Edited version of your written advice

Authorisation Number: 1051468772575

Date of advice: 19 December 2018

Ruling

Subject: GST and supply of membership

Question 1

If the overseas supplier poses the following question to Australian residents during its membership application process, can the overseas supplier use the answer to determine whether or not their intangible membership supplies provided to those individuals are supplies where the recipient is an Australian consumer for the purposes of paragraph 9-25(5)(d), subsection 9-25(7) and section 84-100 of the A New Tax System (Goods and Services Tax) Act 1999?

Complete (a), (b) or (c) as appropriate:

(a) My employer has agreed to pay the overseas supplier (either directly or via reimbursement) to provide this membership to me. My employer is a GST registered entity and is making this acquisition for the purposes of its enterprise.

My employer's ABN is: _ _ _ _ _ _ _ _ _ _ _

(b) I am registered for GST, am making this acquisition of membership for the purposes of my enterprise and my ABN is: _ _ _ _ _ _ _ _ _ _ _

(c) Tick this box if neither (a) or (b) above is applicable [ ].

Answer

From the information received, applicants that can register for membership are individuals. These individuals have to abide to the terms and conditions of the membership application and comply with the membership’s constitution and By-laws. In this instance the individuals are the recipient of the supply of memberships made by the overseas supplier and it is relevant to determine whether these individuals are Australian consumers for GST purposes.

A supplier can be sure their customer is not an Australian consumer under subsection 84-100(3) of the GST Act if they obtain the customer’s Australian business number (ABN) and a statement from the customer that they are registered for GST.

In this instance question (b) is the relevant question to ask to the Australian individuals as the individuals can be registered for GST when carrying on their business as a sole trader.

Questions (a) and (c) are not relevant and do not need to be asked since where an employer pays for the membership of the individual whom they have employed, the employer is considered as a third party payer for GST purposes and is not the recipient of the membership.

Question 2

If the overseas supplier receives an affirmative answer to part (a) or part (b) of the question below, and the overseas supplier’s business processes include reasonable steps to ensure the validity of information regarding ABNs and GST-registration status, can it treat intangible membership supplies provided to that Australian resident as not being supplies where the recipient is an Australian consumer for the purposes of paragraph 9-25(5)(d), subsection 9-25(7) and section 84-100 of the A New Tax System (Goods and Services Tax) Act 1999?

(a) My employer has agreed to pay the overseas supplier (either directly or via reimbursement) to provide this membership to me. My employer is a GST registered entity and is making this acquisition for the purposes of its enterprise.

My employer's ABN is: _ _ _ _ _ _ _ _ _ _ _

(b) I am registered for GST, am making this acquisition of membership for the purposes of my enterprise and my ABN is: _ _ _ _ _ _ _ _ _ _ _

Answer

As advised in question1 the recipient for the supply of membership made by the overseas supplier is an individual. Where the Australian individual has advised they are registered for GST and provides their ABN under question (b), the overseas supplier can treat its supply of membership to the individual as being made not to an Australian consumer.

Where the individual has advised that the employer has agreed to pay for their membership fee under question (a), the overseas supplier cannot use this information to treat the supply made to the Australian individual as a supply that is not made to an Australian consumer. This is because the employer is not the recipient of the supply of membership and instead is a third party payer for GST purposes.

Relevant facts

You are a non-resident entity and do not carry on an enterprise in Australia. You currently are not registered for the Australian goods and services tax (GST).

You are a professional organisation and provide memberships to individuals worldwide. Your main objective is to regulate the profession carried on by these individuals. Your role is to provide support services to your members.

The membership entitles the member to recognition of qualifications and access to online technical resources, newsletters, discussion groups and courses for continuing professional development.

The status of the membership is attached to named individuals (natural persons) rather than to companies, partnerships or other bodies.

All membership subscriptions invoices are issued in the name of the individual member. It is your policy that no subscription invoices be made out in the name of a company, partnerships or other bodies despite the latter has paid the membership subscription on behalf of the individual or refunded the membership subscription to the individual.

All members have to abide by the terms and conditions of the membership application and comply with the membership’s Constitution and By-laws. The By-Laws establish disciplinary procedures to discourage members from improper conduct.

The Australian resident individuals may be acting either directly in their own capacity or as agents (employees, directors, partners, office holders) of a GST registered enterprise. Subject to some exceptions, the Australian resident individuals will generally be members of your professional organisation for the purpose of their role as employees or principals in GST registered entities.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-25 (5)(d)

A New Tax System (Goods and Services Tax) Act 1999 subsection 9-25(7)

A New Tax System (Goods and Services Tax) Act 1999 section 84-100

A New Tax System (Goods and Services Tax) Act 1999 section 195-1

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

Who is the recipient of the supply of membership?

From 1 July 2017 a supply of anything other than goods or real property by an overseas supplier is connected with Australia where the recipient of the supply is an Australian consumer under paragraph 9-25(5)(d) of the GST Act.

‘Recipient’ in relation to a supply is defined in section 195-1 as the entity to which the supply was made.

Generally for every supply there is a supplier, a recipient and an acquisition. To make an acquisition you have to be the recipient of the supply of the thing you are acquiring.

Subsection 9-15(1) of the GST Act provides that the consideration for a supply includes any payment ‘in connection with’, ‘in response to’ or ‘for the inducement of a supply of anything. Subsection 9-15(2) of the GST Act provides that the payment does not have to come from the recipient. Accordingly it makes no difference to the GST liability of the supplier which entity provides the consideration though there are clear ramifications for the recipient of the supply in determining whether they have made a creditable acquisition.

Paragraphs 117 to 216 in Goods and Services Tax Ruling GSTR 2006/9: supplies provide guidance on when a third party makes a payment to the supplier and is not the recipient of the supply.

Paragraph 183 in GSTR 2006/9 states:

183. If you provide or are liable to provide consideration for a supply, but you are not the recipient of the supply, you are referred to in this Ruling as a 'third party payer'. As a third party payer you do not make a creditable acquisition in relation to your payment because the supply is not made to you as required by section 11-5. Making a payment for a supply that is made to another entity is not sufficient to make you the recipient of that supply.

Further paragraph 132 in GSTR 2006/9 states:

132. 'Provide' is used to contrast with 'made' - it distinguishes between the contractual flow of the supply to the recipient (the entity to which the supply is made) and the actual flow of the supply to another entity (the entity to which the supply is provided).

From the information received, applicants that can register for your membership are individuals. These individuals have to abide by the terms and conditions of the membership application and comply with the membership’s Constitution and By-laws. Employers may agree to pay for the membership fee directly to you or reimburse the fee to the individual for the membership as part of the employment of the individual for the business.

From the above, the individuals are the recipients of the supply of memberships since they are the ones that have the contractual arrangement with you when applying for membership and they have to abide by the conditions set by you when the membership is given.

Where the employer agrees to pay the fee directly to you, they are considered as a third party payer and not the recipient of the supply of membership since there is no contractual arrangement between the employer and you. Further by paying or reimbursing the employee for the membership fee the employee is providing a benefit to the employee.

Accordingly, the supply of membership is made and provided to the Australian individuals despite the fact that the fee may be paid by the employers. The next step is to determine if the Australian individuals are Australian consumers.

Are the individuals Australian Consumers?

An Australian consumer is defined in subsection 9-25(7) of the GST Act as:

● an Australian resident that is not registered for GST; or

● an Australian resident registered for GST and the acquisition is not solely or partly for the purpose of the business that the Australian resident carries on.

Section 84-100 of the GST Act provides when entities can be treated as not being Australian consumers and according to subsection 84-100(3) of the GST Act your belief that the entity is not an Australian consumer is reasonable if:

a) the entity has disclosed their ABN to you or you have been disclosed with information that the Commissioner by legislative instrument has prescribed identifying information relating to the entity; and

b) the entity has provided you a declaration or information that indicates that the entity is registered.

You will need to be able to determine whether the supply of memberships are made to Australian consumers or to businesses that are registered for Australian GST since the Australian individuals may be registered for GST and acquiring the membership for their business purposes.

You can be sure the Australian individual is an Australian GST-registered business purchasing for business use if:

● you obtain their Australian Business Number (ABN) and

● they state to you that they are registered for GST.

You can confirm the individual has an ABN and is registered for GST by:

● searching for their ABN on the ABN look up website at https://abr.business.gov.au/ ; or

● integrating ABN lookup validation and data into their own applications using the free ABN Lookup web services at https://abr.business.gov.au/Tools/WebServices

Question (b) you intend to ask is relevant as it will assist you to determine whether the Australian individual is an Australian consumer. Questions (a) and (c) are not relevant and you do not need to ask them since the information will not assist you in determining whether the Australian individuals are Australian consumers.

To assist overseas suppliers to determine whether their supplies are made to an Australian consumer we have published the following documents:

● Sales of imported services and digital products to Australian GST registered businesses at https://www.ato.gov.au/Business/International-tax-for-business/GST-on-imported-services-and-digital-products/Sales-of-ISDP-to-GST---registered-businesses/

● GST on imported services and digital products for Australian businesses at https://www.ato.gov.au/Business/International-tax-for-business/In-detail/GST-on-imported-services-and-digital-products-for-Australian-businesses/

● Goods and Services Tax Ruling GSTR 2017/1: making cross border supplies to Australian consumers available at https://www.ato.gov.au/law/view/document?DocID=GST/GSTR20171/NAT/ATO/00001&PiT=99991231235958