the plant and equipment (the 'plant') purchased by NRCo. The plant will be shipped out of Australia.

Your services will help NRCo comply with its obligations under its contract for the purchase and removal of the plant from another Australian company (AusCo). The plant will be dismantled and exported from Australia for use in NRCo's business activities overseas. Under the contract of sale (which you are not a party to) NRCo is responsible for disassembling and removing the plant from its current site location.

You are providing dismantling services at NRCo's risk and expense, but you must comply with relevant laws and standards when providing your services.

An employee of NRCo may be present in Australia whilst the dismantling and packing works are undertaken. The employee will supervise the work and ensure that it is carried out in a manner acceptable under NRCo's contract with AusCo. The NRCo employee will not undertake any other activities for NRCo whilst in Australia and will not have the authority to enter into any other contracts or conduct or any other business of behalf of NRCo. The employee will remain in Australia only for the length of time for the contract to be completed. NRCo does not intend to undertake any further activities in Australia or maintain any other presence in Australia.

Additional information

You advise that there is no written contract between you and NRCo for your services.

You are invoicing NRCo for your services.

Your understanding is that NRCo has a person here that leaves Australia every few weeks or so (appears to be a fly in fly out worker), who is only involved in overseeing that this plant is dismantled and shipped out of Australia. NRCo does not have any other business here. This person also serves to approve payment claims/represent NRCo, but does not physically work on the site with tools etc.

You receive your instructions from NRCo, which also has that person who undertakes the occasional site inspections and communicates with you by phone.

All references are to the A New Tax System (Goods and Services) Tax Act 1999 unless otherwise stated. For readability and other reasons, where the term 'Australia' is used in this ruling, it is referring to the 'indirect tax zone' as defined in subsection 195-1.

Reasons for decision

GST is payable on a taxable supply under section 9-5. You satisfy all the requirements under paragraphs 9-5(a) to 9-5(d) as follows:

(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 Australia, and

(d) you are registered, or required to be registered for GST.

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

There are no provisions under the GST legislation in which your supply of the services to facilitate the dismantling of the plant could have been input taxed. The GST-free provisions are taken into consideration.

GST-free

Relevant to the supply of your services to a non-resident entity (NRCo) is item 2 in the table in subsection 38-190(1) ('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, 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 for GST.

You only need to satisfy one of the above requirements in Item 2 for the supply to be GST-free.

Not in Australia when the thing supplied is done

For the supply to be GST-free under Item 2 NRCo must be 'not in Australia when the thing supplied is done'. 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.

Under paragraph 37 of 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.

In addition, if a non-resident company is determined to be in Australia on the basis of the above test, it is also necessary to determine if the company is in Australia in relation to the supply when the supply is done (that is, when the services are performed).

In your case, NRCo is incorporated overseas and has its headquarter overseas. You advise that NRCo does not have a presence in Australia.

NRCo has purchased a plant from AusCo, which needs to be dismantled and shipped overseas. An employee of NRCo may be present in Australia whilst the dismantling and packing works are undertaken. This employee will only remain in Australia for the length of time that the plant is dismantled and shipped. The employee leaves Australia every few weeks or so (a fly in fly out worker), who is only involved in overseeing that this plant is dismantled and shipped overseas. This person also serves to approve payment claims.

The NRCo employee will not undertake any other activities for NRCo whilst in Australia and will not have the authority to enter into any other contracts or conduct or any other business on behalf of NRCo. NRCo does not intend to undertake any further business activities in Australia or maintain any other presence in Australia.

On the basis of these facts, we do not consider that NRCo is in Australia for the purposes of Item 2. Accordingly, the requirement that NRCo is not in Australia (in relation to your supply of services) when the thing supplied is done is satisfied.

Paragraphs (a) and (b) of Item 2

Paragraph (a) of Item 2 requires that the supply is neither a supply of work physically performed on goods situated in Australia nor directly connected with real property situated in Australia when the work is done.

The expression 'directly connected with' contemplates a very close link or association between the supply and goods or real property. This is addressed in Goods and Services Tax Ruling GSTR 2003/7.

We consider that your supply of the services to dismantle and pack the plant is a supply of work physically performed on goods (and/or is directly connected with real property) situated in Australia for the purposes of paragraph (a) of Item 2. Accordingly, your supply of these services does not satisfy the requirement in paragraph (a) of Item 2.

Paragraph (b) of Item 2 states that a supply is GST-free if the non-resident acquires the thing in carrying the non-resident's enterprise but the non-resident is neither registered nor required to be registered for GST.

NRCo is incorporated overseas and has its headquarters overseas. You advise that NRCo does not intend to undertake any other business activities in Australia or maintain any other presence in Australia. NRCo's business includes the supply of equipment for use in certain industries. NRCo has purchased a plant from AusCo which needs to be dismantled and shipped overseas. This acquisition is for the purposes of NRCo's business. You also advise that NRCo is neither registered nor required to be registered for GST in Australia.

Therefore, your supply of services to dismantle the plant (to be shipped overseas) satisfies the requirement in paragraph (b) of Item 2.

Limitations

Having met the requirements of Item 2, it is necessary to consider whether the supply is excluded from being GST-free under subsections 38-190(2), 38-190(2A) and 38-190(3).

Subsection 38-190(2) is not applicable because your supply is not of a right or option to acquire something the supply of which would be connected with Australia.

Subsection 38-190(2A) is not applicable because your supply does not relate to the making of a supply of real property in Australia that would be wholly or partly input taxed.

Subsection 38-190(3) is not applicable because your supply of the services to dismantle the plant is not considered to be provided to AusCo or the employee of NRCo that may be Australia from time to time to oversee the work that you are carrying out for NRCo.

Accordingly, your supply of the services to dismantle the plant (to be shipped overseas) is not excluded from being GST-free under Item 2.

Summary

Your supply of services to dismantle the plant (to be shipped overseas) to NRCo is GST-free under paragraph (b) of Item 2. GST is not applicable to this supply.