Edited version of private advice

Authorisation Number: 1051959435763

Date of advice: 11 March 2022

Ruling

Subject: GST and port captain services

Question

Do you make a taxable supply of port captain services to X under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) in relation to goods they transport from overseas to Australia?

Answer

No. Therefore, GST is not payable on your supply of these services.

This ruling applies for the following period

26/10/20XX to 25/10/20XX

The scheme commences on:

26 October 20XX

Relevant facts and circumstances

You are registered for GST.

You have contracted with a shipping company; X headquartered in an overseas country (XC) through their regional office in a second overseas country (YC); to provide port captain services at ports in Australia in support of the shipping line's international freight transport activities.

Your services to X in Australia form part of the international carriage of imported goods up to or at the place of consignment in Australia.

Your services typically comprise a liaison role between vessel command and shore services, such as stevedores, lashing and welding gangs, transport companies, providers, etc., and regulatory and other authorities such as port state control, port authorities and the like. The port captain oversees and organises the efficient loading or discharge of vessels in port, devises safe lifting arrangements for cargo handling or otherwise ensures that pre-conceived lifting arrangements are implemented. Your services invariably take place either at the port of export (not necessarily the place of export as this can be located elsewhere within the indirect tax zone although the port is generally the place at which export cargo physically leaves the indirect tax zone) or the port of import (generally being the place of consignment for the type of cargo which X has contracted your services, although in one case, the place of consignment is beyond the port terminal). In regards to imported goods, your responsibility ends once the cargo has been offloaded from the ship at the port of import. Your role is highly technical. The goods involved are heavy equipment.

X owns an entity in the indirect tax zone; Z. Z is essentially what in shipping circles is referred to as a Representative Office. Z is essentially a local office in a local time zone that assists X with fielding enquiries from, for example, freight forwarders in Australia, and for coordinating its vessels activities at Australian ports with port authorities, shipping agents, local victualling companies and the like on a common time zone whilst XC sleeps. XC or YC arranges and pays for such ancillary services as its vessels may require whilst in Australian ports and Z provides a real time coordination role. Z does not own or operate any cargo carrying vessels.

Z has no sources of income in Australia and is not registered for GST. It does not have any customers in Australia and its sole source of income comes from a management disbursement it receives from X to cover its office running and staff overhead costs.

You have no dealings with Z in the course of your performance of port captain services and you take your instructions from YC or XC depending on whether such instructions are technical or commercial respectively.

A certain individual is your director. Before that individual established the company (you), the individual, had, in a different capacity (not as your representative) entered into several contracts of carriage with X to ship goods for several projects he was involved with to and around Australia. Despite the individual knowing the group of which X forms part's staff in Australia quite well, mostly from social contact at trade shows and the like, such contracts were always entered into by X either directly or through X's representative office in YC (as agents) as this is where X's regional chartering office is based.

The cost of your services to X are included as part of X's cost of sale to their customers in Australia under a contract of affreightment. Goods transported to Australia are assessed for customs duty and GST at the place of import based on the CIF value of goods imported. In the individual's experience, this is generally calculated based on the value of the commercial invoices from the supplier of the goods, the shipper of the goods and the insurer of the goods. Accordingly, GST charged on your services to X is collected from the importer of record.

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 9-25

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

A New Tax System (Goods and Services Tax) Act 1999 section 38-355

A New Tax System (Goods and Services Tax) Act 1999 Subdivision 84-C

A New Tax System (Goods and Services Tax) Act 1999 section 195-1

Reasons for decision

Summary

You supply services to X in the course of the international transport goods from a place outside Australia to the place of consignment in Australia and your supply of these services facilitates the international transport of the goods.

Although you perform the services in Australia, your customer in this case is a non-resident who is not in Australia for the purposes of subsection 38-355(2) of the GST Act and you are not a redeliverer of low value imported goods for the purposes of Subdivision 84-C of the GST Act.

Therefore, you make a GST-free supply of services to X under section 38-355 of the GST Act.

Detailed reasoning

GST is payable on taxable supplies.

Section 9-5 of the 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 (Australia); 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 in section 195-1 of the GST Act)

In your case, you supply port captain services for consideration and in the course or furtherance of an enterprise that you carry on; the supply of the service is connected with Australia and you are registered for GST. Therefore, you meet the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act.

There are no provisions of the GST Act under which your supply of the port captain services is input taxed.

Therefore, what remains to be determined is whether your supply of these services is GST-free.

Paragraph (b) of Item 5 in the table in subsection 38-355(1) of the GST Act, provides that, subject to subsection 38-355(2) and subsection 38-355(3) of the GST Act, the international transport of goods from a place outside Australia to their place of consignment in Australia is GST-free.

Paragraph (b) of item 5A in the table in subsection 38-355(1) of the GST Act provides that, subject to subsections 38-355(2) and 38-355(3) of the GST Act, a supply of a service, during the course of the international transport of goods covered by item 5, that facilitates that international transport is GST-free.

Subsection 38-355(2) of the GST Act provides that paragraphs (a) and (b) of item 5, and item 5A, in the table in subsection 38-355(1) of the GST Act do not apply to the extent that the thing supplied is done in Australia, unless:

(a)           the recipient of the supply:

(i)    is a non-resident; and

(ii)    is not in Australia when the thing supplied is done in Australia.; or

(b)           the supply is done by the supplier of the transport of the goods from or to Australia (whichever is

relevant).

Subsection 38-355(3) of the GST Act provides that items 5 and 5A, paragraphs (b) to (d) of item 6, and paragraphs (b) and (c) of item 7, in the table in subsection 38-355(1) of the GST Act do not apply to a supply to the extent that:

(a)         the supply is, or relates to, the international transport of goods; and

(b)         the supplier is a redeliverer that is treated as the supplier of the goods under subsection 84-81(4)

of the GST Act and

(c)         the supply of the goods is a taxable supply.

Section 195- of the GST Act provides that:

International transport means:

(a)  in relation the export of goods - the transport of the goods from their place of export in Australia to a destination outside Australia; or

(b)  in relation to the import of goods - the transport of the goods from a place outside Australia to the place of consignment in Australia.

Place of consignment of goods means:

(a)  if the goods are posted to a place in Australia - the place in Australia to which the goods are addressed; or

(aa)if the supplier of the goods is to deliver the goods to a place in Australia - the place in Australia to which the goods are to be delivered under the contract for the supply of the goods; or

(ab) if:

(i)            neither paragraph (a) nor (b) applies; and

(ii)            the goods are to be transported into Australia by an entity supplying a

transport service to an entity that is the importer the goods into Australia;

the place in Australia to which the goods are to be delivered under the contract

for the supply of the transport service; or

(b) in any other case - the port or airport of final destination as indicated on the transportation document.

The fact sheet, GST and international freight transport, states:

The international transport of goods (including the arranging of such services) is GST-free from a place outside Australia to the place of consignment in Australia for a supplier of that transport into Australia. 'Place of consignment' is defined in the GST law and is generally determined by the agreement between the entity responsible for delivering the goods to Australia and its contractual counterparty (overarching agreement). The overarching agreement would be:

•                The sale of goods agreement if the seller is responsible for delivering the goods to Australia;

•                The buyer's agreement with a transport supplier (or forwarder) if the buyer is responsible for transporting (or arranging for the transport) of the goods from the country of export to Australia; or

•                In circumstances where there is no overarching agreement (for example, self-transport), the port or airport of final destination.

Loading, handling and facilitation services (associated services) provided during the course of the international transport are GST-free where those services are:

•                Provided to a non-resident recipient who is not in Australia when the supply is made; or

•                Supplied by the supplier of the international transport service.

In relation to an inbound move, the place of consignment determines the extent to which transport and associated services are:

•                GST-free

•                Included in the taxable value of the imported goods (i.e. the base upon which GST payable on importation is calculated).

The fact sheet states under the heading 'Subcontractors and forwarders who do not bring the goods to Australia':

Subcontractors and forwarders who provide (or arrange) domestic transport and associated services to a non-resident who is not in Australia when the services are provided, make a GST-free supply where those services form part of the international transport of goods.

In your case, you supply port captain services at ports in Australia. These services which you supply to X are supplied in the course of the international transport goods from a place outside Australia to the place of consignment in Australia and they facilitate the international transport of the goods.

However, we need to consider the exclusions in subsections 38-355(2) and 38-355(3) of the GST Act as you perform your services in Australia.

The concept 'non-resident is not in Australia' in section 38-355 of the GST Act is also used in section 38-190 of the GST Act. Goods and Services Tax Ruling GSTR 2004/7, at paragraph 34 provides the meaning of this expression. It states:

34. We determine whether the not in Australia requirement is satisfied by determining whether the non-resident entity is in Australia in relation to the supply. If the entity is in Australia in relation to the supply, the entity does not satisfy the not in Australia requirement.

Paragraphs 37 to 41 of GSTR 2004/7 state:

37. A non-resident company is in Australia if that company carries on business (or in the case of a company that does not carry on business, carries on its activities) in Australia:

(a) at or through a fixed and definite place of its own for a sufficiently substantial period of time; or

(b) through an agent at a fixed and definite place for a sufficiently substantial period of time.

38. We consider that it would be reasonable for a supplier to conclude that a non-resident company is in Australia if:

•                the company is registered with ASIC; or

•                the company has a permanent establishment in Australia for income tax purposes.

39. However, a non-resident company to which the supplier makes a supply may be able to demonstrate to the supplier that, even though it is registered with ASIC or has a permanent establishment, on application of the test (at paragraph 37) to its particular circumstances, the non-resident company is not in Australia.

40. Suppliers should be aware that even if a company is not registered with ASIC, it may still be in Australia on an application of the test (at paragraph 37). Similarly, even if a company does not have a permanent establishment in Australia for income tax purposes, it may still be in Australia on application of the test to its particular circumstances.

41. A non-resident company is in Australia in relation to the supply if the supply is solely or partly for the purposes of the Australian presence, for example, its Australian branch. If the supply is not for the purposes of the Australian presence but that Australian presence is involved in the supply, the company is in Australia in relation to the supply, except where the only involvement is minor.

X, being the non-resident recipient of your supply of the services in question, has a representative office in Australia.

You did not enter into a contract with the Australian representative office of X. You entered into a contract with X through its office in YC. The Australian representative office of X has no role to play in relation to this contract and it has no involvement in the services you supply to X. You take your instructions from YC or XC depending on whether such instructions are technical or commercial respectively. Therefore, we do not consider that X is in Australia in relation to the supply of services you make to X as:

•                the supply of these services is not for the purposes of an Australian presence of X; and

•                the Australian representative office of X is not involved with this supply.

Hence, X is not in Australia for the purposes of subsection 38-355(2) of the GST Act.

Additionally, you are not a redeliverer that is treated as the supplier of the goods under subsection 84-81(4) of the GST Act.

Therefore, although you perform the services in question in Australia, the exclusions in subsection 38-355(2) and 38-355(3) of the GST Act do not apply.

Hence, you make a GST-free supply of services to X under paragraph (b) of item 5A in the table in subsection 38-355(1) of the GST Act. Therefore, GST is not payable on your supply of the services in question to X.