Edited version of your written advice

Authorisation Number: 1051215616906

Date of advice: 21 April 2017

Ruling

Subject: GST - Am I in business?

Issue 1

Question 1

Are you in business in relation to your internet activities?

Answer

Yes.

Issue 2

Question 1

Are the payments that you receive from subscribers to your internet channel subject to GST where the subscribers are overseas?

Answer

No.

Question 2

Are the payments that you receive from another online company for advertising on your Internet channel subject to GST?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 2013.

Year ended 30 June 2014.

Year ended 30 June 2015.

Year ended 30 June 2016.

Year ending 30 June 2017.

The scheme commences on:

1 July 2012.

Relevant facts and circumstances

You started your Internet channel activity on the internet some years ago.

You began this as a hobby by posting videos while still attending an educational facility.

The channel did not attract much attention in the first couple of years, before later receiving a wave of exposure coming in from Internet search results and through their recommended system.

You make the content for enjoyment purposes which started off as entertainment for close friends.

You have continued to carry on this activity with regular (daily) Internet content over the past few years.

Your Internet channel is available for anyone to access.

Your initial outlay costs were minimal and were funded by your parents.

After a couple of years you met another person online, and joined together as you both had similar interests.

You worked together for a couple of years before continuing on your own.

You had no formal agreement with the other person, who helped manage a lot of the workload.

You held an online account in your name. The other person was not included on this account.

You and the other person split the income received from your activity.

You and the other person have received large amounts of money.

You plan on continuing to upload content to your Internet channel.

You expect to continue managing the channel without outsourcing any work.

The main demographic of your audience is people who play a specific game.

You began receiving payments from another online company sometime after commencing your activity.

You also began receiving payments from subscribers to support the growth of content.

Most of the income received was reinvested into the Internet channel and server costs, travel, travel and equipment.

Equipment used in carrying out your activities has been documented.

Expenses paid from your personal bank account would include:

● Rental home expenses for some years

● International and domestic flights

● Travel costs

● Equipment

● Hardware

● Computer costs

● Internet bills

Most transactions went through your online account.

Recently, you had thousands of subscribers to your Internet channel.

You also receive income from game server hosting.

From the income you receive, you expend amounts on the upkeep of the Internet channel and game servers.

You require the servers in order to record the content you post on your Internet channel.

The servers require routine maintenance.

You have a relevant qualification in your chosen field.

You do not seek any expert or technical advice.

You are required to adhere to the Internet Community Guidelines.

You do not actively advertise your Internet channel; all traffic comes from within the platform.

You spend at least 40 hours per week on your Internet channel activity.

You do not have a designated work space.

You are not engaged in any other business activities.

You have not kept any records of your income/expenses.

You do not have a specific business plan.

You do not have a registered business name.

Your parents have been recently supporting you financially.

You estimate that at least 95% of your subscribers live overseas.

The majority of your subscribers are in Country A and the Country B.

Last year, your annual turnover was a specified amount with only 1-5% of turnover sourced from subscribers in Australia.

The Internet does not forward you specific information on who the subscribers are or where they reside; however, subscribers are individuals who are not in business.

You have no control or knowledge about the providence of advertising that another online company supplies to your content.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 995-1

Income Tax Assessment Act 1997 section 6-5

A New Tax System (Goods and Services Tax) Act 1999 section 9-5

A New Tax System (Goods and Services Tax) Act 1999 section 23-5

A New Tax System (Goods and Services Tax) Act 1999 section 188-15

A New Tax System (Goods and Services Tax) Act 1999 section 188-20

A New Tax System (Goods and Services Tax) Act 1999 subsection 38-19(1)

Reasons for decision

Issue 1 Question 1

Summary

Your Internet activity amounts to carrying on a business for income tax purposes. Any income you receive from this activity is assessable under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997).

Detailed reasoning

Section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) defines 'business' as 'including any profession, trade, employment, vocation or calling, but not occupation as an employee'.

The question of whether a business is being carried on is a question of fact and degree. The courts have developed a series of indicators that are applied to determine the matter on the facts.

Taxation Ruling TR 97/11 Income tax: am I carrying on a business of primary production? provides the Commissioner's view of the indicators that are taken into account when determining when a taxpayer is carrying on a business of primary production. These indicators are not confined to primary production activities but also are applied to all manner of business activities. The factors considered important are:

● whether the activity has a significant commercial purpose or character

● whether the taxpayer has more than just an intention to engage in business

● whether the taxpayer has a purpose of profit as well as a prospect of profit from the activity

● whether there is regularity and repetition of the activity

● whether the activity is of the same kind and carried on in a similar manner to that of ordinary trade in that line of business

● whether the activity is planned, organised and carried on in a businesslike manner such that it is described as making a profit

● the size, scale and permanency of the activity, and

● whether the activity is better described as a hobby, a form of recreation, or sporting activity.

No one indicator is decisive. The indicators must be considered in combination and as a whole. Whether a 'business' is carried on depends on the large or general impression.

Application to your situation

In your case, you are an enthusiast who has created an Internet channel in relation to a specific computer game. You state that you began this activity as a hobby, with no intention of making a profit. You show a high level of regularity and repetition as you post daily videos. You travel overseas in a businesslike manner to attend conventions and collaborate with other Internet creators, as well in order to access better internet connections for your activity. The size and scale of your Internet channel which is continuing to grow shows that your activity is carried out on a large scale, reaching a large number of viewers. You state that you began this activity as a hobby, with no intention of making a profit, however upon consideration of the relevant factors, your Internet channel activity amounts to carrying on a business for income tax purposes.

As your activities amount to that of carrying on a business, the income received will be assessable income under section 6-5 of the ITAA 1997.

Issue 2 Question 1

Summary

The payments that you receive from subscribers to your Internet channel are not subject to GST where the subscribers are overseas.

Detailed reasoning

GST is payable on a taxable supply.

According to section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act 1999), you make a taxable supply if:

a) you make the 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 the indirect tax zone; and

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

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

You supply subscription to your Internet channel for which you receive payments. You make the supply in the course of an enterprise that you carry on. The supply is connected with the indirect tax zone because you make the supply through an enterprise that you carry on in the indirect tax zone. Therefore, paragraphs 9-5(a) to 9-5(c) of the GST Act 1999 are satisfied. As you are not registered for GST, it must be determined whether you are required to be registered.

Section 23-5 of the GST Act 1999 provides that you are required to be registered if you are carrying on an enterprise and your GST turnover meets the registration turnover threshold. Currently, the registration turnover threshold is $75,000 ($150, 000 for a non-profit body).

You are carrying on an enterprise. You advised that your turnover is more than $75,000, of which 95% are payments from subscribers overseas.

Sections 188-15 and 188-20 of the GST Act 1999 exclude certain supplies in working out an entity's current and projected GST turnover. GST-free supplies are not excluded by section 188-15 and 188-20. Therefore, even if the supplies that you make to subscribers overseas would be GST-free they are included in your GST turnover.

As you meet the registration turnover threshold, you are required to be registered for GST. Paragraph 9-5(d) of the GST Act 1999 is satisfied. Accordingly, your supply of subscription to your Internetchannel is a taxable supply unless it is GST-free or input taxed.

Under item 2 in the table in subsection 38-190(1) of the GST Act, a supply that is made to a non-resident who is not in the indirect tax zone when the thing supplied is done is GST-free if:

a) the supply is neither a supply of work physically performed on goods situated in the indirect tax zone when the work is done nor a supply directly connected with real property; 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.

For the purpose of item 2, a non-resident individual is in the indirect tax zone if the individual is physically in the indirect tax zone at the time the thing supplied is done.

You advised that at least 95% of the subscribers live overseas; thus, they are not physically in indirect tax zone when you supply them with subscription to your Internet channel.

Your supply of subscription is neither a supply of work physically performed on goods nor a supply directly connected with real property. Therefore, the supply is GST-free under paragraph (a) of item 2 in the table in subsection 38-190(1) of the GST Act 1999.

Accordingly, the payments that you receive from subscribers to your Internet channel are not subject to GST where the subscribers are overseas.

Issue 2 Question 2

Summary

The payments that you receive from another online company for advertising on your Internet channel are not subject to GST.

Detailed reasoning

You supply advertising services to another online company for consideration. You make the supply in the course of your enterprise. The supply is connected with the indirect tax zone as you make it through an enterprise that you carry on in the indirect tax zone. You are required to be registered for GST. The requirements in paragraph 9-5(a) to 9-5(d) of the GST Act 1999 are satisfied. Therefore, your supply of advertising services to another online company is a taxable supply unless it is GST-free or input taxed.

You advised that another online company is a non-resident entity that is not in the indirect tax zone at the time you supply your services. Your supply is neither a supply of work physically performed on goods nor a supply directly connected with real property. Therefore, the supply is GST-free under paragraph (a) of item 2 in the table in subsection 38-190(1) of the GST Act 1999.

Accordingly, the payments that you receive from another online company for advertising on your Internet channel are not subject to GST.