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Edited version of private advice
Authorisation Number: 1051622035482
Date of advice: 17 December 2019
Ruling
Subject: GST and supply of services to a non-resident
Question
Is the supply of services you make to the non-resident company a GST-free supply under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
Yes, the supply of services you make to the non-resident company is a GST-free supply under item 2 in the table in subsection 38-190(1) of the GST Act.
Relevant facts
You are a resident of Australia and currently not registered for GST.
You have entered into a contractual agreement with a non-resident company located outside Australia and under the agreement you agreed to supply services to the non-resident company
You advised the following:
· All services are technical in nature and are supplied by electronic remote access to the overseas company. Remote access is commonly made from outside Australia.
· You do not provide any of the services to an entity in Australia.
· The non-resident company does not carry on any business activity in Australia.
· You receive instructions directly from the non-resident company and this is done via electronic communication and/or teleconference.
· The non-resident company does not have any employee or representative in Australia that is involved with your supply.
· The non-resident company is not required to be registered for GST.
· Your annual turnover for your services would be above A$75,000.
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.
Detailed reasoning
GST is payable on a taxable supply. A supply is a taxable supply under section 9-5 of the GST Act if:
- the supplier makes the supply for consideration; and
- the supply is made in the course or furtherance of an enterprise that the supplier carries on; and
- the supply is connected with Australia; and
- 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 services to be a taxable supply.
From the information given, your supply of services to the non-resident company satisfies paragraphs (a) to (d) of 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 required to be registered for GST since your annual turnover is above the GST registration threshold of A$75,000.
However, your supply of services is not a taxable supply to the extent that it is GST-free or input taxed.
There is no provision under the GST Act that makes your supply of services input taxed.
GST-free supply
Relevant to your supply of services to the non-resident company is item 2 in the table in subsection 38-190(1) of GST Act (item 2).
Item 2 provides that a supply of a thing (other than goods or real property) made to a non-resident is GST-free if it is a supply that is made to a non-resident that is not in Australia when the thing supplied is done, and:
a) the supply is neither a supply of work physically performed on goods situated in Australia when the work is done, nor a supply directly connected with real property situated in Australia; 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.
Only one of the paragraphs in item 2 needs to be satisfied.
From the information given your supply of services to the non-resident company satisfies paragraph (a) in item 2 as:
· you make your supply of services to a non-resident company who is not in Australia in relation to your supply at the time the supply is done; and
· your supply of services is neither a supply of work physically performed on goods situated in Australia when the work is done, nor a supply directly connected with real property situated in Australia
Your supply of services to the non-resident company is GST-free under paragraph (a) to the extent that the supply is not negated by subsection 38-190(3) of the GST Act.
There is no need to consider paragraph (b) as (a) is satisfied.
Subsection 38-190(3) of the GST Act
Subsection 38-190(3) of the GST Act provides that without limiting subsection 38-190(2) or (2A), a supply covered by item 2 in that table is not GST-free if:
a) it is a supply under an agreement entered into, whether directly or indirectly, with a non-resident; and
b) the supply is provided or the agreement requires it to be provided to another entity in Australia; and
c) for a supply other than an input taxed supply - none of the following applies:
i. the other entity would be an Australian-based business recipient of the supply, if the supply had been made to it;
ii. the other entity is an individual who is provided with the supply as an employee or officer of an entity that would be an Australian-based business recipient of the supply, if the supply had been made to it; or
iii. the other entity is an individual who is provided with the supply as an employee or officer of the recipient, and the recipient's acquisition of the thing is solely for a creditable purpose and is not a non-deductible expense.
All of the requirements in this subsection have to be satisfied for the GST-free supply of the services under item 2 to be negated from being GST-free and be a taxable supply under section 9-5 of the GST Act.
Subsection 38-190(3) of the GST Act does not apply to the supply of the services you make to the non-resident company as you are not required to provide the services to another entity in Australia.
Accordingly, the supply of the services you make and provide to the non-resident company is a GST-free supply under paragraph (a) of item 2.