Edited version of your written advice

Authorisation Number: 1051477976212

Date of advice: 30 January 2019

Ruling

Subject: GST and supply of goods and services to an Australian entity which will be used outside Australia

Question 1

Is the supply of goods and services made by the overseas company to an Australian entity connected with Australia for the purposes of paragraph 9-5(c) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Advice

Yes, the supply of goods and services made by the overseas company to the Australian entity is not connected with Australia for the purposes of paragraph 9-5(c) of the GST Act

Relevant facts

You are an overseas company. You do not have a presence or a permanent establishment in Australia. You are not registered for Australian income tax or GST purposes and are not required to undertake Australian tax and accounting compliance obligations.

You have been engaged to deliver a Goods and Services Contract to an Australian entity that is registered for GST and these goods and services will be delivered outside Australia.

None of the goods you supply to the Australian entity will be sourced nor supplied from Australia.

The Goods and Services Contract between you and the Australian entity requires the services to be delivered outside Australia.

Relevant legislative provisions

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

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.

Under section 9-5 of the GST Act GST is payable on a taxable supply. The connection with Australia is one of the elements required to be satisfied before a supply is a taxable supply (9-5 (c) of the GST Act. However, a supply is not a taxable supply to the extent that it is GST-free or input taxed.

Connected with Australia

Section 9-25 of the GST Act defines when a supply is ‘connected with Australia’. For the purposes of determining whether a supply is connected with Australia, section 9-25 of the GST Act makes a distinction between a supply of goods, a supply of real property and a supply of anything other than goods or real property.

Accordingly we need to determine the character of your supplies to DFAT before determining whether the supply is connected with Australia.

Characterisation of supply

From the facts given your supply consists of the provision of goods and services which are to be delivered outside Australia.

In this instance you make two distinct supplies for GST purposes:

1. A supply of goods; and

2. A supply of services.

We will now consider whether each of the supplies is connected with Australia.

Supply of goods

A supply of goods is connected with Australia if any of the following applies:

● The goods are delivered or made available in Australia to the recipient of the supply;

● The supply of goods involves goods being removed from Australia

● The supply of goods involves the goods being brought to Australia and the supplier imports the goods into Australia;

● The supply is an offshore supply of low value imported goods to a consumer (purchaser not registered for GST or registered for GST and the purchase is not for the Australian business carried on by the purchaser).

You advised that none of the goods are sourced or supplied from Australia and the goods are be used outside Australia. In this instance none of the above applies to your supply.

Accordingly, your supply of goods to the Australian entity is not connected with Australia.

Supply of services

For a supply of services to be subject to GST the supply must be connected with Australia under one of the requirements in subsection 9-25(5) of the GST Act.

Under subsection 9-25(5) of the GST Act, a supply of services is connected with Australia if one of the following is satisfied:

a) the supply is done in Australia; or

b) the supplier makes the supply through a business that the supplier carries on in Australia; 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 Australia zone; or

d) the recipient of the supply is an Australian consumer (Australian resident not registered for GST or registered for GST and the acquisition is not for business purposes).

Where none of the above is satisfied, the supply of services is not connected with Australia and therefore will be outside the scope of the GST system.

From the facts given, none of the paragraphs in subsection 9-25(5) of the GST Act applies to your supply of services as:

● your supply of services to the Australian entity is not done in Australia;

● you make your supply through a business that you carry on outside Australia;

● your supply of services is not a supply of right or option to acquire another thing, the supply of the other thing would be connected with Australia.; and

● you have not made a supply of imported services to an Australian consumer as the Australian entity is acquiring your services for business purposes and is registered for GST.

Summary

Your supply of goods and services to the Australian entity is not connected with Australia.