Edited version of your written advice

Authorisation Number: 1051381902875

Date of advice: 7 June 2018

Ruling

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

Question 1

Were you required to be registered for GST as at (date)?

Answer

No.

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

No.

Question 6

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

Answer

No.

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.

You do not have employees.

Sometimes you hire contractors to assist you in teaching students.

Sometimes you are sub-contracted by a GST-registered Australian company, which carries on a business of supplying lessons, to deliver teaching overseas.

You spend less than 183 days a year in Australia.

Your 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, your relative’s place (the Australian residence) and cafes. You do not deliver lessons/training at the Australian residence.

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

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

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

● Communicating with clients over the internet and by phone

● Doing research relevant to your field

● Doing your business and tax accounting

Dissection of time spent in Australia in (year)

In (year), you spent (number) days in Australia. (Number) of these days were interstate, approximately (number) days were outside of (locality) (camping, staying with friends etc). So perhaps you spent (number) days sleeping at the Australian residence. During these days you estimate that you would have spent not more than (fraction) of the time actually working at the Australian residence (you were either running programs in hired venues or working in cafes/libraries/co-working spaces). This means that you may have spent approximately (number) days actually working at (Australian residence).

Schedule for (year)

For (year), based on your current plans, you should also spend approximately (number) days in Australia, some of these you will spend staying at friends' or outside of the (locality). Most of your work days in Australia in (year) will be spent delivering programs in hired venues. So if you estimate (fraction) of your days in Australia you may be working at the Australian residence, it would total no more than (number) days of work actually at that residence. In actuality, it is likely to be less, as often your days at the Australian residence are your rest days or you work only a few hours.

GST turnover as at (date)

As at (date), your current GST turnover was under $75,000.

Projected GST turnover as at (date)

As at (date) your projected GST turnover was under $75,000. You included the following supplies/forecasted supplies in the calculation:

● Supplies/forecasted supplies of Australian lessons; and

● Supplies/forecasted 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 9-26

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 under $75,000, you were not required to be registered for GST on that 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.

(*As defined in section 195-1 of the GST Act).

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 that 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; or

● 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 (year)

In (year), you spent (number) days in Australia. (Number) of these days were interstate, approximately (number) days were outside of (locality) (camping, staying with friends etc). So perhaps you spent (number) days sleeping at the Australian residence. During these days you estimate that you would have spent not more than (fraction) of the time actually working at the Australian residence (you were either running programs in hired venues or working in cafes/libraries/co-working spaces). This means that you may have spent approximately (number) days actually working at (Australian residence).

Schedule for (year)

For (year), based on your current plans, you should also spend approximately (Number) days in Australia, some of these you will spend staying at friends' or outside of the (locality). Most of your work days in Australia in (year) will be spent delivering programs in hired venues. So if you estimate (fraction) of your days in Australia you may be working at the Australian residence, it would total no more than (number) days of work actually at that residence. In actuality, it is likely to be less, as often your days at the Australian residence are your rest days or you work only a few hours.

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 Australian residence. They are merely incidental. You can and do operate your enterprise wherever you happen to be located (e.g. at the Australian 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.

The recipient of your supply (the purchaser of your services) is not an Australian consumer if:

● the purchaser is a non-resident; or

● the purchaser is a GST-registered business operator who has purchased your services for the purposes of their business.

Conclusion

The following supplies are connected with Australia:

● Supplies of Australian lessons (lessons delivered in Australia)

● Supplies of lessons to Australian consumers

As at (date), your projected turnover from these supplies was under $75,000. Therefore, your GST turnover was under $75,000 as at (date). Hence, you did not meet the requirement of paragraph 23-5(b) of the GST Act as at that date.

As you did not meet the requirements of section 23-5 of the GST Act as at (date), you were not required to be registered as at that date.

Although you were not required to be registered for GST on (date), it may be prudent to calculate your GST turnover from time to time in future to determine whether it has met the registration turnover threshold. If your GST turnover meets the registration turnover threshold at some stage, you would be required to be registered from the time it reaches the threshold.

Questions 2 to 6

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.

So long as your GST turnover remains under the registration turnover threshold, you will not be required to be registered for GST, in which case GST would not be payable on the supplies of any of your lessons, provided that you do not choose to register for GST. However, if your GST turnover meets the threshold at some stage this will have effect on whether the supplies of your lessons thereafter are subject to GST.

Some of your supplies are not connected with Australia. These supplies will remain as being not taxable even if you are required to be registered for GST at some later stage.

Some of the supplies of your lessons are GST-free under section 38-190 of the GST Act, as explained in the original ruling we issued. These supplies will remain GST-free even if you are required to be registered for GST at some later stage.

This includes supplies of overseas lessons.

As explained in the earlier ruling, your supplies of Australian lessons to non-residents could potentially be GST-free where the person attending the lessons is a different entity to the purchaser of the lessons, depending on the circumstances of those purchasers and third parties.