| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your written advice
Authorisation Number: 1013141278403
Date of advice: 21 December 2016
Ruling
Subject: GST and supplies made by a franchisor to non-residents
In order to protect the privacy and commercial in-confidence components of this private binding ruling the following summary is provided.
Question
Are the following supplies made by the Australian franchisor ('you') to overseas entities (individuals and companies) GST-free under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?:
1. Supply of franchise/franchise system
2. Supply of monthly fees payable by the franchisees in order to continue using the franchisor's intellectual property
3. Sales of promotional products to franchisees
4. Online sales of promotional products directly to the public
5. Membership sales directly to the public.
Advice
Based on the information received:
1. Your supply of franchise/franchise system is a supply of right for GST purposes.
Your supply of right to the overseas franchisees is GST-free under item 4 in the table in subsection 38-190(1) of the GST Act if:
a) the non-resident franchisee will use the rights outside Australia when carrying on the franchise business outside Australia; or
b) the non-resident entity that is purchasing the franchise/franchise system is located outside Australia when the supply of rights is done.
2. The monthly fees payable by the franchisees is consideration for your continuous supply of rights to use your intellectual property to the overseas franchisees after purchasing the franchise/franchise system. This supply of rights to the overseas franchisees is GST-free under item 4 where the supply of rights in regard to the purchase of the franchise/franchise system is GST-free under item 4.
3. The sale of promotional products to the overseas franchisees is GST-free under item 1 in the table in subsection 38-185(1) of the GST Act where you export the products within 60 days after the day you receive the payment or you issue an invoice to the franchisee.
4. The online sale of promotional products directly to the public is GST-free under item 1 in the table in subsection 38-185(1) f the GST Act where you export the products within 60 days after the day you receive the payment or you issue an invoice to the buyer.
5. You supply two types of membership - Membership 1 and Membership 2.
Membership 1
Your supply of membership 1 to overseas individuals or companies that carry on their business activity outside Australia is GST-free under item 2 in the table in subsection 38-190(1) of the GST Act.
Membership 2
Your supply of membership 2 consists of two distinct supplies - a supply of goods and a supply of services.
Supply of goods
Your supply of goods to the members is GST-free under item 1 in the table in subsection 38-185(1) of the GST Act where you export the goods within 60 days after the day you receive the payment for the membership subscription or you issue an invoice to the member.
Supply of services
Your supply of services to members that are overseas individuals or companies carrying on their business activities outside Australia is GST-free under item 2 in the table in subsection 38-190(1) of the GST Act.