Edited version of private advice

Authorisation Number: 1051791182592

Date of advice: 16 December 2020

Ruling

Subject: GST - supply of services to non-resident

Question

Will your supply of services to the non-resident entities be subject to Goods and Services Tax (GST)?

Answer

No. Your supply of services to the non-resident entities is GST-free under item 2 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) where you are registered or required to be registered for GST and will not be subject to GST.

This ruling applies for the following period: 30 June 20XX to 30 June 20XX

Relevant facts and circumstances

You are a newly formed company based in Australia.

You currently are not registered for GST.

You will enter into agreements with non-resident entities to provide your services.

Your agreements with the non-resident entities will not require you to provide your services to other entities in Australia.

The services that you supply under your agreements with the non-resident entities will not include work physically performed on goods and will not be directly connected with a particular property in Australia

You will perform your services in either Australia or overseas.

The non-resident entities will not be in Australia at the time you supply your services.

The non-resident entities are not registered or required to be registered for GST.

Your current turnover is below $75,000; however, it will be more than $75,000 from the next financial year.

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)

Your supply of services to the non-resident entities will be made for consideration and in the course of your enterprise. The supply will be connected with the indirect tax zone as it is made through an enterprise that you carry on in Australia. You are currently not registered for GST; however, you will be required to register in the next financial year as your turnover will meet the threshold.

Once you become registered or required to be registered, all the requirements in paragraph 9-5(a) to 9-5(d) of the GST Act will be satisfied; therefore, your supply of services to the non-resident entities will be a taxable supply unless it is GST-free or input taxed.

There is no provision in the GST Act under which your supply of services would be input taxed; thus, what remains to be determined is whether your supply would be GST-free.

Item 2 in the table in subsection 38-190(1) of the GST Act (item 2) provides that a supply of anything, other than goods or real property, made to a non-resident who is not in 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.

However, in accordance with subsection 38-190(3) of the GST Act, a supply covered by item 2 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 the indirect tax zone; 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.

You supply your services to the non-resident entities who are not in Australia at the time you make the supply. The non-resident entities will acquire your services for the purpose of their enterprise but are not registered or required to be registered for GST. Furthermore, your supply of services will not involve work physically performed on goods situated in Australia and will not be directly connected with real property in Australia. As such, the supply is covered by item 2 and is GST-free.

As you are not required under your agreements with the non-resident entities to provide your services to other entities in Australia, subsection 38-190(3) of the GST Act will not apply to negate the GST-free status of your supply. Accordingly, your supply of services to the non-resident entities will remain GST-free where you are registered or required to be registered for GST and will not be subject to GST.