Edited version of your written advice

Authorisation Number: 1051493881430

Date of advice: 13 March 2019

Ruling

Subject: GST and supply of retreat and digital products

Question

Can you treat all of the revenue received for the business as income for GST-free supplies under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Advice

No, you cannot treat all the revenue received for the business as income for GST-free supplies because you make distinct supplies that are either taxable or GST-free under the GST law.

Your supplies that are made to:

● individuals (resident and non-resident) located in Australia at the time of the supply are taxable supplies under section 9-5 of the GST Act; and

● individuals located outside Australia at the time of the supply are GST-free under item 3 in the table in subsection 38-190(1) of the GST Act.

Relevant facts

You are registered for GST you run an online based training and education courses across the world. This includes:

● a range of training courses and a membership program with monthly recurring payments.

● a range of digital online books

● occasional private retreat in Australia.

You provide digital online training and digital worksheets for the courses and program to your customers. Some programs may include newsletter, a free networking event once or twice a year, live digital group training webinars, a welcome kit.

Your online training courses and programs are all delivered digitally via email and the content is held within a secure, password protected online portal.

Customers receive an automated email with their log-ins to access the content digitally, immediately after a successful online payment. They can decide when to access the content and all programs which are self-paced and accessible anywhere in the world where they have a laptop

All products are sold via online order forms with credit card capture. Your customer’s journey usually starts where they see your advertisement. You then walk them through a series of free trainings or gifts then product payments and order forms.

Most customers purchase and go through your automated billing and product delivery email nurtures without you noticing or knowing their name etc. You can gather some customer information from your merchant banking process but it is not required to deliver and rarely done.

The only way you would be able to assume where the attendees are located is by looking at their Billing Address (that is collected by your merchant banking provider to authenticate their credit card in the payment process – a legal requirement for processing credit cards online). The digital delivery of courses and programs is not impacted by their address.

You do not know if the customers are consuming the digital content as an individual or a business so you cannot say if any of the customers are registered for GST; but as most customers are from overseas, you assume they are not registered for GST

Customers receive an automated email with their log-ins to access the content digitally, immediately after a successful online payment. They can decide when they access the content and all programs are self-paced and accessible anywhere in the world where they have a laptop.

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.

Characterisation of your supply

From the information given we consider you are making the following distinct supplies to your customers:

● A supply of retreat; and

● A supply of digital products -online books and online training courses. When you supply the online training courses we consider that the videos and worksheets are the main component of the supply and where the training courses include a welcome kit, newsletter or a free networking event we consider these are incidental to the supply of the main component of the supply which is the videos and worksheets.

The next step is to consider the GST status of these supplies.

GST status of supplies

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 retreat and digital products to be a taxable supply.

From the information given, your supply of retreat and digital products satisfies paragraphs (a) to (d) in section 9-5 of the GST Act as:

a) you make your supply 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.

Your supply of retreat and digital products is a taxable supply to the extent that it is not GST-free or input taxed.

Your supply of retreat and digital products is not an input taxed under the GST Act.

GST-free supply

Relevant to your supply of retreat and digital products to individuals is item 3 in the table in subsection 38-190(1) of the GST Act (item 3).

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

Under item 3, a supply of a thing other than goods or real property for used or enjoyed outside 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

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 when the thing supplied is done.

For your supply of retreat and digital products to be treated as GST- free under that item, you must satisfy both paragraphs (a) and (b) of item 3 since the supply is not work physically performed on goods or directly connected with real property in Australia.

Paragraph (a) of item 3

Goods and Services Tax Rulings GSTR 2004/7 (available at www.ato.gov.au) provides guidance on the application of paragraph (a) of item 3.

For your supply of retreat and digital products to be GST-free under item 3 there is a condition that the individual must not be in Australia in relation to the supply when it is done.

To determine whether there is provision of a supply to an individual in Australia or outside Australia we distinguish between resident and non-resident individuals and whether they are physically in or outside Australia when the thing supplied is done. Goods and Services Tax Ruling GSTR 2017/1 provides assistance in determining whether a supply is made to an Australian resident.

An individual is in Australia if that individual is physically in Australia. If an individual carries on business in Australia through employees or other representatives (including an agent), but is not physically in Australia, the individual is ‘not in Australia’.

An individual is in Australia in relation to the supply if the individual is involved with the supply while in Australia. A resident individual who is physically in Australia is in Australia in relation to the supply.

A non-resident individual is in Australia in relation to the supply where the individual is involved with the supply, that is where the individual is in contact with the supplier while in Australia and that contact is not minor (for example a courtesy call or checking on the progress of the supply).

If the non-resident individual is in Australia for a purpose that is not related to the supply (for example the individual is on holiday in Australia and has no contact with the supplier or only has minor contact), the non-resident is not considered to be involved with the supply and is therefore not in Australia in relation to the supply.

If it is determined that the supply is made and provided to the same entity, this entity is the recipient of the supply and we determine whether effective use or enjoyment of the supply takes place outside Australia with reference to that entity.

Supply of retreat

The supply of retreat is done at the time the individual attend the retreat.

The individuals (resident and non-resident of Australia) are in Australia when they attend the retreat. In this instance the individuals (resident and non-resident) are in relation to the supply of the retreat. Paragraph (a) in item 3 is not satisfied.

Paragraph (b) in item 3 is not satisfied as well as the use and enjoyment of the supply takes place in Australia.

Your supply of retreat is in this case is a taxable supply under section 9-5 of the GST Act.

Supply of digital products

The digital products are emailed to the individuals at the time the sales transaction take place and payment is received. In this instance the individual’s presence is integral with the receipt of the digital products.

From the facts given, the individuals are located worldwide. Where the address provided by the individual is an overseas address at the time the sales transactions occur, we consider the individual is located outside Australia. Similarly where the address provided is an Australian address at the time the sales transactions occur, we consider the individual is located in Australia.

Where the individuals (resident and non-resident of Australia are in Australia in relation to the supply when the supply is done, paragraph (a) in item 3 is not satisfied. Since the use and enjoyment of the supply is in Australia, the supply is a taxable under section 9-5 of the GST Act.

Where the individuals (resident and non-resident of Australia) are not in Australia in relation to the supply when the supply is done, paragraph (a) of item 3 is satisfied. Next is to consider paragraph (b) in item 3.

Paragraph (b) of item 3

Goods and Services Tax Ruling GSTR 2007/2 provides guidance when effective use or enjoyment of the supply takes place outside Australia.

Effective use or enjoyment of the supply only takes place outside of Australia, if there is provision of the supply to the individual outside Australia.

When the supply of digital products is provided to individuals (resident and non-resident) located outside Australia, the use and enjoyment of the digital products is outside Australia. In this instance paragraph (b) in item 3 is satisfied. The supply is GST-free under item 3.

You will need to hold evidence before treating your supply as GST-free under item 3

Summary

Your supply of retreat to individuals (resident and non-resident) is a taxable supply under section 9-5 of the GST Act.

Your supply of digital products to individuals (resident and non-resident) located in Australia at the time of the supply is a taxable supply under section 9-5 of the GST Act.

Your supply of digital products to individuals (resident and non-resident) located outside Australia at the time of the supply is GST-free under item 3.