Edited version of private advice

Authorisation Number: 1051998486962

Date of advice: 28 June 2022

Ruling

Subject: GST and services provided to a non-resident entity

Question

Are you required to register and remit GST on the consideration/payments you receive from an overseas entity?

Answer

An entity is required to register for the GST if its turnover meets or is higher than the GST registration threshold. Therefore, you will be required to register if your GST turnover meets or is higher than the GST registration threshold. The GST registration turnover threshold is currently $75,000; $150,000 for not-for-profit entities.

However, as your supplies of consultancy services are GST-free you will not need to remit GST on the consideration received from your supplies.

This ruling applies for the following period:

year ending 30 June 20XX

The scheme commences on:

1 April 20XX

Relevant facts and circumstances

You are a self-employed (sole trader) consultant.

You have an ABN but are not currently registered for GST.

You currently have a contract for the provision of consultancy services to an overseas company.

You work remotely from your home in Australia.

The services you provide are listed in the consultancy agreement you provided with your ruling application.

The overseas company has no offices or operations in Australia.

You charge an hourly rate for your services.

You raise a monthly invoice to the overseas company for the number of hours worked during that month.

Documents you provided with your ruling application:

Consultancy agreement with the overseas company.

A recent invoice.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 subsections 38-190(1) & (3)

Reasons for decision

Relevant to the supply described above is item 2 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) (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) of the GST Act.

Limitations of item 2 - subsection 38-190(3) of the GST Act

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) of the GST Act negates the GST-free status of that supply.

When an Australian entity provides general consultancy services to a non-resident subsection 38-190(3) of the GST Act 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 such circumstances the services provided by the Australian entity to the non-resident entity will be GST-free.

Therefore, your supplies of consultancy services as described herein are GST-free.

As the supplies described in this ruling are GST-free you do not have to remit GST on the consideration/payments you receive on the provision of such services.

Are you required to be registered for GST?

Under section 23-5 of the GST Act, a supplier is required to be registered for GST if:

a) the supplier carries on an enterprise; and

b) the supplier's GST turnover (current and/or projected) meets the GST registration turnover threshold (currently $A75,000 and $A150,000 for non-profit organisation).

Section 188-10 of the GST Act provides that your GST turnover meets the registration turnover threshold if:

•         your current GST turnover is at or above $75,000 and the Commissioner is not satisfied that your projected GST turnover is below $75,000; or

•         your projected GST turnover is at or above $75,000.

An entity can choose to register for GST if its GST turnover is less than $A75, 000.

Goods and Services Tax Ruling GSTR 2001/7 (available at www.ato.gov.au) provides guidance on the meaning of GST turnover.

The current annual turnover is the sum of the values of all supplies made in a particular month plus the previous 11 months. The projected annual turnover is the sum of the value of all supplies made in a particular month plus the next 11 months.

The GST turnover is the gross business income (not the profit). Supplies that are connected with Australia are included when calculating the GST turnover even if these connected supplies are determined to be GST-free.

Therefore, if your annual GST turnover meets the registration turnover threshold you will be required to register for GST.

To reiterate, even though you may be required to register for GST as the supplies described in this ruling are GST-free you do not have to remit GST on the consideration/payments you receive on the provision of such services.