Edited version of your written advice

Authorisation Number: 1051416109886

Date of advice: 15 August 2018

Ruling

Subject: GST and supply of online products and services to resident and non-resident individuals

Question 1

Is the subscription income earned from a non-resident individual through your website not subject to the goods and services tax (GST)?

Advice

From the facts given, the subscription income received from the non-resident individual is for the supply of online products/services made through your website.

Where the non-resident individual is located outside Australia at the time of the supply, the supply of the online product/services is GST-free under item 3 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

Where the non-resident individual is located in Australia at the time of the supply, the supply of the online product/services is a taxable supply under section 9-5 of the GST Act.

Question 2

Is the subscription income earned from an Australian resident individual through your website subject to GST?

Advice

From the facts given, the subscription income received from the Australian resident individual is for the supply of online products/services made through your website.

Where the Australian resident individual is located in Australia at the time of the supply, the supply of the online product/services is a taxable supply under section 9-5 of the GST Act.

Where the Australian resident individual is located outside Australia at the time of the supply, the supply of the online product/services is GST-free under item 3 in the table in subsection 38-190(1) of the GST Act.

Question 3

Is the income earned from running a seminar in a foreign country not subject to GST?

Advice

When the seminar is done outside Australia, the supply of seminar to the individuals (resident and non-resident of Australia) attending the seminar is GST-free under item 3 in the table in subsection 38-190(1) of the GST Act.

Question 4

Is the income earned from running a seminar in Australia subject to GST?

Advice

When the seminar is done in Australia, the supply of seminar to the individuals (resident and non-resident of Australia) attending the seminar is a taxable supply under section 9-5 of the GST Act.

Relevant facts

You are an Australian company and registered for GST.

You supply online marketing education services and you derive your income from two main sources:

● Subscription to your website which provides customers with access to various on-line resources. The customers are a mixture of both Australian residents and Australian non-residents.

● Seminars which are run both in Australia and overseas. The customers are a mixture of both Australian residents and Australian non-residents

Online subscription to website

Your website is an educational platform which consists of several online products levels/services that teaches the customer the fundamentals of using social media and related resources to build an online business in whichever niche and career they desire.

What the members receive when they subscribe to your website depends on which product they purchase.

Once someone purchases any of your online products they get access to it straight away.

The customers are located when they make the subscription and the members are from all over the world. Some of your Australian members are not based in Australia at the time of purchase but they would be using an Australian Credit card.

Your customers are all individuals and you have not had any customer asking you to provide the subscription to another entity.

You have provided us with a copy of the terms and conditions to be a member and terms and condition for the products purchased.

Seminars

The seminars are training events that consist of different speakers and coaches that specialise in specific areas.

Private individuals attend the seminars.

There will not be any sponsorship available when you hold the seminar.

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.

Questions 1 and 2

Summary

Where the supply of online products/services is made to an individual (resident and non-resident of Australia) located in Australia, the supply is a taxable under section 9-5 of the GST Act.

Where the supply of online products/services is made to an individual (resident and non-resident) located outside Australia, the supply is GST-free under item 3.

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 or furtherance of an enterprise that the supplier carries on; and

c. the supply is connected with Australia; and

d. the supplier is registered or required to be registered for GST.

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

All of the above must be satisfied for your supply of online products/services to be a taxable supply.

From the information given, your supply of online products/services to Australian individuals and non-resident individuals satisfies paragraphs (a) to (d) of section 9-5 of the GST Act as:

a) you make your supply of online products/services for consideration; and

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

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

d) you are registered for GST.

However, your supply of online products/services to Australian individuals and non-resident individuals is not a taxable supply to the extent that it is GST-free or input taxed.

There is no provision under the GST Act that makes your supply of online products/services input taxed.

GST-free supply

Relevant to your supply of online products/services to Australian individuals and non-resident individuals is item 3 in the table in subsection 38-190(1) of GST Act (item 3).

Under item 3, a supply of a thing other than a supply of work physically performed on goods situated in Australia when the thing supplied is done or a supply directly connected with real property situated in Australia is GST-free if:

a) the supply is made to a recipient who is not in Australia when the thing supplied is done; and

b) the effective use or enjoyment of which takes place outside Australia.

All the requirements in item 3 must be satisfied for the supply to be treated as GST-free under that item.

Item 3 applies irrespective of whether the recipient is a resident or non-resident of Australia.

Paragraph (a) of item 3

The requirement that 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 is not in Australia in relation to the supply when the thing supplied is done. If the recipient is in Australia in relation to the supply the recipient does not satisfy the ‘not in Australia’ requirement.

A resident individual who is physically in Australia when the thing supplied is done is in Australia in relation to the supply.

A non-resident individual who is physically in Australia when the thing supplied is done is in Australia in relation to the supply to the extent that the non-resident is in contact (other than contact which is only of a minor nature) with the supplier while in Australia.

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.

Where paragraph (a) of item 3 is satisfied it is necessary to consider paragraph (b) of item 3.

For more information on paragraph (a) of item 3 refer to Goods and Services Tax Ruling GSTR 2004/7 which is available from the legal database of www.ato.gov.au

Paragraph (b) of item 3

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).

To work out whether effective use or enjoyment of a supply takes place outside Australia, we apply the following two step approach:

● Determine the entity to which the supply is provided (the providee entity);

A supply is provided to an entity if in the performance or doing of the supply, the service or thing supplied flows to that entity. For example a supply travel services is provided to the entity that undertakes the travel. The actual flow of the travel service is to that entity.

● Determine whether provision of the supply to the providee entity is outside Australia.

Effective use or enjoyment of the supply takes place outside Australia if there is provision of the supply to the providee entity outside Australia.

Supply provided to a resident individual in Australia or outside Australia

A supply of online product/services is provided as and when the thing supplied is done. Therefore this is the relevant time for determining whether a supply is provided to an individual in or outside Australia.

A supply is provided to a resident individual in Australia if that individual is physically in Australia when the thing supplied is done; or is physically outside Australia when the thing supplied is done but that presence outside Australia is not integral to, but is merely coincidental with, the provision of the supply.

A supply is provided to a resident individual outside Australia if that individual is physically outside Australia when the thing supplied is done and, that presence outside Australia is integral to, as distinct from being merely coincidental with the provision of the supply.

Indicators that the presence of the individual outside Australia is integral to the provision of the supply include:

● the need for the supply arises from the resident individual’s presence outside Australia, for example a supply of legal services in relation to an office committed by that individual while outside Australia; or

● the presence of the resident individual outside Australia is integral to the performance, receipt or delivery of the supply, for example training, entertainment or travel services.

Where the supply of online products/services is provided to a resident individual in Australia effective use or enjoyment of the supply does not take place outside Australia. The supply is not GST-free under item 3 and is a taxable supply under section 9-5 of the GST Act.

Where the supply of online products/services is provided to a resident individual outside Australia effective use or enjoyment of the supply takes place outside Australia. The supply is GST-free if the other requirements of item 3 are met and subsections 38-190(2) and (2A) do not apply.

Supply provided to a non-resident individual outside Australia or in Australia

A supply is provided to a non-resident individual outside Australia if that individual is physically outside Australia when the thing supplied is done; or is physically in Australia when the thing supplied is done but that presence in Australia is not integral to, but is merely coincidental with, the provision of the supply.

A supply is provided to a non-resident individual in Australia if that individual is physically in Australia when the thing supplied is done and that presence in Australia is integral to, as distinct from being merely coincidental with the provision of the supply.

Where the supply is provided to a non-resident individual in Australia effective use or enjoyment of the supply does not take place outside Australia. The supply is not GST-free under item 3. The supply is a taxable supply under section 9-5 of the GST Act.

Where the supply is provided to a non-resident individual outside Australia effective use or enjoyment of the supply takes place outside Australia. The supply is GST-free if the other requirements of item 3 are met and subsections 38-190(2) and (2A) do not apply.

Applying facts to item 3

Your supply of online products/services is neither a supply of work physically performed on goods situated in Australia when it is done nor a supply directly connected with real property situated in Australia.

The supply of online products/services is done when it is delivered to the individual. The presence of the individual is therefore integral to the receipt of the online products/services.

Accordingly, where the supply of online product/services is made to an individual (resident and non-resident) located in Australia, the supply is a taxable under section 9-5 of the GST Act.

Where the supply of online product/services is made to an individual (resident and non-resident) located outside Australia, the supply is GST-free under item 3 to the extent that subsections 38-190(2) and (2A) do not apply.

Based on the facts received, subsections 38-190(2) and (2A) do not apply to your supply of online products/services.

For more information on paragraph (b) of item 3 please refer to Goods and Services Tax Ruling GSTR 2007/2.

Summary

To summarise where the supply of online products/services is made to an individual (resident and non-resident of Australia) located in Australia, the supply is a taxable under section 9-5 of the GST Act.

Where the supply of online products/services is made to an individual (resident and non-resident) located outside Australia, the supply is GST-free under item 3.

Questions 3 and 4

Summary

When the seminar is run outside Australia, your supply is GST-free under item 3 as the individuals (resident and non-resident) attending the seminar are located outside Australia. The use and enjoyment of the supply is outside Australia.

When the seminar is run in Australia, your supply is not GST-free under item 3 as the individuals (resident and non-resident) attending the seminar are located in Australia. The use and enjoyment of the supply is in Australia. The supply of the seminar in Australia is a taxable supply under section 9-5 of the GST Act.

Detailed reasoning

When you run seminars in and outside Australia, your supply of seminars satisfies paragraphs (a) to (d) in section 9-5 of the GST Act as:

a) you make your supply of seminars for consideration; and

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

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

d) you are registered for GST.

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

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

GST-free supply

Relevant to your supply of seminars to Australian and non-resident individuals is item 3 in the table in subsection 38-190(1) of GST Act (item 3).

Under item 3, a supply of a thing other than a supply of work physically performed on goods situated in Australia when the thing supplied is done or a supply directly connected with real property situated in Australia is GST-free if:

a) the supply is made to a recipient who is not in Australia when the thing supplied is done; and

b) the effective use or enjoyment of which takes place outside Australia.

All the requirements in item 3 must be satisfied for the supply to be treated as GST-free under that item.

Item 3 applies irrespective of whether the recipient is a resident or non-resident of Australia.

(For more information on item 3 please refer to the detailed reasoning for questions 1 and 2 above)

Seminar outside Australia

When the seminar is run outside Australia, your supply is GST-free under item 3 as the individuals (resident and non-resident) attending the seminar are located outside Australia. The use and enjoyment of the supply is outside Australia.

Seminar in Australia

When the seminar is run in Australia, your supply is not GST-free under item 3 as the individuals (resident and non-resident) attending the seminar are located in Australia. The use and enjoyment of the supply is in Australia. The supply of the seminar in Australia is a taxable supply under section 9-5 of the GST Act.