Edited version of private advice

Authorisation Number: 1051962517643

Date of advice: 18 March 2022

Ruling

Subject: GST and education

Question 1

Is the supply of the Relevant Courses by Entity X (the RTO) to Entity Y under a specified funding program (Program) a GST-free supply of an education course under section 38-85 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes, the supply of the Relevant Courses by the RTO to Entity Y under the Program is a GST-free supply of an education course under section 38-85 of the GST Act.

Question 2

Is Entity Y a third-party payer such that there is no supply of education courses by the RTO to Entity Y under the Program?

Answer

No, the Entity Y is not considered a third-party payer. Rather based on our response to question 1 you make the supply of the education course to Entity Y under the Program.

This ruling applies for the following period:

1 January 20XX till quarter ending 31 December 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

Entity X (the RTO) is currently registered for GST and has been registered since 1 July 20XX.

Entity X has been supplying training course (Relevant Courses) under the contracts executed with Entity Y which is a Government entity

Each of the Relevant Courses meets the definition of 'tertiary course' in section 195-1 of the GST Act.

The RTO is a recognised Registered Training Organisation and each of the Relevant Courses is within scope of its RTO Registration.

Generally, the RTO provides the Relevant Course to an enrolled participant (the Student). However, under the terms of the Program, the RTO receives payments from Entity Y.

The Program refers to the agreement between the RTO and Entity Y. A copy of this agreement and related documents (Contract) has been provided as part of this ruling request.

Under the Contract the term Funding means funding allocated to the RTO under the Contract.to provide the Training Services.

The Training Services under the Contract are a full qualification in the Relevant Courses.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 38-85

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

Reasons for decision

Section 38-85 of the GST Act states:

A supply is GST-free if it is a supply of:

(a) an *education course; or

(b) administrative services directly related to the supply of such a course, but only if they are supplied by the supplier of the course.

(* denotes a term defined in section 195-1 of the GST Act)

The definition of education course includes a tertiary course, and tertiary course means:

(a) a course of study or instruction that is a tertiary course determined by the *Education Minister under subsection 5D(1) of the Student Assistance Act 1973 for the purposes of that Act; or

(aa) a course of study or instruction accredited at Masters or Doctoral level and supplied by a *higher education institution or a *non-government higher education institution; or

(b) any other course of study or instruction that the Education Minister has determined is a tertiary course for the purposes of this Act.

In this case each of the Relevant Courses is considered a tertiary course for the purposes of the GST Act and consequently is a GST-free supply by the RTO under section 38-85 of the GST Act. It is noted, section 38-85 of the GST Act does not stipulate who the recipient must be for the supply to be GST-free, however what remains to be determined is whether there is a supply of the Relevant Courses to Entity Y.

Goods and Services Tax Ruling GSTR 2006/9, Goods and services tax: supplies (GSTR 2006/9) examines the meaning of 'supply' in the GST Act. Relevantly it discusses how to identify and characterise supplies in the context of the transactions in which they are made.

GSTR 2006/9 provides a number of propositions which focus on analysing the various arrangements in which supplies are made. The propositions are not universal as they may have exceptions or be qualified either by the operation of particular provisions of the GST Act, or by the facts and circumstances of a transaction.

The ruling explains that complex arrangements involving more than two entities are called 'tripartite arrangements'. In tripartite arrangements, as in two party transactions, the GST consequences turn on identifying:

•         One or more supplies

•         Consideration

•         A nexus between the supply and the consideration and

•         To whom the supply is made.

Paragraph 23 of GSTR 2006/9 sets out a number of propositions in analysing more complex multi-party arrangements, commonly known as tripartite arrangements an includes propositions 13 to 15:

In this case the RTO has submitted that under the terms of the Contact there is a supply to Entity Y of a GST-free education course which is the Relevant Courses.

We agree with this conclusion. Relevantly, we consider Proposition 15 applies such that the RTO is making two supplies. The education course (Relevant Courses) delivered by the RTO results in a supply made by the RTO to Entity Y and provided to the eligible student, and another supply made and provided by the RTO to the eligible student. Paragraphs 221 and 221B of GSTR 2006/9 states:

221 Where there are two supplies made based on one set of acts, it is possible that one of those supplies may be made to one entity and provided to another. For example, for a claim under an insurance policy, the insured may be required to pay an insurance excess to a repairer, who is not acting as agent of the insurer. The one set of acts, the repairs by the repairer, can, depending on the particular facts, result in a supply made by the repairer to the insurer and provided to the insured, and a supply made and provided by the repairer to the insured. This is consistent with the UK Court of Appeal decision in Brown & Davis Ltd v. Galbraith⁶⁷ where it was held that, although the primary contract was between the insurance company and the repairer for a supply of repair services, there was a second contract between the insured and the repairer requiring the insured to pay for the repairs only to the extent of the excess under the policy.⁶⁸

221B The Commissioner considers that the following factors, in combination, may point to a supply being made by the supplier to the payer under a tripartite arrangement that involves a supply by the supplier to the customer, even where there is no binding obligation between the payer and the supplier for the supplier to make a supply to the customer:

...

In this case applying each of the factors discussed in paragraph 221B of GSTR 2006/9 to the current circumstances we accept that there is a supply of the Relevant Courses to Entity Y. Consequently, as the RTO provides the Relevant Courses to Entity Y and the Relevant Courses are a GST-free supply under section 38-85 of the GST Act, the supply is therefore not subject to GST.