Edited version of your written advice

Authorisation Number: 1051284622338

Date of advice: 19 September 2017

Ruling

Subject: GST and supply of membership subscription to non-resident entities

Question 1

Is the supply of membership subscription made by the Australian company to non-residents a GST-free supply under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Advice

Yes. From the facts given, the supply of membership subscription made by the Australian company to non-residents is a GST-free supply under item 2 in the table in subsection 38-190(1) of the GST Act.

Relevant facts

You are an Australian company and your main source of income is from membership subscriptions. You are registered for the goods and services tax (GST).

People pay an annual membership fee and the subscription period runs from 1 July to 30 June each year. The majority of your members are Australian residents. You have a small number of non-residents.

The annual membership subscription provides each person with access to the member only area of your website which has professional reference material.

Members can:

● participate in discussion forums, and register to watch webinars, attend local workshops and local branch meetings.

● access your profession reference material, view webinars and participate in online discussions outside Australia.

You do provide an occasional workshop overseas but the majority are hosted in Australia. There are local branches established overseas so that the non-residents do not have to come to Australia to attend the workshop. There is no additional charge for members to attend these activities as the cost is included in their membership fee.

You also provide a range of professional development activities to assist members to maintain their professional accreditation.

Non-resident members are typically individuals who are not registered for Australian GST. Sometimes an overseas corporate will pay the membership for the individual. In such cases the overseas Company is not registered for Australian GST. Also, a non-resident corporate can apply for corporate membership. A non-resident corporate is not typically registered for Australian GST.

To your knowledge the non-resident members do not carry on any business activity through a representative or agent in Australia.

The non-resident individual member is not typically in Australia during the membership period. A member may travel to Australia to attend our annual conference or may obviously travel to Australia for a holiday.

An employee of a non-resident member company is not typically in Australia during the membership period. They may travel to Australia to attend your annual conference or may obviously travel to Australia for a holiday. Entry to the conference is not included in the membership subscription.

The webinars are done online so no non-resident members need to come to Australia.

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 38-190

Reasons for decision

Note: Where the term ‘Australia’ is used in this document, it is referring to the ‘indirect tax zone’ as defined in section 195-1 of the GST Act.

Summary

From the facts given, the supply of membership subscription you make to non-residents is a GST-free supply under item 2 in the table in subsection 38-190(1) of the GST Act.

Detailed reasoning

GST is payable on a taxable supply. A supply is a taxable supply under section 9-5 of the GST Act if:

a) the supplier makes the supply for consideration; and

b) the supply is made in the course of an enterprise that the supplies carries on; and

c) the supply is connected with Australia; and

d) the supplier is registered for GST.

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

You must satisfy all the above for your supply of membership subscription to the non-residents to be a taxable supply and to be liable for the GST.

From the facts given, you satisfy paragraphs 9-5(a) to (d) of the GST Act as:

a) you make the supply for consideration

b) your supply is made in the course of the business that you carry on;

c) your supply is connected with Australia as the supply is made through a business that you carry on in Australia; and

d) you are registered for GST.

However, your supply of membership subscription is not a taxable supply to the extent that it is GST-free.

There is no provision under the GST Act that makes your supply of membership subscription input taxed.

GST-free supply

Relevant to your supply of membership subscription to the non-resident members is item 2 in the table in subsection 38-190(1) of the GST Act (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.

Only one of the paragraphs needs to be satisfied for the supply to be GST-free.

Precondition of item 2 – non-resident is 'not in Australia'

The requirement that the non-resident in item 2 is not ‘in Australia’ when the thing supplied is done is a requirement that the non-resident is not in Australia in relation to the supply 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. The ruling is available at ato.gov.au

Non-resident company

We consider that a non-resident company is in Australia for the purposes of item 2 if that company carries on its business (or in the case of a company that does not carry on its 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.

A non-resident company is in Australia in relation to a supply if:

● the supply is for the purposes of the Australian presence of the company; or

● the presence of the company in Australia is involved in the supply unless the only involvement is minor.

Non-resident individuals

A non-resident individual must be physically in Australia to be ‘in Australia’.

A non-resident individual is in Australia in relation to the supply if the non-resident individual is involved with the supply while in Australia. A non-resident individual is involved with the supply where the non-resident is in contact with the supplier while in Australia and that contact is not minor (e.g a courtesy call or checking on the progress of the supply).

If the non-resident individual is in Australia for a purpose that is not related to the supply, e.g the individual is on holiday in Australia and has no contact with the supplier or only has minor contact, the non-resident individual is not considered to be involved with the supply and is therefore ‘not in Australia in relation to the supply’.

A supply to a non-resident individual who is physically in Australia and involved, other than in a minor way, with the supply is taxable during the period of that involvement. The period of the individual’s involvement while in Australia is determined on a reasonable basis having regard to the circumstances of the case. That part of the supply that is done when the non-resident individual is not physically in Australia, or is physically in Australia but not involved with the supply will satisfy the requirement that the ‘non-resident is not in Australia in relation to the supply’.

From the facts given your supply of membership subscription to the non-resident company and non-resident individuals satisfy the requirement for the non-resident not to be ‘in Australia in relation to the supply’.

The next step is to consider the paragraphs in item 2.

Paragraph (a) of item 2

Paragraph (a) of item 2 requires that the supply of services 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.

Goods and Services Tax Ruling GSTR 2003/7 provides guidance on when a supply is a supply of work physically performed on goods and when a supply is directly connected with real property.

From the facts given, your supply of membership subscription to the non-residents satisfies paragraph (a) of item 2 as:

● your supply is made to non-residents that are not in Australia in relation to the supply; and

● your supply of membership subscription is characterised as a supply of services for GST purposes. The supply of services is neither a supply of work physically performed on goods situated in Australia when done nor a supply directly connected with real property situated in Australia.

In this instance your supply of membership subscription is GST-free to the extent it is not negated by subsection 38-190(3) of the GST Act.

There is no need to consider paragraph (b) of item 2 as paragraph (a) is satisfied.

Subsection 38-190(3) of the GST Act

Subsection 38-190(3) of the GST Act provides that without limiting subsection 38-190(2) or (2A), a supply covered by item 2 in that table is not GST-free if:

a) it is a supply under an agreement entered into, whether directly or indirectly, with a non-resident; and

b) the supply is provided or the agreement requires it to be provided to another entity in Australia; and

c) for a supply other than an input taxed supply – none of the following applies:

i. the other entity would be an Australian-based business recipient of the supply, if the supply had been made to it;

ii. the other entity is an individual who is provided with the supply as an employee or officer of an entity that would be an Australian-based business recipient of the supply, if the supply had been made to it; or

iii. the other entity is an individual who is provided with the supply as an employee or officer of the recipient, and the recipient’s acquisition of the thing is solely for a creditable purpose and is not a non-deductible expense.

From the facts given, subsection 38-190(3) of the GST Act does not negate the GST-free status of your supply of membership subscription to the non-resident individuals and companies as they are located outside Australia and you are not required to provide your services to an entity in Australia. Your supply of membership subscription to the non-resident individual is therefore GST-free under item 2.

If at any time the non-resident individual is in Australia in relation to the supply (for example to attend an Australian workshop while in Australia) the part of this supply is not GST-free.

However, if at any time in Australia you supply your services to an employee of the non-resident company that is a member of the Australasian Sonographers Association and the purpose of that presence in Australia is for the business purposes of the non-resident company, requirement (iii) in paragraph 38-190(3)(c) applies to the supply. In this instance subsection 38-190(3) of the GST Act will not negate the GST-free status of the supply. It is only where the acquisition made by the employee of the non-resident company in Australia is for the private purposes of the employee that subsection 38-190(3) of the GST Act will negate the GST-free status of that supply.

More information on subsection 38-190(3) of the GST Act is available in Goods and Services Tax Ruling GSTR 2005/6 which is available at ato.gov.au.