Edited version of private advice

Authorisation Number: 1051567688041

Date of advice: 16 August 2019

Ruling

Subject: GST and advertising revenues

Question

Is the share of advertising revenues received by you through your channel in an online platform consideration for a GST-free supply?

Answer

Yes, the share of advertising revenues received by you through your channel in an online platform is consideration for a GST-free supply.

This ruling applies for the following period:

16 August 20XX - 16 August 20YY

Relevant facts and circumstances

You are not registered for GST.

You produce media and online content in Australia. You are registered for GST.

You entered into a contract with a non-resident entity under which advertisements are inserted into the content that you upload to your channel in an online platform.

The non-resident does not have any presence in Australia through which you entered into the contract.

As part of the arrangement, you receive a certain percentage of advertising revenue collected by the non-resident from advertisers. The amount of revenue that you are entitled to receive depends on the number of views accrued by the advertisements that are inserted into your videos.

You are not privy to other information pertinent to the calculation of the advertising revenue, including the locations from which your videos and the advertisements are viewed.

You have no control and no oversight over which advertisers have their advertisements inserted into your videos.

The terms of your arrangement with the non-resident place the burden upon you to determine whether the payments you receive from the non-resident are subject to GST; and if so, the payments are treated as inclusive of GST.

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

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 the indirect tax zone; 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 term defined under section 195-1 of the GST Act)

You entered into a contract with the non-resident under which you receive a share of advertising revenues earned through the advertisements inserted into the content that you upload. Therefore, we take the view that you make a supply by making your channel available for advertisements.

The supply is for consideration as you receive payments calculated on the advertising revenues earned. You make the supply in the course of carrying on your enterprise. The supply is connected with the indirect tax zone as you make the supply through the enterprise that you carry on in the indirect tax zone. Paragraphs 9-5(a) to 9-5(c) of the GST Act are satisfied.

Where you are required to register for GST, paragraph 9-5(d) would also be satisfied. As such, the supply would be a taxable supply unless it is GST-free or input taxed.

There is no provision in the GST Act under which your supply would be input taxed.

Under subsection 38-190(1) of the GST Act certain supplies of things, other than goods or real property, for consumption outside the indirect tax zone are GST-free. Item 2 in the table in subsection 38-190(1) (item 2) provides that a supply that is made to a non-resident who is not in the indirect tax zone when the thing supplied is done is GST-free if:

(a)  the supply is neither a supply of work physically performed on goods situated in the indirect tax zone when the work is done nor a supply directly connected with real property situated in the indirect tax zone; or

(b)  the non-resident acquires the thing in carrying on the non-resident's enterprise, but is not registered or required to be registered for GST.

Firstly, it must be determined who is the recipient of your supply. Based on the information you provided, you make the supply under a contract with the non-resident where you make your channel available for advertisements to be inserted into the video contents. This is done through an advertising program which is run by Google AP. Therefore, the recipient of your supply is the non-resident.

You do not make the supply to the operator of the online platform where you upload your content or to those who view the content. Furthermore, you do not make the supply to the advertisers as you have no control and no oversight over which advertisers have their advertisements inserted into your videos. You are not privy to information pertinent to the calculation of the advertising revenue including the locations from which your videos and the advertisements are viewed.

You make the supply to a non-resident entity. The non-resident does not have any presence in Australia through which you entered into the contract. The supply is neither a supply of work physically performed on goods situated in the indirect tax zone nor a supply directly connected with real property situated in the indirect tax zone.

Therefore, your supply is GST-free under item 2. The share in advertising revenues that you receive from the non-resident is consideration for a GST-free supply.

Additional information

Note that GST-free supplies are not excluded in the calculation of your GST turnover. Therefore, you must include the share of advertising revenues that you receive from the non-resident in working out your GST turnover for the purpose of determining whether you are required to be registered.