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Edited version of private advice
Authorisation Number: 1051888232547
Date of advice: 20 August 2021
Ruling
Subject: GST and supplies of services to a non-resident
Question 1
Is the provision of services to a non-resident by an Australian entity GST-free?
Answer
Provided the non-resident is not required to be registered for GST then all the requirements in item 2 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) will be satisfied and the supplies of services made by the Australian entity are GST-free.
Relevant facts and circumstances
An Australian entity (registered for GST) provides legal advice to a non-resident.
The non-resident is an entity established overseas and is not registered for GST.
The non-resident entity has no employee and establishment in Australia.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999
subsection 38-190 (1)
subsection 38-190 (1) table item2
subsection 38-190 (3)
Reasons for decision
Subsection 38-190(1) of the GST Act specifies circumstances where the supply of things other than goods or real property, for consumption outside of Australia, is GST-free.
Services provided by the Australian entity Pty Ltd to the non-resident are intangible products and are neither goods nor real property. As such, the supply of such services is appropriately considered under subsection 38-190(1) of the GST Act.
Item 2 in the table in subsection 38-190(1) of the GST Act provides that a supply that is made to a non-resident who is not in Australia when the thing supplied is done is GST- free where:
(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.
The supply of the services to a non-resident overseas recipient is not work physically performed on goods situated in Australia nor directly related to real property in Australia. Therefore, the supply satisfies the requirements of item 2(a) in the table in subsection 38-190(1) of the GST Act.
The non-resident recipient acquires the services in carrying on its enterprise overseas.
According to the information provided the non-resident is not registered for GST.
Further, the non-resident has completely ceased all Australian operations and has no presence in Australia.
Section 23-5 of the GST Act provides that an entity is required to be registered for GST if it is carrying on an enterprise and its GST turnover meets the registration turnover threshold (currently $75,000; $150,000 for not for profit bodies).
It does not matter whether the enterprise is not carried on in Australia. What matters is whether the entity makes supplies connected with Australia and meets the registration turnover threshold.
Therefore, in the event the non-resident is not required to be registered for GST then, the supplies satisfy the requirements of item 2(b) in the table in subsection 38-190(1) of the GST Act and the services provided by the Australian entity to the non-resident will be GST-free.
Item 2 in the table in subsection 38-190(1) of the GST Act is limited by subsection 38-190(3) of the GST Act which provides that a supply covered by item 2 in that table is not GST-free if:
• it is a supply under an agreement entered into, whether directly or indirectly, with a non-resident; and
• the supply is provided, or the agreement requires it to be provided, to another entity in Australia.
In this case, we have seen no agreement between the Australian entity and the non-resident recipient to provide the supply to another entity within Australia. Therefore, the supply is not excluded by subsection 38-190(3) of the GST Act from being GST-free.
If the supply satisfies the requirements in item 2 in the table in subsection 38-190(1) of the GST Act and is not excluded from being GST-free by subsection 38-190(3) of the GST Act, then supplies made by the Australian entity are GST-free when supplied to the non-resident recipient outside Australia.