Edited version of your written advice

Authorisation Number: 1051485983596

Date of advice: 25 February 2019

Ruling

Subject: Good and services tax (GST) and a supply of examination preparation training courses

Question

Is a supply of examination (exam) preparation training courses provided by an Australian entity (you) to the participants/individuals in Australia a taxable supply?

Answer

Yes. Your supply of exam preparation training courses provided by you to the participants/individuals in Australia is a taxable supply under section 9-5 of the GST Act and therefore subject to GST.

Relevant facts and circumstances

You are an Australian entity which is registered for goods and services tax (GST).

You provide examination (exam) preparation training courses to the participants/individuals who are preparing for their fellowship exams.

You are not a Registered Training organisation (RTO).

You are not a recognised or registered adult community education (ACE) course provider.

Your exam preparation training courses are provided both face-to-face and online.

Your exam preparation training courses do not lead to a qualification that is an essential prerequisite for entry into the profession.

You provide to the students all the materials they need to pass the exams.

Your exam preparation training courses are optional preparation for students to attempt the exams.

Your exam preparation training courses are not mandatory for a person to have the qualification before he or she can enter into, or commence the practice of, in the profession.

Your exam preparation training courses are designed for those are already working in a trade or profession and designed to increase their knowledge.

Your exam preparation training courses do not count towards continuing the professional development.

Your exam preparation training courses are not provided to an employee at the request of his/her employer or to a member of an organisation at the request of that organisation.

Your exam preparation training courses are conducted in groups or online.

Your exam preparation training courses are not likely to add to the employment related skills of people undertaking the courses.

Your exam preparation training courses are only relevant to the participants/individuals who are preparing for their fellowship exams.

Your exam preparation training courses are issued with the relevant “Certificate of Attendance’ that certifies that they have undertaken and successfully completed the courses.

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 38-85

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

Reasons for decision

GST is payable on a taxable supply. Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (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 Australia; 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.

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

Your supply of exam preparation training courses to the participants/individuals in Australia will be taxable if all the requirements in section 9-5 of the GST Act are satisfied.

From the facts given, your supply of exam preparation training courses to the participants/individuals in Australia satisfy paragraphs 9-5(a) to 9-5(d) of the GST Act, as follows:

(a) you make the supply of exam preparation training courses to the participants/individuals in Australia in return for consideration by way of payments;

(b) you make the supply in the course of your business;

(c) the services (courses) are performed/provided in Australia or made through an enterprise that you carry on in Australia (and therefore the supply is connected with Australia); and

(d) you are registered for GST in Australia.

However, section 9-5 of the GST Act also provides that the supply is not taxable to the extent that it is GST-free or input taxed.

Your supply of exam preparation training courses to the participants/individuals in Australia does not satisfy the input taxed provisions under the GST Act. The GST-free provisions are taken into consideration.

GST-free

A supply of an education course is GST-free under section 38-85 of the GST Act. An education course is defined in section 195-1 of the GST Act to include among other things;

● a tertiary course;

● an adult and community education (ACE) course; and

● a professional or trade course.

Each of the above courses is further defined under section 195-1 of the GST Act.

Tertiary course

Goods and Services Tax Ruling GSTR 2001/1 discusses supplies that are GST-free tertiary courses.

A tertiary course is defined in the GST Act to be a course that is determined by the Education Minister to be a tertiary course for the purposes of the Student Assistance Act 1973. A tertiary course can also be GST-free if the course is determined by the Education Minister to be a tertiary course for the purposes of the GST Act.

Schedule 2 of the Student Assistance Act 1973 Determination No. 2002/1 (Determination No. 2002/1) specifies a range of courses that are tertiary courses and the type of education institution that can provide those courses. The relevant institutions are an RTO, Secondary School or a Higher Education Institution.

As you are not an RTO or one of the other institutions, your exam preparation training courses do not satisfy the definition of a tertiary course as set out in Determination No. 2002/1. Accordingly, your supply of exam preparation training courses is not GST-free tertiary education courses.

We need to determine whether exam preparation training courses provided by you satisfy definition of an ACE course.

Adult and Community Education (ACE) courses

To be GST-free as an ACE course for the purposes of section 38-85 of the GST Act and section 195-1 of the definition of an ACE course, a course must be:

(a) likely to add to the employment related skills of people undertaking the course; and

(b) of a kind determined by the Education Minister to be an adult and community education course; and

(c) provided by, or on behalf of, a body that is a higher education institution, recognised or funded by the State or Territory authority as a provider of ACE courses or a body corporate operating on a not-for-profit basis (that has not been refused registration, or disqualified as a provider of ACE courses).

First requirement

Goods and Services Tax Ruling GSTR 2000/27, discusses the meaning of 'likely to add to employment related skills'. The test as to whether an adult and community education course is likely to add to the employment related skills of people undertaking the course is an objective test and not dependent on the subjective intention of the providers of the course or the recipients.

Based on the information provided, the exam preparation training courses provided by you are not likely to add to the employment related skills of the people undertaking them and therefore do not satisfy the criteria outlined above.

Second requirement

To satisfy the definition of an ACE course the course must also meet the requirements of the Education Minister's Determination A New Tax System (Goods and Services Tax)(Adult and Community Education Courses) Determination 2000 (ACE Determination). At paragraph 5(2) of this Determination, the Education Minister states that an adult and community education course must:

(a) not be any other education course defined in section 195-1 of the Act; and

(b) be available to adults in the general community; and

(c) not be provided by or at the request of an employer to employees of that employer; and

(d) not be provided by or at the request of an organisation to members of that organisation, except an organisation for which membership is open to adults in the general community; and

(e) not be a course that is provided by way of private tuition to an individual.

Based on the information given, the exam preparation training courses provided by you are not available to adults in general community. The exam preparation training courses provided by you are only relevant to students sitting exams. Accordingly exam preparation training courses provided by you do not satisfy the criteria outlined above.

Third requirement

Finally, the course must be provided by, or on behalf of, a body that is a higher education institution, or recognised or funded as a provider of ACE courses, or a body corporate operating on a not-for-profit basis that has not been refused recognition or disqualified by a State or Territory authority as provider of ACE courses for failing to meet or maintain the standards required by that authority.

The facts provided indicates that you are not a higher education institution, and are not recognised or funded as a provider of ACE courses, nor are you a body corporate operating on a not-for-profit basis. Therefore, you do not satisfy the third requirement and as such the courses fail to satisfy the definition of an ACE course.

We need to determine whether the exam preparation training courses provided by you satisfy the requirement as a professional or trade course under section 38-85 of the GST Act.

Professional or Trade Course

To be GST-free as a professional or trade course under section 38-85 of the GST Act, a course must:

● leads to a qualification, and

● that qualification must be an essential prerequisite for entry to, or to commence the practice of (but not to maintain or progress the practice of) a profession or trade in Australia.

Goods and Services Tax Ruling GSTR 2003/1 discusses what supplies are GST-free as a professional or trade course.

First requirement: leading to a qualification

Paragraph 45 of GSTR 2003/1 identifies documents that are qualifications or that provide evidence of a qualification. These include a statement of satisfactory completion, a certificate (including a degree or diploma), a licence or an accreditation. This requirement will be satisfied where such a document is awarded to the participants undertaking your course upon successful completion of all of the units or modules that make up your course.

You advise that the people undertaking the exam preparation training courses provided by you are issued with the relevant certificate of completion or documentation that certifies that they have undertaken and successfully completed the courses. It is therefore accepted that all your courses lead to a qualification and have satisfied the first requirement.

Second requirement: qualification to be an essential prerequisite

We need to determine whether the exam preparation training courses provided by you satisfy the second requirement which is the qualification must be an ‘essential prerequisite’.

Paragraph 46 of GSTR 2003/1 states that your course will only be a professional or trade course if it leads to a qualification that is an essential prerequisite for entry to, or to commence the practice of, a particular profession or trade.

Under the section 195-1 of the GST Act definition of ‘essential prerequisite’, the qualification must be imposed:

(i) by or under an industrial instrument;

(ii) if there is no industrial instrument, by a professional or trade association that operates on a national level; or

(iii) if neither (i) nor (ii) applies, by a professional or trade association that operates at a State or Territory level.

An 'industrial instrument' means:

(a) an Australian law; or

(b) an award, order, determination or industrial agreement in force under an Australian law.'

An 'Australian law' means 'a Commonwealth law, a State law or a Territory law'.

The qualification must be a legal requirement, for example a law, regulation or industrial agreement, or be one imposed by a professional or trade organisation, either nationally or on a State or Territory basis.

A qualification is an essential prerequisite if it is mandatory for a person to have the qualification before he or she can enter into, or commence the practice of a particular profession or trade. This necessarily requires the imposition of penalties or sanctions if a person enters into, or commences the practice of, the profession or trade without the relevant qualifications.

A qualification that is imposed for reasons other than for entry to, or to commence the practice of, a profession or trade, is not an essential prerequisite for the purposes of a professional or trade course. Similarly, a qualification required by an employer or group of employers, but which is not imposed by an industrial instrument, or a professional or trade association at either the national level, or State or Territory level will not be an essential prerequisite.

A qualification that is an essential can be imposed by only one profession or trade association at the national level or State or Territory (as applicable).

In relation to the 'ability of a professional or trade association to impose a qualification', paragraphs 59 to 61 of GSTR 2003/1 state:

59. A professional or trade association's ability to impose membership requirements is not conclusive evidence of that association's ability to impose a qualification that is an essential prerequisite.

60. If more than one professional or trade association, either at the national level or for a particular State or Territory, has requirements relating to the entry to, or the commencement of the practice of, the profession or trade concerned, no qualification, set by any of the associations as a requirement for entry or commencement, would be an 'essential prerequisite'. None of the associations can prevent someone entering that profession or trade through one of the other associations.

61. The capacity of a professional or trade association to impose a qualification would require some threat of legal sanction or penalty.

In relation to a 'particular' profession or trade' paragraphs 65 to 67 of GSTR 2003/1 state:

65. The reference in paragraph (a) of the definition of a 'professional or trade course' and in the definition of 'essential prerequisite', in section 195-1, to a 'particular profession or trade' establishes a requirement that the qualification be specific to the profession or trade in question.

66. Qualifications that are general in nature and that relate to the entry to, or the commencement of the practice of, a number of professions or trades, are not essential prerequisites for entry to, or to commence the practice of, a particular profession or trade.

67. Courses that you supply for general knowledge, or for personal development, would not ordinarily be professional or trade courses. This is because they lack a sufficiently direct link between the qualification they lead to and the requirement that the qualification be for entry to, or to commence the practice of, a particular profession or trade.

Further paragraphs 96 and 98 of GSTR 2003/1 cover the ATO’s view in relation to a 'course that provides additional skills' and ‘maintaining the practice of a profession or trade’:

96. There are numerous industrial instruments that require a person to obtain approval or certification before a particular task or duty in an occupation can be undertaken. The fact that there is such a requirement does not necessarily mean that the particular task or duty is a separate profession or trade. If the qualification merely relates to the undertaking of a duty or task in a profession or trade, a course leading to that qualification is not a professional or trade course. The qualification is not an essential prerequisite.

98. The exclusion in paragraph (b) of the definition of a professional or trade course in section 195-1 ensures that a course which leads to a qualification that is an essential prerequisite to maintaining the practice of a profession or trade, is not a professional or trade course.

In accordance with GSTR 2003/1 outlined above and the facts provided, we do not consider that your supply of the exam preparation training courses are qualifications which are essential prerequisite for entry to, or to commence the practice of, the profession or trade for the purposes of section 38-85 of the GST Act for following reasons:

● There is no legal requirement, for example a law, regulation or industrial agreement, either nationally or at a State or Territory level to complete the exam preparation training courses provided by you in order to enter, or commence the practice of, the profession.

● There are no penalties or sanctions imposed on the person/entity without the certifications from your exam preparation training courses, under any legislation or by a professional or trade association;

● the exam preparation training courses provided by you do not lead to a qualification which relates to a particular profession or trade. The fact is a person might be employed in the industry without having completed these courses.

● the exam preparation training courses provided by you can be done by people who are already in a in a trade or profession in order to prepare for their fellowship exams. The qualification merely relates to the undertaking of a duty or task in the profession or trade and therefore the exam preparation training courses are not essential prerequisites.

Accordingly, as the exam preparation training courses provided by you do not satisfy the second requirement of a professional or trade course, the supply of the exam preparation training courses by you are not GST-free.

Conclusion

The supply of the exam preparation training courses by you to the participants/individuals in Australia do not satisfy the requirements of GST-free education courses under section 38-85 of the GST Act and are not GST-free. Furthermore, your supply of the exam preparation training courses by you to the participants/individuals in Australia does not satisfy any other GST-free provisions.

Therefore, the supply of the exam preparation training courses by you to the participants/individuals in Australia is taxable supply under section 9-5 of the GST Act and is subject to GST.