Edited version of private advice

Authorisation Number: 1051967214752

Date of advice: 1 April 2022

Ruling

Subject: GST and supplies to non-residents

Question 1

Is the supply of online digital content by an entity to non-residents a GST-free supply under Division 38 of the A New Tax System (Goods and Services Tax) Act 1999?

Answer

Yes.

Question 2

Is the supply of brand endorsement by an entity to non-residents 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 following period:

N/A

The scheme commences on:

N/A

Relevant facts and circumstances

1. The entity operates an enterprise of producing media and online content.

2. The entity is registered for goods and services tax.

3. There are several platforms where the entity distributes media and online content and each of the websites hosted outside of Australia:

4. The entity uploads content to the Websites on a regular basis.

5. Each Website is operated by a company incorporated overseas.

6. Each Website is a video hosting/social media website and application service which allows users to create profiles, upload photos and videos and set subscription prices payable by viewers.

7. Exclusive content created by the entity is uploaded on the Websites. Once uploaded, viewers have access to the entity's content.

8. The entity derives revenue directly from each Website:

9. In each case, the entity has agreed to the Terms of Service of the applicable Website which govern the use of the Website.

10. Each Terms of Service is set by the applicable Website and is the only contractual agreement which governs the transactions conducted by users on the Website.

11. There are no contractual agreements in place between users themselves - that is, there is no contractual obligations between content providers/creators and any content viewers/users/purchasers.

12. Specifically, the entity does not have any contractual relationship to its viewers or subscribers.

13. The entity does not:

a. provide any content to subscribers directly; or

b. invoice its subscribers.

14. Rather, the entity:

a. provides content to each Website for uploading; and

b. receives payments and statements from the relevant Websites.

15. Subscribers are located all over the world and there is no ability within any of the Websites to determine where the subscribers are located when they purchase content.

16. Each Website operator does not have any representative in Australia that is involved with the supplies made by the entity.

17. In addition to the Website revenue, brands also sponsor the entity to produce and publish advertisements for their products. In each instance of brand endorsement:

a. the brand pays the entity directly for the endorsements;

b. the relevant brand does not have any representative or physical presence in Australia;

c. the relevant brands are operated by companies located overseas and Israel; and

d. the target audience for the brand endorsements is overseas customers.

18. The entity's sole income stream is from its content and related activities on the Websites and from brand endorsements, and the entity does 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) & 38-190(3)

Reasons for decision

Unless explicitly stated all references are to the A New Tax System (Goods and Services Tax) Act 1999.

Section 9-5 provides that an entity makes a taxable supply if its supply is made for consideration; in the course or furtherance of an enterprise that the entity carries on; the supply is connected with Australia and 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.

The entity's supplies described in this ruling are not input taxed.

Relevant to the supply described above is item 2 in the table in subsection 38-190(1) (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 it is a supply that is made to a non-resident, who 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.

Where the requirements of paragraphs (a) or (b) of item 2 are satisfied, the supply will be GST-free. However, item 2 is limited by subsection 38-190(3).

Limitations of item 2 - subsection 38-190(3)

If the supply covered by item 2 is under an agreement entered into, whether directly or indirectly, with a non-resident entity and that supply is provided or the agreement requires that it to be provided to another entity in Australia, subsection 38-190(3) negates the GST-free status of that supply.

When an Australian entity provides a supply of online digital content to a non-resident subsection 38-190(3) will not be applicable if that supply is not provided or the agreement does not require that it to be provided to another entity in Australia. Under the circumstances described in this ruling the supplies provided by the entity to the non-resident entity will be GST-free.

Detailed reasoning 2

The same reasoning as in question 1 will apply to a supply of brand endorsement described in this ruling. Such supplies by the entity will be GST-free.