Edited version of your written advice

Authorisation Number: 1051372592187

Date of advice: 18 May 2018

Ruling

Subject: Goods and services tax (GST) and supplies of lessons

Question 1

Are you required to be registered for GST?

Answer

Yes.

You were required to be registered for GST with effect from the date your GST turnover first reached $75,000. The following supplies (historical and projected) are included in the GST turnover calculations:

● Supplies of lessons and programs delivered in Australia

● Supplies of lessons and programs to ‘Australian consumers’ (including where the lessons and programs supplied to Australian consumers are delivered overseas)

Question 2

Is GST payable on your supplies of lessons and programs delivered overseas where the purchaser is not a resident of Australia?

Answer

No.

Question 3

Is GST payable on your supplies of lessons and programs delivered overseas where the purchaser is a resident of Australia and not an Australian consumer?

Answer

No.

Question 4

Is GST payable on your supplies of lessons and programs delivered overseas where the purchaser is a resident of Australia and an Australian consumer?

Answer

No.

Question 5

Is GST payable on your supplies of lessons and programs delivered in Australia where the purchaser is not a resident of Australia?

Answer

GST is payable on these supplies to non-residents unless the participant in the lessons or program is a different entity to the purchaser and any one of the following scenarios occurs:

● The participant would be an *Australian-based business recipient of the supply, if the supply had been made to it (that is, if the participant had hypothetically been the purchaser).

● The participant is provided with the supply of the lessons or program 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 (that is, if that entity had hypothetically been the purchaser).

● The participant is provided with the supply of the lessons or program as an employee or officer of the recipient of the supply (that is, the purchaser), and the purchaser’s acquisition of the thing is solely for a creditable purpose and is not a non-deductible expense and the purchaser is not registered for GST.

Question 6

Is GST payable on your supplies of lessons and programs delivered in Australia where the purchaser is a resident?

Answer

Yes.

The scheme commences on xx xx 2018.

Relevant facts and circumstances

You are not registered for GST.

You are a resident of Australia.

You supply lessons and training programs to people to become teachers. You deliver these lessons/programs in Australia and overseas.

Sometimes you hire contractors to assist you in teaching students.

You spend less than 183 days a year in Australia.

The customers may be residents of Australia or non-residents. Some of your customers are ‘Australian consumers’.

Your customers who are not residents of Australia are not based in Australia.

Nearly all of the entities you sell to who are not residents of Australia are individuals, including sole-traders.

There are no situations where an individual who is not a resident of Australia would purchase lessons for delivery to a third party.

When you are in Australia, you work at various locations, including hired venues, co-working spaces, someone else’s place (the residence) and cafes. You do not deliver lessons/training at the residence.

You may receive and accept orders while overseas or in Australia (including at the residence).

Other work related activities you may do at the residence are:

● Placing/updating an advertisement, for your services, on the internet

● Communicating with clients over the internet and by phone

● Doing research on your field

● Doing your business and tax accounting

Dissection of time spent in Australia in a particular year

You provided a dissection of your time spent in Australia in a particular year

Schedule for a particular year

You provided a schedule of your planned itinerary for another year.

Likely income for particular 12 months period

On (date), you calculated that for the period (date) to (date) the likely combined income from

● Australian lessons and

● overseas lessons sold to customers who are Australian residents

is less than $75,000.

Income projection for period of (date) to (date)

On (date) you calculated your projected GST turnover as at that date. As at (date), your projected turnover for the twelve month period beginning with (date) was likely to be over $75,000 – the following supplies were factored into the calculation:

● Supplies of Australian lessons; and

● Supplies of lessons to Australian consumers

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 9-25

A New Tax System (Goods and Services Tax) Act 1999 section 9-27

A New Tax System (Goods and Services Tax) Act 1999 section 11-15

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

A New Tax System (Goods and Services Tax) Act 1999 section 38-190

A New Tax System (Goods and Services Tax) Act 1999 Division 188

Reasons for decisions

Question 1

Are you required to be registered for GST?

Summary

As your projected turnover as at (date) was $75,000, you were required to be registered for GST on that date. Whether you are required to be registered for GST with effect from an earlier date depends on what your turnover figures would have been on the earlier date.

Detailed reasoning

Determining whether an entity is required to be registered for GST

An entity is required to be registered for GST if it meets the requirements of section 23-5 of A New Tax System (Goods and Services Tax) Act 1999 (GST Act), which states:

You are required to be registered under this Act if:

(a) you are *carrying on an *enterprise; and

(b) your *GST turnover meets the *registration turnover threshold.

The registration turnover threshold is $75,000.

You are carrying on an enterprise. Therefore, you meet the requirements of paragraph 23-5(a) of the GST Act.

An entity’s GST turnover meets a particular turnover threshold if the requirements of subsection 188-10(1) of the GST Act are met, which states:

You have a GST turnover that meets a particular *turnover threshold if:

(a) your *current GST turnover is at or above the turnover threshold, and the Commissioner is not satisfied that your *projected GST turnover is below the turnover threshold; or

(b) your projected GST turnover is at or above the turnover threshold.

Section 188-15 of the GST Act sets out the method for calculating current GST turnover. Subsection 188-15(1) of the GST Act states:

Your current GST turnover at a time during a particular month is the sum of the *values of all the supplies that you have made, or are likely to make, during the 12 months ending at the end of that month, other than:

(a) supplies that are *input taxed, or

(b) supplies that are not for *consideration (and are not *taxable supplies under section 72-5): or

(c) supplies that are not made in connection with an *enterprise that you *carry on.

In accordance with paragraph 188-15(3)(a) of the GST Act, any supply that is not connected with Australia is excluded from the calculation of current GST turnover.

Section 188-20 of the GST Act sets out the method for calculating projected GST turnover. Subsection 188-20(1) of the GST Act states:

Your projected GST turnover at a time during a particular month is the sum of all of the *values of all the supplies that you have made, or are likely to make, during that month and the next 11 months, other than:

(a) supplies that are *input taxed; or

(b) supplies that are not for *consideration (and are not *taxable supplies under section 72-5); or

(c) supplies that are not made in connection with an *enterprise that you *carry on.

In accordance with paragraph 188-20(3)(a) of the GST Act, any supply that is not connected with Australia is excluded from the calculation of projected GST turnover.

“Connected with Australia”

As only supplies connected with Australia are included in the GST turnover calculations, we need to consider whether your supplies of lessons are connected with Australia.

A supply of an intangible, for example, a service, is connected with Australia if the requirements of subsection 9-25(5) of the GST Act are met, which states:

A supply of anything other than goods or *real property is connected with the indirect tax zone if:

(a) the thing is done in the indirect tax zone; or

(b) the supplier makes the supply through an *enterprise that the supplier *carries on in the indirect tax zone; or

(c) all of the following apply:

(i) neither paragraph (a) nor (b) applies in respect of the thing:

(ii) the thing is a right or option to acquire another thing;

(iii) the supply of the other thing would be connected with the indirect tax zone: or

(d) the *recipient of the supply is an *Australian consumer.

The thing is done in Australia

When you deliver lessons in Australia, the thing supplied is done in Australia, as it is performed in Australia (in accordance with paragraph 65 of Goods and Services Tax Ruling GSTR 2000/31) Therefore, your supplies of these lessons are connected with Australia under paragraph 9-25(5)(a) of the GST Act. Hence, the income and projected income from these transactions is included in your GST turnover calculations for the purposes of determining whether you are required to be registered for GST.

Whether you make supplies through an enterprise that you carry on in Australia

Section 9-27 of the GST Act defines the meaning of ‘enterprise of an entity is carried on in the indirect tax zone’ It states:

(1) An *enterprise of an entity is carried on in the indirect tax zone if:

(a) an enterprise is *carried on by one or more individuals covered by subsection (3) who are in the indirect tax zone; and

(b) any of the following applies:

(i) the enterprise is carried on through a fixed place in the indirect tax zone;

(ii) the enterprise has been carried on through one or more places in the indirect tax zone for more than 183 days in a 12 month period;

(iii) the entity intends to carry on the enterprise through one or more place in the indirect tax zone for more than 183 days in a 12 month period.

(2) It does not matter whether:

(a) the entity has exclusive use of a place; or

(b) the entity owns, leases or has any other claim or interest in relation to a place.

(3) This subsection covers the following individuals:

(a) if the entity is an individual – that individual;

(b) an employee or *officer of the entity;

(c) an individual who is, or is employed by, an agent of the entity that:

(i) has, and habitually exercises, authority to conclude contracts on behalf of the entity; and

(ii) is not a broker, general commission agent or other agent of independent status that is acting in the ordinary course of the agent’s business as such an agent.

For a supply to be connected with Australia under paragraph 9-25(5)(b) of the GST Act, it is necessary that:

● the entity carries on an enterprise in Australia under section 9-27 of the GST Act; and

● the supply is made ‘through’ that enterprise

Under section 9-27 of the GST Act, an enterprise of an entity is carried on in Australia if the enterprise is carried on by one or more specified individuals who are in Australia, and

● The enterprise is carried on through a fixed place in Australia

● The enterprise has been carried on through one or more places in Australia for more than 183 days in a 12 month period, or

● The entity intends to carry on the enterprise through one or more places in Australia for more than 183 days in a 12 month period.

In your case, you do not spend more than 183 days in Australia each year. Also, you do not carry on your enterprise through a fixed place in Australia for the purposes of section 9-27 of the GST Act as explained below:

Law Companion Ruling LCR 2016/1 at paragraphs 37 to 39 explains when an enterprise is carried on in a fixed place. The term ‘fixed place’ is not defined in the GST Act, but is interpreted consistently with the term ‘fixed place’ in the permanent establishment articles in Australia’s tax treaties and the similar term used in the definition of ‘permanent establishment’ in subsection 6(1) of the Income Tax Assessment Act 1936, as explained in Taxation Ruling TR 2002/5.

A fixed place must have an element of permanence, both geographic and temporal, and requires a stable or continual connection between the enterprise and the place that is more than temporary or transitory in nature. That is, the enterprise must be linked to a particular place, through which the habitual pursuit of business activities occurs, for a particular period.

Dissection of time spent in Australia in a particular year

You provided a dissection of your time spent in Australia in a particular year

Schedule for a particular year

You provided a schedule of your planned itinerary for another year.

While permanence may still exist where an enterprise operates in Australia for a period of less than six months, in this case, the nature of your enterprise activities do not have a sufficient element of permanence at any particular place, including the residence. They are merely incidental. You can and do operate your enterprise wherever you happen to be located (e.g. at the residence, café, library). Your enterprise is not linked to a particular place through which you habitually pursue your business activities when in Australia. Your enterprise activities at the various locations are more transitory in nature.

Since sufficient permanence does not exist, you do not carry on your enterprise through a fixed place in Australia for the purposes of section 9-27 of the GST Act. As a result, the supplies made by you do not satisfy paragraph 9-25(5)(b) of the GST Act. Hence, your supplies are not connected with Australia under that provision.

Your supplies of services to Australian consumers

Under a paragraph 9-25(5)(d) of the GST Act, a supply of a service to an Australian consumer is connected with Australia.

‘Australian consumer’ is defined in subsection 9-25(7) of the GST Act, which states:

An entity is an Australia consumer of a supply made to the entity if:

(a) the entity is an *Australian resident (other than an entity that is an Australian resident solely because the definition of Australia in the *ITAA 1997 includes the external Territories); and

(b) the entity:

(i) is not *registered; or

(ii) if the entity is registered – the entity does not acquire the thing supplied solely or partly for the purpose of an enterprise that the entity *carries on.

Your supplies of lessons to Australian consumers are connected with Australia pursuant to paragraph 9-25(5)(d) of the GST Act. Hence, the income and projected income from these transactions is included in your GST turnover calculations for the purposes of determining whether you are required to be registered for GST.

Conclusion

The following supplies are connected with Australia:

● Supplies of Australian lessons;

● Supplies of lessons to Australian consumers

As at (date), your projected turnover from these supplies was likely to be over $75,000. Therefore, your GST turnover was over $75,000 as at (date). Hence, you met the requirement of paragraph 23-5(b) of the GST Act as at that date.

As you met the requirements of section 23-5 of the GST Act as at (date), you were required to be registered as at that date.

You were required to be registered for GST with effect from the date your GST turnover first reached $75,000. The following supplies (historical and projected) are included in the GST turnover calculations:

● Supplies of lessons and programs delivered in Australia

● Supplies of lessons and programs to ‘Australian consumers’ (including where the lessons and programs supplied to Australian consumers are delivered overseas)

It is possible that you may have been required to be registered for GST on a date earlier than (date).

Question 2

Is GST payable on your supplies of overseas lessons to non-residents?

Summary

Your supplies of overseas lessons to customers who are not residents of Australia are not subject to GST because these supplies are not connected with Australia.

(Even if these supplies were connected with Australia, they may be GST-free under item 2 in the table in subsection 38-190(1) of the GST Act.)

Detailed reasoning

GST is payable on taxable supplies

Section 9-5 of the GST Act states:

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.

However, the supply is not a *taxable supply to the extent that it is

*GST-free or *input taxed.

(*Defines a term defined in section 195-1 of the GST Act)

You meet the requirements of paragraphs 9-5(a), 9-5(b) and 9-5(d) of the GST Act, that is:

● you supply your lessons for consideration (the fees for these services)(paragraph 9-5(a)); and

● you supply these lessons in the course or furtherance of an enterprise that you carry on (paragraph 9-5(b)); and

● you are required to be registered for GST (paragraph 9-5(d) of the GST Act)

Your non-resident customers are not Australian consumers.

Your supplies of overseas lessons to customers who are not residents of Australia are not connected with Australia under paragraph 9-25(5)(a) of the GST Act as the thing supplied (the lessons) are not done in Australia.

The supplies are also not connected with Australia under paragraph 9-25(5)(d) of the GST Act

as your non-resident customers are not Australian consumers.

Question 3

Is GST payable on your supplies of overseas lessons to residents who are not Australian consumers?

Reasoning

Your supplies of lessons under these circumstances are not connected with Australia under paragraph 9-25(5)(a) of the GST Act as the thing supplied (the lessons) are not done in Australia.

The supplies are also not connected with Australia under paragraph 9-25(5)(d) of the GST Act as your resident customers are not Australian consumers.

Neither paragraph 9-25(5)(b) nor paragraph 9-25(5)(c) of the GST Act is satisfied.

Therefore, as the requirement of paragraph 9-5(c) of the GST Act is not satisfied, the supplies are not taxable supplies. Accordingly, GST does not apply.

Question 4

Is GST payable on your supplies of overseas lessons to residents who are Australian consumers?

Summary

Your supplies of overseas lessons to a customer who is a resident of Australia are GST-free under item 3 in the table in subsection 38-190(1) of the GST Act.

Detailed reasoning

As mentioned in our response to question 1 above, your supplies of lessons to Australian consumers are connected with Australia. Therefore, the requirements in paragraphs 9-5(a) to 9-5(d) of GST Act are satisfied. Therefore, the supplies are taxable supplies unless they are GST-free or input taxed.

Item 3 in the table in subsection 38-190(1) of the GST Act (item 3) provides that a supply of something other than goods or real property, is GST-free provided that the recipient is not in the indirect tax zone when the thing supplied is done, and

(a) effective use or enjoyment takes place outside the indirect tax zone; and

(b) 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 situated in the indirect tax zone.

However, there are a number of exclusions from GST-free treatment under item 3, as set out in subsections 38-190(2) and 38-190(2A) of the GST Act.

Supply of overseas lessons to a resident individual who receives the lessons

Paragraphs 222 and 223 of GSTR 2004/7 provide guidance on determining whether a resident individual is in Australia when the thing supplied is done. They state:

Resident individuals

222. Like non-resident individuals, an Australian resident individual is in Australia if the individual is physically located in Australia when the thing supplied is done.

Example 8 - resident individual who is not in Australia

223. An Australian tourist is arrested in New Zealand for possession of an illegal substance. While in New Zealand waiting for her trial, she receives legal advice from an Australian solicitor. She is not in Australia when the thing supplied is done for the purposes of item 3. However, the supply is only GST-free if the other requirements of item 3 are satisfied.

Where you supply overseas lessons to an individual who is a resident of Australia and they receive the lessons, the resident individual is not in Australia for the purposes of item 3.

Our approach to determining the place of effective use or enjoyment of a supply

Paragraphs 39 to 46 of Goods and Services Tax Ruling GSTR 2007/2 state:

39. Paragraph (b) of item 3 requires the place of effective use or enjoyment of a supply to be determined (that is, whether the place is outside Australia). As paragraph (b) refers to the 'effective' use or enjoyment of the supply, it is necessary to inquire as to the entity that has the actual use or enjoyment of the supply.

40. The requirement in paragraph (a) of item 3 refers to the recipient of the supply. The recipient of the supply is the entity to which the supply is made. A supply that is made to a recipient entity may be provided to another entity. If a supply is made to a recipient and provided to another entity, the entity that actually uses or enjoys the supply is that other entity. For example, if a supply of travel services is made to a company (recipient) and the travel is undertaken by an employee of the recipient, the supply is provided to the employee and it is the employee that actually uses or enjoys the supply.

41. A supply is made to a recipient and provided to another entity if in the performance of a service (or in the doing of something) the actual flow of that supply is to an entity that is not the recipient entity with which the supplier made the agreement for the supply. That is, while the contractual flow of the supply is to the recipient entity, the actual flow of the supply is to another entity.

42. Thus in determining where a supply is used or enjoyed it is first necessary to establish the entity to which the supply is provided (the providee entity). The providee entity is also the recipient if the supply is not provided to some other entity. However, if the supply is provided to some other entity that other entity is the providee entity.

43. Having determined the providee entity it is then necessary to consider whether use or enjoyment of the supply by that providee entity takes place outside Australia.

44. Both the heading to section 38-190 and the table in subsection 38-190(1) refer to '[s]upplies of things...for consumption outside Australia'. Thus in the context of subsection 38-190(1) use or enjoyment of a supply takes place outside Australia if the supply is for consumption by an entity outside Australia.

45. In our view, a supply is for consumption, and thus used or enjoyed, outside Australia if there is provision of the supply to the providee entity outside Australia.

46. On the other hand, effective use or enjoyment of a supply does not take place outside Australia, if there is provision of the supply to the providee entity in Australia.

You provide the supply of overseas lessons to providee entities outside Australia as the actual flow of the supply is to entities outside Australia. Therefore, the effective use and enjoyment of the supply takes place outside Australia.

Your supply of lessons is not a supply of work physically performed on goods and is not directly connected with real property.

The exclusion at subsection 38-190(2) of the GST Act is not relevant as it deals with supplies of rights and options.

The exclusion at subsection 38-190(2A) of the GST Act is not relevant as it deals with supplies of things, the acquisition of which relates to making supplies of real property.

Therefore, your supply of overseas lessons to customers who are residents of Australia and who receive the lessons is GST-free under item 3. Hence, GST is not payable on your supplies of these lessons.

Supply of overseas lessons to a resident who is in Australia, where a third party receives the lessons

Subsection 38-190(4) of the GST Act provides a special rule for arrangements where the recipient is a resident, but the lessons are provided to a third party outside Australia. It states:

A supply is taken, for the purposes of item 3 in that table, to be a supply made to a *recipient who is not in the indirect tax zone if:

(a) it is a supply under an agreement entered into, whether directly or indirectly, with an *Australian resident; and

(b) the supply is provided, or the agreement requires it to be provided, to another entity outside the indirect tax zone.

Paragraphs 192 to 195 of Goods and Services Tax Ruling GSTR 2004/7 provide guidance on subsection 38-190(4) of the GST Act. They state:

192. That supply refers to the supply made to a recipient who is in Australia in relation to the supply.

193. Subsection 38-190(4), by means of the expression 'provided to another entity' seeks to identify the entity to which the item 3 supply actually flows.

194. If the supply is made under an agreement with an Australian resident recipient but the thing supplied is provided, or the agreement requires it to be provided, to another entity located outside Australia, subsection 38-190(4) applies and the not in Australia requirement in item 3 is satisfied.

195. An example illustrating the application of subsection 38-190(4) (and provided in the Explanatory Memorandum for subsection 38-190(4)) is a supply of training services made to an Australian employer but provided to employees attending a training course conducted outside Australia. The Australian employer is treated as a recipient who is not in Australia in relation to the supply because the supply is provided to another entity (an employee) outside Australia.

Where you supply overseas lessons to a customer who is a resident of Australia and they are not the person who is receiving the lessons, your supply is provided to ‘another entity’ outside Australia. Hence, the requirements of subsection 38-190(4) of the GST Act would be met. Therefore, the customer is treated as not being in Australia for the purposes of Item 3.

You provide the supply of overseas lessons to providee entities outside Australia. Therefore, the effective use and enjoyment of the supply takes place outside Australia.

Your supplies of overseas lessons are not supplies of work physically performed on goods situated in Australia when the thing supplied is done and they are not directly connected with real property situated in Australia.

The exclusions at subsections 38-190(2) and 38-190(2A) of the GST Act do not apply.

Therefore, as all of the requirements of item 3 are met, your supplies of overseas lessons to customers who are residents of Australia, where you provide the lessons to third parties, are GST-free. Hence, GST is not payable on your supplies of these lessons.

Question 5

Is GST payable on your supplies of lessons and programs delivered in Australia where the purchaser is a non-resident?

Summary

Your supply of Australian lessons to customers who are non-residents could potentially be GST-free under item 2 in the table in subsection 38-190(1) of the GST Act if the person attending the lessons is a different entity to the purchaser.

Detailed reasoning

Your supply of Australian lessons to a customer who is not a resident of Australia is connected with Australia under paragraph 9-25(5)(a) of the GST Act as the teaching is performed in Australia. Paragraph 9-5(c) of the GST Act is satisfied; therefore, the supply is a taxable supply unless it is GST-free or input taxed.

Item 2 in the table in subsection 38-190(1) of the GST Act (item 2) provides that a supply of something other than goods or real property, to a non-resident is GST-free provided that the non-resident is not in the indirect tax zone when the thing supplied is done, and

(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 situated in the indirect tax zone; 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.

However, there are a number of exclusions from GST-free treatment under item 2, as set out in subsections 38-190(2), 38-190(2A) and 38-190(3) of the GST Act.

Your supplies of lessons are not supplies of goods or real property.

Paragraph 31 of GSTR 2004/7 interprets the meaning of ‘recipient is not in Australia’, for the purposes of item 2 and 3 in the table in subsection 38-190(1) of the GST Act. It states:

31. The requirement that the non-resident in item 2, or the recipient in item 3, is not in Australia when the thing supplied is done is a requirement, in our view, that the non-resident or recipient is not in Australia in relation to the supply when the thing supplied is done.

Paragraphs 35 and 214 to 218 of Goods and Services Tax Ruling GSTR 2004/7 provide guidance on determining whether a non-resident individual recipient of a supply is in Australia in relation to the supply. They state:

35. A non-resident individual is in Australia if that individual is physically in Australia. If a non-resident individual is physically in Australia and in contact (other than contact which is only of a minor nature) with the supplier, that presence is in relation to the supply.

Supplies of overseas lessons to non-resident individual

214. A non-resident individual may be physically in Australia when the thing supplied is done, but that presence in Australia may be unrelated to the supply. For example, the non-resident is in Australia on holidays only.

215. If that individual is in Australia only on matters unrelated to the supply, we consider that the individual recipient is in Australia but not 'in relation to the supply'. We recognise that the physical presence in Australia of the non-resident individual at the relevant time is merely coincidental.

216. Thus, if a non-resident individual is, for example, in Australia on holidays and has no contact with the supplier, we consider that the presence of the non-resident individual in Australia when the thing supplied is done is not in relation to the supply.

217. If a non-resident individual recipient of a supply is physically in Australia and in contact with the supplier (other than contact which is only of a minor nature), we consider that presence is in relation to the supply. The extent to which an individual's presence in Australia is in relation to the supply must be determined on a reasonable basis having regard to the period of the individual's involvement with the supply while in Australia. This is discussed further in 'Part IV - apportionment'.

218. Contact is minor if it is limited to contact of a simple administrative nature, such as checking on the progress of the supply or a courtesy call on the supplier. If this is the only contact between the non-resident individual and the supplier we consider that the individual is not in Australia in relation to the supply.

Paragraph 41 of GSTR 2004/7 provides guidance on determining whether a non-resident company is in Australia in relation to a supply. It states:

41. A non-resident company is in Australia in relation to the supply if the supply is solely or partly for the purposes of the Australian presence, for example, its Australian branch. If the supply is not for the purposes of the Australian presence but that Australian presence is involved in the supply, the company is in Australia in relation to the supply, except where the only involvement is minor.

Supply of lessons to a customer who is not a resident of Australia where the customer receives the lessons

Where you supply an Australian lesson to an individual who is not a resident of Australia, and they receive the lesson, the customer is in Australia in relation to the supply as they come to Australia to receive the lessons. Therefore, your supply of the lesson is not GST-free under item 2. There are no other provisions of the GST Act under which your supply of the lesson is GST-free. Therefore, as all of the requirements of section 9-5 of the GST Act is met, GST is payable on the supply of the lesson.

Supply of lessons to a non-individual customer where the person receiving the lessons is a third party

Your non-individual customers who are not residents of Australia are not based in Australia. Therefore, they are not in Australia in relation to your supplies of lessons.

Your supplies of lessons are not supplies of work physically performed on goods nor are they directly connected with real property.

The exclusions at subsections 38-190(2) and 38-190(2A) of the GST Act do not apply.

Subsection 38-190(3) of the GST Act states:

Without limiting subsection (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 the indirect tax zone; 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 entities 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:

(iii) the other 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.

In accordance with the Exposure Draft Explanatory Material for the Tax Law Amendment (GST Treatment of Cross-Border Transactions) Bill 2015, in order for GST-free treatment under item 2 to potentially be preserved pursuant to subparagraph 38-190(3)(c)(iii) of the GST Act, the recipient of the supply must also not be registered for GST.

An acquisition is for a creditable purpose if the requirements of section 11-15 of the GST Act are met.

Subsection 11-15(1) of the GST Act states:

You acquire a thing for a creditable purpose to the extent that you acquire it in *carrying on your *enterprise.

Subsection 11-15(2) of the GST Act states:

However, you do not acquire the thing for a creditable purpose to the extent that:

(a) the acquisition relates to making supplies that would be *input taxed; or

(b) the acquisition is of a private or domestic nature.

‘Australian-based business recipient’ is defined in subsection 9-26(2) of the GST Act, which states:

An entity is an Australian-based business recipient of a supply made to the entity if:

(a) the entity is *registered; and

(b) an *enterprise of the entity is *carried on in the indirect tax zone; and

(c) the entity’s acquisition of the thing supplied is not solely of a private or domestic nature.

In accordance with paragraphs 220 to 225 of Goods and Services Tax Ruling GSTR 2005/6, the contractual flow of the supply of a lesson is to the customer who purchases the lesson. The actual flow of the supply of the supply is to the person receiving the lesson (who is the providee). Where the providee is a different entity to the purchaser of the lesson, the providee will be ‘another entity’ for the purposes of paragraph 38-190(3)(b) of the GST Act.

Your supplies are not input taxed.

Therefore, where you supply Australian lessons to a non-individual customer who is not a resident of Australia, but you provide the lessons to a third party individual, these supplies are not GST-free under item 2 unless a scenario referred to in subparagraph 38-190(3)(c)(i), 38-190(3)(c)(ii) or 38-190(3)(c)(iii) of the GST Act is present (see information above which sets out these scenarios)

If your supplies of Australian lessons to customers who are not residents of Australia are not GST-free under item 2, they are subject to GST, as all of the requirements of section 9-5 of the GST Act would be met.

If your supplies of Australian lessons to customers who are not residents of Australia are GST-free, GST does not apply.

Question 6

Is GST payable on your supplies of Australian lessons to residents?

Your supplies of Australian lessons to residents of Australia will meet the requirements in paragraph 9-5(a) to 9-5(d) of the GST Act. There are no provisions in the GST Act under which the supplies would be GST-free or input taxed. Therefore, the supplies of Australian lessons to residents are taxable supplies. Accordingly, GST is payable on your supplies of these lessons.