Edited version of private advice

Authorisation Number: 1051790531422

Date of advice: 15 January 2021

Ruling

Subject: GST and supply of digital content

Question 1

Is your supply of online digital content a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999?

Answer

No.

Question 2

Is your supply of online digital content a GST-free supply under Division 38 of the A New Tax System (Goods and Services Tax) Act 1999?

Answer

Yes.

This ruling applies for the specified period.

The scheme commences on the specified date.

Relevant facts and circumstances

•         You are an entity and you carry on an enterprise.

•         You are registered for the goods and services tax (GST).

•         You are a content creator.

•         Your content is made available digitally on the specified website (Website).

•         Your exclusive content is uploaded for the Website. Once uploaded, subscribers have access to your content. One will only be able to see your content if one pays for the subscription.

•         The Website is a social media website and application service which allows Users to create a profile, upload photos and videos onto their profile, set a monthly subscription price payable by other Users who wish to view their User Content and thereby generate revenue from the Users.

•         The Website is operated by a company incorporated overseas.

•         When you sign up to the Website as a content producer you agree to the terms and conditions set by the Website.

•         To become a User, you must register and create a User Account on the Website.

•         The Terms of Service govern the User's use of the Website, including any content, functionality, and services offered on or through the Website. By registering with and using the Website, the User accepts and agrees to be bound by and abide by those Terms.

•         The Terms of Service are set by the Website and is the only contractual agreement that governs the transactions conducted by users on the Website. There are no contractual agreements between the users themselves, that is, there is no contractual obligations between content providers/creators and any content viewers/users/purchasers.

•         Users must sign up to the Website and to receive your exclusive content, they must subscribe to your page, which is $X per month. This involves creating an account on the Website. They have to provide personal identification and credit card details so that the Website can charge their account the subscription fee and any other purchases and tips.

•         When a subscriber subscribes to your page, the subscriber is agreeing to the terms and conditions set by the Website. Once a subscriber has signed up by accepting the terms and conditions and paying the $X monthly subscription, they may view your content as often as they wish. All they need to do is view your main page for posted content.

•         Besides the initial agreement to the terms and conditions of the Website when a user signs up to the service, there is no other arrangement or contractual agreement between you and the users.

•         You have no influence on who subscribes to your page, although you can block subscribers, at which point the Website refunds them the $X subscription which is deducted from your earnings.

•         If a subscriber is unsatisfied with the level of engagement from you via direct messaging, they can leave the subscription.

•         Once the users have signed up for a subscription to your page, the Website allows them access to your content.

•         Subscribers must pay for a monthly subscription fee for each content creator.

•         Your main income is derived from subscribers that receive content from you. You earn income from subscriptions, tips, messages, referrals, posts and streams.

•         You upload content to your Website page on a regular basis.

•         You do not send any content to subscribers outside of the Website. You are supplying content to the Website rather than the Users as such.

•         At any time, you can delete posts on the main page and un-viewed content sent to subscribers Inbox via direct message. However, if a subscriber has purchased a video via direct message, you cannot delete it after the fact.

•         If you no longer want to use the Website, you would simply delete your account. The Website would not use your content for their own separate purposes or make it available to other users.

•         You yourself do not issue any invoices to your subscribers. Subscribers have access to their statements from the Website as a reference for their spending on the Website.

•         You get paid a commission from the operator of the Website. Your commission is a % of the Revenue generated by users paying to view your Content, calculated in accordance with the Terms of Service set by the Website.

•         The Website charges a % management fee. The management fee is for providing, maintaining and operating the Website.

•         You are able to view how many subscribers you have via your profile page.

•         You can view how many people purchase your content via notification and the statistics page.

•         Subscribers are located all over the world and there is no ability within the Website to determine where the subscribers are located when they purchase your content.

•         The operator does not have any representative in Australia that is involved with your supplies.

•         Your sole income stream is from your content and related activities on the Website and you do not carry out any other enterprise activities in Australia or overseas.

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 subsection 38-190(1)

A New Tax System (Goods and Services Tax) Act 1999 subsection 38-190(2) & (2A)

A New Tax System (Goods and Services Tax) Act 1999 subsection 38-190(3)

Reasons for decision

In this reasoning,

•         unless otherwise stated, all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act);

•         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.

Summary

Your supply of online digital content is a GST-free supply under item 2 in the table in subsection 38-190(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:

(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 the above must be satisfied for your supply of online digital content to be a taxable supply.

From the information given, your supply of online content 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 registered for GST.

However, your supply of online digital content 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 online digital content input taxed.

GST-free supply

Relevant to your supply of online digital content 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 the non-resident 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 facts given, your supply of online digital content is made to the operator of the Website, for which you receive consideration paid by the operator to you in accordance with the agreed terms. The operator of Website is the recipient of your supply.

Paragraph (a) of item 2

Based on this, your supply of online digital content satisfies paragraph (a) of item 2 as:

•         your supply of online digital content is made to the operator of the Website, a non-resident business who is not in Australia in relation to your supply when the supply is done; and

•         your supply of online digital content 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.

However, paragraph (a) of item 2 is limited by subsection 38-190(3) of the GST Act.

There is no need to consider paragraph (b) as paragraph (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

Based on the information given, subsection 38-190(3) does not apply to your supply as you are supplying and providing the online digital content to the non-resident business operating the Website.

Your supply of online digital content to the non-resident business is therefore GST-free under item 2 in the table in subsection 38-190(1) of the GST Act.

Where a supply is GST-free, no GST is payable on the supply.