Edited version of private advice

Authorisation Number: 1052121287701

Date of advice: 26 September 2023

Ruling

Subject: Residency and GST

Question 1

Are you a resident of Australia for taxation purposes from DD MM 20XX to DD MM 20XX?

Answer

Yes.

Question 2

Are you a resident of Australia for taxation purposes from DD MM 20XX to DD MM 20XX?

Answer

No.

Question 3

Are the amounts that you received under the agreement you entered into with Company Z assessable?

Answer

Yes

Question 4

Is this income considered personal services income (PSI)?

Answer

Yes.

Question 5

Are you entitled to a deduction for the business use percentage of your equipment?

Answer

Yes.

Question 6

Are you required to be registered for GST under section 23-5 of A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes, you are required to be registered for GST in the relevant period.

Question 7

Is your supply to Company Y GST-free under table item 2 of subsection 38-190(1) of the GST Act?

Answer

Yes, your supply to Company Y is GST-free under table item 2 of subsection 38-190(1) of the GST Act.

Your supply to Company Y in the relevant financial year is not taxable under section 9-5 of the GST Act.

Question 8

Is your supply to recipients (users) through Company X (a non-resident platform operator), a taxable supply under section 9-5 of the GST Act?

Answer

Yes, your supply to recipients/users on the Company X platform is a taxable supply under section 9-5 of the GST Act.

Question 9

Is your supply of services to Company Z in accordance with the agreement taxable under section 9-5 of the GST Act?

Answer

Yes, your supply of services to Company Z in accordance with the agreement is taxable under section 9-5 of the GST Act.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You were born in Australia.

You are a citizen of Australia.

You are not a permanent resident of any other country.

You left Australia in a previous financial year for the purpose of work and travel.

Your initial intended stay was for several months in Country Z and Country Y.

Due to Covid restrictions in place you were unable to enter Country Y.

You always wanted to visit Country Z, so you went there until Covid Restrictions eased.

You then moved to Country Y when travel restrictions were lifted.

You were in Country Z for several months.

You have been in Country Y for several months up to the present day.

You intend on returning to Australia in a later financial year.

You had a visa to enter Country Z.

You did not pay tax in Country Z.

You did not need a visa to enter Country Y.

You do not pay tax in Country Y.

You and/or your spouse return to Australia approximately every few months to visit family whether, either together or separately.

Prior to going overseas, you lived in your parents-in-laws home.

You have put your household items into storage.

In Country Z and Country Y, you were working remotely.

In Country Z you had a few months rental/lease paid for by Company Z.

In Country Y you had a number of months rental/lease paid by Company Z.

All mail is redirected to your parents address in Australia.

You have a bank account in Australia and no overseas bank accounts.

You own an Australian debit card in Australia and no overseas debit cards.

All your family is in Australia.

You are using a full permit Australian Drivers licence overseas.

You have a vehicle which you plan to sell before leaving Country Y and this is the only asset you have overseas.

You have advised the electoral commission that both yourself and your spouse cannot participate in the election as you are overseas.

Neither you nor your spouse are eligible to contribute to the PSS or the CSS super funds.

Previously you received revenue from Company Y.

You commenced your activity with Company Z in a previous year.

You are not employed by Company Z.

You used monies won to start your activity with Company Z.

You have a partnership/sponsorship with Company Z to promote their services.

In the agreement, under "Terms" it stated that:

o   This contract is valid for a number of months from the renegotiation date and includes details for all associated parties.

o   Company Z Deliverables:

a) Establish and maintain all financial agreements set in place by you & Company Z

b) Remuneration of a certain amount per week paid into account if all deliverables are delivered by you.

c) Cover the expense of accommodation.

d) To give a number weeks' notice if Company Z decide to end the agreement

Company Z makes a direct payment into Company Z own casino account, which is then used for a period of activities. Anything that remains at the end of the week is cashed out into your personal account and withdrawn into your bank account.

Your agreement with Company Z was switched to a "handshake agreement" retaining the deliverables and information of the original partnership agreement.

There are no other financial agreements between you and Company Z, besides the payment made by Company Z into Company Z own Casino account and your accommodation expenses paid by Company Z.

The arrangement of streaming for Company Z will cease in another few months.

You have separate bank account for withdrawals of the streaming activities.

You spent a number of hours per week on the activities during an earlier financial period.

You did not receive any other sponsorship for the financial year.

You did not have any other work during the financial year.

Your account is the main source of your records in relation to your activity showing incoming revenue and end of period withdrawals.

You provided a transaction summary from your account for the activity.

You earned income by you for promoting the activity for Company Z.

The expenses you incurred in participating in the activity include various expenses.

You were unable to verify the residency of Company Z.

You have provided us with links to Company Y and Company X Terms of Service.

Your account is not monetised, and you did not earn any income from account.

Company Y and Company X do not provide information on the location of your clients.

You do not issue invoices to your clients.

Company Y and Company X do not have any representatives in Australia that are involved with your supplies.

You reached the GST registration threshold in a specific month.

You are not registered for GST.

You also have other activities not related to the activities with Company Z.

Company Y currently bans certain activities. However, you used to conduct activities with Company Y before the ban was initiated.

You do not generate income from any other sources.

Agreement/Terms of Service

Your participation with Company Y, including your supply of services, is governed by the agreement and Terms of Service.

As part of the process into the agreement with Company Y, individuals must submit a complete and accurate application (including all forms, documents, or certifications as may be required to satisfy any tax obligations with respect to payments under the Agreement.

Clause 1 of the Terms of Service provides that the services are operated by Company Y and that the Terms of Service is a binding contract between Company Y and you. The Terms of Service are subject to the Company Y Terms of Sale and Community Guidelines.

Under the Program, you have received fees of various kinds.

You are paid monthly by Company Y in accordance with the agreement.

Terms of Service

Certain services are only available to Company X affiliates and Company X Partners.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1936 section 21A

Income Tax Assessment Act 1997 section 6-5

Income Tax Assessment Act 1997 section 8-1

Income Tax Assessment Act 1997 Part 2-42

Income Tax Assessment Act 1997 subsection 40-25

Income Tax Assessment Act 1997 section 84-5

Income Tax Assessment Act 1997 section 85-15

Income Tax Assessment Act 1997 section 995-1

Domicile Act 1982

Superannuation Act 1976

Superannuation Act 1990

A New Tax System (Goods and Services Tax) Act 1999 section 9-5

A New Tax System (Goods and Services Tax) Act 1999 section 9-10

A New Tax System (Goods and Services Tax) Act 1999 section 9-20

A New Tax System (Goods and Services Tax) Act 1999 section 9-25

A New Tax System (Goods and Services Tax) Act 1999 section 23-5

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

A New Tax System (Goods and Services Tax) Act 1999 section 188-10

A New Tax System (Goods and Services Tax) Act 1999 section 188-15

A New Tax System (Goods and Services Tax) Act 1999 section 188-20

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

Reasons for decision

Issue 1

Questions 1 and 2

Overview of the law

Section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for tax purposes as a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936).

The terms 'resident' and 'resident of Australia', as applied to an individual, are defined in subsection 6(1) of the ITAA 1936.

The definition offers four tests to ascertain whether each individual taxpayer is a resident of Australia for income tax purposes. These tests are:

•         the resides test (also referred to as the ordinary concepts test)

•         the domicile test

•         the 183-day test, and

•         the Commonwealth superannuation fund test.

The resides test is the primary test for deciding the residency status of an individual. This test considers whether an individual resides in Australia according to the ordinary meaning of the word 'resides'.

Where an individual does not reside in Australia according to ordinary concepts, they will still be an Australian resident if they meet the conditions of one of the other tests (the domicile test, 183-day test and Commonwealth superannuation fund test).

Our interpretation of the law in respect of residency is set out in Taxation Ruling TR 2023/1 Income tax: residency tests for individuals.

We have considered the statutory tests listed above in relation to your situation as follows:

The resides test

The ordinary meaning of the word 'reside' has been expressed as 'to dwell permanently or for a considerable time, to have one's settled or usual abode,

to live, in or at a particular place': See Commissioner of Taxation v Miller (1946) 73 CLR 93 at 99 per Latham CJ, citing Viscount Cave LC in Levene v Inland Revenue Commissioners [1928] AC 217 at 222, citing the Oxford English Dictionary. Likewise, the Macquarie Dictionary defines 'reside' as 'to dwell permanently or for a considerable time; have one's abode for a time'.

The observations contained in the case of Hafza v Director-General of Social Security (1985) 6 FCR 444 are also important:

Physical presence and intention will coincide for most of the time. But few people are always at home. Once a person has established a home in a particular place - even involuntarily: see Commissioners of Inland Revenue v Lysaght [1928] AC 234 at 248; and Keil v Keil [1947] VLR 383 - a person does not necessarily cease to be resident there because he or she is physically absent. The test is whether the person has retained a continuity of association with the place - Levene v Inland Revenue Commissioners [1928] AC 217 at 225 and Judd v Judd (1957) 75 WN (NSW) 147 at 149 - together with an intention to return to that place and an attitude that that place remains "home": see Norman v Norman (No 3) (1969) 16 FLR 231 at 235... [W]here the general concept is applicable, it is obvious that, as residence of a place in which a person is not physically present depends upon an intention to return and to continue to treat that place as "home", a change of intention may be decisive of the question whether residence in a particular place has been maintained.

The Commissioner considers the following factors in relation to whether a taxpayer is a resident under the 'resides' test:

•         period of physical presence in Australia

•         intention or purpose of presence

•         behaviour while in Australia

•         family and business/employment ties

•         maintenance and location of assets

•         social and living arrangements.

It is important to note that no one single factor is decisive, and the weight given to each factor depends on each individual's circumstances.

Because the ordinary concepts test is whether an individual resides in Australia, the factors focus on the individual's connection to Australia. Having a connection with another country, or being a resident of another country, does not diminish any connection to Australia: Logan J in Pike v Commissioner of Taxation [2019] FCA 2185 at 57 reminds us that 'it is no part of the ordinary meaning of reside in the 1936 Act that there be a "principal" or even "usual" place of residence. ... It is important that ... "resident" not be construed and applied as if there were such adjectival qualifications.' For this reason, the test is not about dominance or exclusivity.

Application to your situation

For period DD MM 20XX to DD MM 20XX

We have taken the following into consideration when determining whether you meet the resides test for the relevant period:

•         You left Australia to go to Country Z

•         Your spouse accompanied you to Country Z

•         You were in Country Z for a few months

•         You were on a tourist visa in Country Z

•         The purpose of your visit to Country Z was to work remotely and to travel

•         You rented accommodation in Country Z paid for by Company Z

•         You were in Country Z for several months

As your intentions was to spend only a few months in Country Z, and that is what transpired, and you entered with a tourist visa and only spent a few months there in the earlier income year, the Commissioner is of the view that you did not have a permanent place of abode outside Australia due to the brevity of your stay. You also did not appear to form any connections to Country Z and did not demonstrate that you were living in a town, city, region or country in a permanent way. The Commissioner is also not satisfied that you had definitely abandoned, in a permanent way, living in Australia due to the remaining ties you had with Australia.

Therefore, for the period you were in Country Z, you remained a resident of Australia for taxation purposes.

For period DD MM 20XX to DD MM 20XX

We have taken the following into consideration when determining whether you meet the resides test for the relevant period:

•         You arrived in Country Y

•         You did not need a visa to enter Country Y

•         You are working remotely gambling online in Country Y

•         You rent accommodation in Country Y which is being paid for by Company Z

•         You intended on being in Country Y for several months

It was your intention to go to Country Y for several months and then perhaps return to Australia at a later date.

You have been in Country Y for the intended several months and beyond.

You have remained in Country Y living and working.

You ceased residing in Australia according to ordinary concepts in the later income year.

You are not a resident for taxation purposes for the relevant ruling period.

Therefore, for the period you were in Country Y, you are not considered a of Australia for taxation purposes.

Domicile test

Under the domicile test, you are a resident of Australia if your domicile is in Australia unless the Commissioner is satisfied that your permanent place of abode is outside Australia.

Domicile

Whether your domicile is in Australia is determined by the Domicile Act 1982 and the common law rules on domicile.

Your domicile is your domicile of origin (usually the domicile of your father at the time of your birth) unless you have a domicile of dependence or have acquired a domicile of choice elsewhere. To acquire a domicile of choice of a particular country you must be lawfully present there and hold the positive intention to make that country your home indefinitely. Your domicile continues until you acquire a different domicile. Whether your domicile has changed depends on an objective consideration of all relevant facts.

Application to your situation

In your case, you were born in Australia and your domicile of origin is Australia.

It is considered that you did not abandon your domicile of origin in Australia and acquire a domicile of choice in either Country Z or Country Y.

Therefore, your domicile is Australia.

Permanent place of abode

If you have an Australian domicile, you are an Australian resident unless the Commissioner is satisfied that your permanent place of abode is outside Australia. This is a question of fact to be determined in light of all the facts and circumstances of each case.

'Permanent' does not mean everlasting or forever, but it is to be distinguished from temporary or transitory.

The phrase 'permanent place of abode' calls for a consideration of the physical surroundings in which you live, extending to a town or country. It does not extend to more than one country, or a region of the world.

The Full Federal Court in Harding v Commissioner of Taxation [2019] FCA 29 held at paragraphs 36 and 40 that key considerations in determining whether a taxpayer has their permanent place of abode outside Australia are:

•         whether the taxpayer has definitely abandoned, in a permanent way, living in Australia

•         whether the taxpayer is living in a town, city, region or country in a permanent way.

The Commissioner considers the following factors relevant to whether a taxpayer's permanent place of abode is outside Australia:

(a)   the intended and actual length of the taxpayer's stay in the overseas country;

(b)   whether the taxpayer intended to stay in the overseas country only temporarily and then to move on to another country or to return to Australia at some definite point in time;

(c)   whether the taxpayer has established a home (in the sense of dwelling place; a house or other shelter that is the fixed residence of a person, a family, or a household), outside Australia;

(d)   whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence;

(e)   the duration and continuity of the taxpayer's presence in the overseas country; and

(f)    the durability of association that the person has with a particular place in Australia, i.e. maintaining assets in Australia, informing government departments such as the Department of Social Security that he or she is leaving permanently and that family allowance payments should be stopped, place of education of the taxpayer's children, family ties and so on.

As with the factors under the resides test, no one single factor is decisive, and the weight given to each factor depends on the individual circumstances.

Application to your situation

The Commissioner is not satisfied that you had a permanent place of abode outside Australia for the following reasons:

•         you were in Country Z on a tourist visa

•         you were in Country Z for X months

•         you rented accommodation in Country Z paid by Company Z

•         it was your intention to leave Country Z

Your trip to Country Z was for a short period whereby you entered on a tourist visa and did not appear to establish any ties to the country.

For the period you were in Country Z you did not establish a permanent place of abode in Country Z.

You are a resident of Australia for the relevant period under this test.

The Commissioner is satisfied that you have a permanent place of abode outside Australia for the relevant period, for the following reasons:

•         You have been in Country Y for several months

•         You rent accommodation in Country Y paid for by Company Z

•         You have been gambling remotely in Country Y

Your time in Country Y is more certain and more permanent than that of Country Z.

You have been in Country Y since the middle of the earlier financial year living and working with your spouse.

It is your intention to return to Australia in a future financial year, but this is subject to change.

You live and work in Country Y and have a pattern of behaviour which is consistent with a person living and working in a particular place.

You are not a resident for taxation purposes for the relevant period under this test.

183-day test

Where a person is present in Australia for 183 days or more during the year of income the person will be a resident, unless the Commissioner is satisfied that both:

•         the person's usual place of abode is outside Australia, and

•         the person does not intend to take up residence in Australia.

Application to your situation

You were present for more than 183 days in the earlier income year.

You are a resident under this test.

You were not in Australia for more than 183 days in the later income year.

You are not a resident under this test for the later income yar.

Superannuation test

An individual is a resident of Australia if they are either a member of the superannuation scheme established by deed under the Superannuation Act 1990 or an eligible employee for the purposes of the Superannuation Act 1976, or they are the spouse, or the child under 16,of such a person.

Application to your situation

You are not a member on behalf of whom contributions are being made to the Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS) or a spouse of such a person, or a child under 16 of such a person.

Therefore, you are not a resident under this test.

Conclusion

You are a resident of Australia for taxation purposes for the period you were in Country Z.

You are not a resident of Australia for taxation purposes for the period you are in Country Y.

Issue 2

Question 3

Subsection 6-1(1) of the ITAA 1997 states that assessable income is made up of both ordinary income and statutory income.

Ordinary income

Under subsection 6-5(2) of the ITAA 1997, the assessable income of an Australian resident includes ordinary income that you derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Ordinary income has generally been held to include three categories, namely, income from rendering personal services, income from property, and income from carrying on a business.

The value of non-cash benefits, such as flights and accommodation, that is related to services rendered, is assessable under section 21A of the Income Tax Assessment Act 1936 (ITAA 1936).

Income generated from similar services to yours that have been created for the purpose of making a profit is assessable as ordinary income. The exemption from this would be where the receipt is from a mere hobby or recreational pursuit.

Application to your situation

In your case, the intention of your activities was principally to make profit. You were not employed elsewhere while conducting your activity.

The remuneration that you receive from providing your service is assessable as income. If you have incurred expenses in producing that income, that amount would be deductible. You would declare the full amount that you received from Company Z as income. The losses that you can claim are limited to those that you made while using the Company Z account owned by Company Z when you were providing the live streaming services.

The value of the accommodation and any flights paid for in relation to providing your service would also form part of your assessable income (no deduction will be available against the value of accommodation expense as it is private in nature).

Question 4

Personal services income (PSI)

Section 84-5 of the ITAA 1997 defines PSI as income that is mainly a reward for an individual's personal efforts or skills.

By definition, income earned by an employee is PSI. However, the PSI rules do not apply to income received as an employee unless they are an employee of an interposed entity.

Income that is mainly generated from:

•         the sale or supply of goods

•         the supply and use of income-producing assets, or

•         a business structures

is not PSI.

Only individuals can have PSI. PSI can be earned directly by an individual or indirectly through a company, partnership or trust (personal services entity).

The use of the word 'mainly' means that the income referred to needs to be 'chiefly', 'principally' or 'primarily' a reward for the provision of the personal efforts of, or for the exercise of the skills of, an individual. That is, more than half (50%) of the ordinary or statutory income received is required to be a reward for the personal efforts and skills of an individual rather than being generated by the use of assets, the sale of goods or by a business structure.

Application to your circumstances

The income received by you each week, according to the agreement with Company Z, was paid for you to promote the relevant activities. The agreement evidences the deliverables that are to be provided by you each week in order for you to receive payment the previous week. The deliverables in the agreement mainly relate to activities that use your personal skills and efforts.

Based on information provided in the agreement, the money paid is mainly the reward for your personal efforts and skills. The income is not derived from the supply and use of assets, or granting a right to use property, the supply or sale of goods, or from a business structure.

The income will be thePSI of the individual and the personal services income rules in Part 2-42 of the ITAA 1997 will apply to that income.

The income earned under the agreement is mainly a reward for your personal efforts and skills and is your personal services income.

Question 5

According to section 8-1 of the ITAA 1997, you can deduct a loss or outgoing to the extent that it is incurred in producing your assessable income except where the outgoing is of a capital, private or domestic nature.

Earning personal services income (PSI) may affect the types of deductions you can claim.

Section 85-15 of the ITAA 1997 may deny deductions even though an outgoing would otherwise be deductible under another provision of the Act (such as paragraph 8-1(1)(a) of the ITAA 1997).

When the PSI rules apply, you cannot claim deductions against the PSI for the following:

• rent mortgage interest, rates and land tax
• payments to associates for non-principal work
• superannuation contributions for associates for non-principal work.

As a sole trader, you can claim deductions directly against your PSI in your individual tax return.

Exchange rates

When claiming any deductions for the acquisition of goods or services overseas, the expenses must be translated (converted) to Australian dollars before including them as a deduction in your tax return.

The specific rules for converting foreign currency are that you use the exchange rate prevailing at the time of a transaction, or an average rate.

The average rates are published on the Tax Office website under the heading Foreign exchange rates.

Decline in value

For depreciating assets that cost more than $300, the decline in value of the asset is to be claimed over time. A deduction is allowed for the cost of a depreciating asset by spreading the deduction over the effective life of the asset.

Section 40-25 of the ITAA 1997 allows a taxpayer to deduct an amount equal to the decline in value of a depreciating asset which is held for any time during an income year and used for a taxable purpose. A taxable purpose includes the purpose of producing assessable income (subsection 40-25(7) of the ITAA 1997). You need to apportion the deduction to exclude any private use of the asset. To determine the appropriate apportionment amounts, the onus is on the individual to maintain accurate records when completing the apportionment calculations.

To determine the work-related use of the computer and microphone you could keep a diary for a representative 4-week period (paragraph 4 of Practice Statement Law Administration PS LA 2001/6). This can be used to calculate the percentage you can claim.

For example: Ben holds a depreciating asset that he used for private purpose for 30% of his total use in the income year. If the asset declines by $1,000 for the year, Ben will have to reduce his deduction by $300 (30% of $1,000).

Application to your circumstances

In the course of generating your personal services income, you incurred expenditure. Section 85-15 of the ITAA 1997 does not prevent you from claiming a deduction for the business use percentage of these items.

As the equipment you have purchased are related to producing your assessable income a deduction is allowed under section 8-1 of the ITAA 1997 to the extent they are used in producing your assessable income. If the equipment were acquired overseas, the expenses must be converted to Australian dollars before including them as a deduction. If the items cost more than $300 you will claim the expense over the effective life of the asset.

Additional information

Cryptocurrency

We note that you receive funds from the activity in cryptocurrency. Cryptocurrency are assets for capital gains tax purposes. When you dispose of the cryptocurrency, a CGT event will occur, and a capital gain or capital loss may arise for Australian income tax purposes.

Issue 3

Question 5

Section 23-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states that:

You are required to be registered under this Act if:

(a)  you are carrying on an enterprise; and

(b)  your GST turnover meets the registration turnover threshold.

Note: it is the entity that carries on the enterprise that is required to be registered (and not the enterprise).

Enterprise

Your activities and providing services to Company Z come within the definition of carrying on an enterprise under section 9-20 of the GST Act.

Registration turnover threshold

Section 188-10 of the GST Act is relevant for working out whether your GST turnover meets or does not exceed a particular turnover threshold.

You have a GST turnover that meets a particular turnover threshold under subsection 188-10(1) when:

•         your current GST turnover is at or above the turnover threshold, and the Commissioner is not satisfied that you projected GST turnover is below the turnover threshold; or

•         your projected GST turnover is at or above the turnover threshold.

The registration turnover threshold is $75,000.

Section 188-15 defines 'current GST turnover.' Subject to certain exclusions, 'current GST turnover' at any time during a particular month is the sum of the values of all the supplies that you made or are likely to make during the current month and the preceding 11 months.

Section 188-20 defines 'projected GST turnover.' Subject to certain exclusions, 'projected GST turnover' at a time during a particular month is the sum of the values of all the supplies that you made, or are likely to make, during that month and the next 11 months.

As you are an Australian resident in the earlier financial year and a non-resident in the following year, we will need to consider your requirement to be registered separately for each financial year.

Your supply of services to Company Z under the agreement is taxable (refer to the response to Question 8). Additionally, your supply of services on the Company X platform is also taxable (refer to the response to Question 7). Therefore, consideration received from these supplies will need to be included in the calculation of your GST-turnover.

Your supply of content to Company Y is GST-free (refer to the response to Question 6). However, it will still need to be included in the calculation of your GST-turnover as subsection 188-15(1) of the GST Act, provides that only supplies that are input taxed, not for consideration or not made in connection with an enterprise that you carry on will be excluded from the calculation of your GST turnover. None of these exclusions apply in your circumstances.

Your GST turnover exceeded the $75,000 registration threshold.

As you have exceeded the GST registration threshold and have satisfied the requirements under section 23-5 of the GST Act, you are required to be registered for GST.

Subsection 188-15(3) of the GST Act further states that:

(3) In working out your current GST turnover, disregard:

(a)  any supply that is not connected with the indirect tax zone; and

(b)  any supply that is connected with the indirect tax zone because of paragraph 9-25(5)(c), unless:

                            (i)        the supply is made to an Australian consumer; and

                          (ii)         the supply is not GST-free; and

                         (iii)        the thing to be acquired under the right or option referred to in that paragraph is not goods or real property; and

(c)   (Repealed by No 65 of 2019)

(d)  any GST-free supply made by a non-resident that does not make the supply through an enterprise that the non-resident carries on in the indirect tax zone.

Consideration received from your supplies under the agreement with Company Z does not satisfy paragraph 188-15(3)(d) of the GST Act as your supply of services to Company Z is not GST-free (refer to the response to Question 8).

Therefore, consideration received from your supply of services to Company Z under the agreement will count towards the calculation of your GST turnover and you will be required to register for GST in the later financial year as your GST turnover exceeds the registration threshold.

Question 6

Who is the recipient of your supply?

To address this issue, the first step is to identify the nature of the supply you make to Company Y.

The term 'supply' is defined in subsection 9-10(1) of the GST Act as 'any form of supply whatsoever' and includes a creation, grant, transfer, assignment or surrender of any right (paragraph 9-10(2)(e) of the GST Act). This definition requires an entity, the supplier to make the supply and generally another entity, the recipient to acquire the supply.

The Commissioners' views on supplies are outlined in several goods and services tax rulings. Goods and Services Tax Ruling GSTR 2006/9 Goods and services tax: supplies (GSTR 2006/9) provides 16 propositions that are considered relevant in analysing a transaction in relation to a supply.

Proposition 11 detailed in GSTR 2006/9 provides that the agreement is the logical starting point when working out the entity making the supply and the recipient of that supply.

Therefore, to determine the nature of the supply regard must be given to the agreement and Terms of Service set out by Company Y.

Under clause 8a(i) of the Terms of Service set out by Company Y, you provide Company Y an unrestricted, worldwide, irrevocable, fully sub-licenseable, nonexclusive, and royalty-free right to: (a) use, reproduce, modify, adapt, publish, translate, create derivative works from, distribute, perform, and display your content.

We consider this to be the supply you make to Company Y.

Given the nature of your contractual relationship with Company Y under the Terms of Service, we consider Company Y to be the recipient of your supply.

Is the supply made to Company Y taxable?

Under section 9-5 of the GST Act, 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; and

d)    you are registered or required to be registered for GST.

However, a supply is not taxable supply to the extent that it is GST-free or input taxed.

You are carrying on an enterprise of supplying digital content to Company Y. You receive consideration for your supply from Company Y and you are required to be registered for GST in the earlier financial year (as established in the response to Question 5).

One of the requirements for a taxable supply is that the supply should be connected with the indirect tax zone (Australia).

Subsection 9-25(5) of the GST Act provides that a supply of anything other than goods or real property is connected with Australia if:

a)    the thing is done in Australia; or

b)    the supplier makes the supply through an enterprise that the supplier carries on in Australia; or

c)    all of the following apply:

                      i.        neither paragraph (a) nor (b) applies in respect of the thing;

                     ii.        the thing is a right or option to acquire another thing;

                    iii.        the supply of the other thing would be connected with Australia; or

d)    the recipient of the supply is an Australian consumer.

To satisfy whether your supply of content will be connected with Australia, you need to meet one of the listed elements in subsection 9-25(5) of the GST Act. Since you make the supply through your enterprise carried on in Australia in the earlier financial, your supply will satisfy paragraph 9-25(5)(b) of the GST Act.

However, your supply of content to Company Y in the later financial year will not be connected with Australia and therefore not taxable as you make the supply of services to Company Y (a non-resident entity) from a location outside Australia.

As such only your supply of content to Company Y during the earlier year will be a taxable supply unless it is GST-free or input taxed. There are no provisions that make your supply of digital content to Company Y input taxed.

Is the supply made to Company Y GST-free?

Subsection 38-190(1) of the GST Act provides that the supplies of things other than goods or real property for consumption outside Australia will be GST-free.

Table item 2 of subsection 38-190(1) of the GST Act (item 2) states 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.

Only one of the paragraphs in item 2 need to be satisfied.

Your supply of digital content to Company Y satisfies paragraph (a) of item 2 as:

• your supply of digital content is made to Company Y, a non-resident who is not in Australia in relation to your supply when the supply is done; and
• your supply of digital content is neither a supply of work physically performed on goods located in Australia nor a supply connected with real property situated in Australia.

There is no need to consider paragraph (b) as paragraph (a) is satisfied.

Subsection 38-190(3) of the GST Act does not apply to limit the application of item 2.

Therefore, your supply of services to Company Y is GST-free under table item 2 of subsection 38-190(1) of the GST Act.

Question 7

Who is the recipient of your supply?

According to the Terms of Service for users, there is a contract between you and Company X. However, you are only granted a non-exclusive, limited, non-transferable, freely revocable license to use the Company X platform for your commercial and/or personal use as permitted by the features of the platform.

Company X claims no ownership right over your activities.

Furthermore, under clause 2.1 of the Terms of Service, you grant each user of the Service a non-exclusive license to access your user content through the service, and to use, reproduce, distribute, display and perform such user Content as permitted through the functionality of the Service and under these terms.

Based on the Terms of Service for Company X and the method of subscription, it is our view that you do not make a supply of services to the Company X platform, but rather you make the supply of services directly to third parties through the Company X platform under the Terms of Service.

Is your supply to users of Company X taxable?

Your supply of content users/subscribers will satisfy all the requirements of paragraphs (a) and (b) of section 9-5 of the GST Act as:

•         you make the supply of services for consideration; and

•         the supply is made in the course or furtherance of an enterprise that you carry on.

We will need to consider whether your supplies or services are connected with Australia under paragraph 9-5(c) of the GST Act.

Subsection 9-25(5) of the GST Act provides that supplies of anything other than goods or real property is connected with Australia if:

• the thing is done in Australia; or
• the supplier makes the supply through an enterprise that the supplier carries on in Australia; or
• the thing is a right and satisfies all the requirements under paragraph (d) of subsection 9-25(5) of the GST Act; or
• the recipient of the supply is an Australian consumer.

The services are not provided in Australia and you do not run an enterprise in Australia as you are a non-resident. Paragraph 9-25(5)(c) of the GST Act does not apply as you are not supplying rights. We will need to consider whether your subscribers are Australian consumers under paragraph 9-25(5)(d) of the GST Act.

Subsection 9-25(7) of the GST Act provides that an entity is an Australian consumer if:

•         the entity is an Australian resident (other than an entity that is an Australian resident solely because the definition of Australia in the ITAA 1997 includes the external Territories); and

•         the entity is not registered; or

•         if the entity is registered - the entity does not acquire the thing supplied solely or partly for the purpose of an enterprise that the entity carries on.

Goods and Services Tax Ruling GSTR 2017/1 Goods and services tax: making cross-border supplies to Australian consumers (GSTR 2017/1) provides more information on determining if the recipient is an Australian consumer.

Paragraph 13 states that under section 84-100 of the GST Act, you can treat the supply as having not been made to an Australian consumer if you:

• have satisfied particular evidentiary requirements, and
• reasonably believe that the recipient is not an Australian consumer.

Paragraph 15 further provides that you must have a reasonable basis for forming a reasonable belief about whether the recipient of the supply is an Australian consumer based on your usually systems and processes or have taken reasonable steps to obtain information about whether the recipient is an Australian consumer.

GSTR 2017/1 states:

29. Examples of information that the Commissioner will accept to support a conclusion about whether the recipient satisfies the residency element include:

• the recipient's billing address
• the recipient's mailing address
• the recipient's banking or credit card details, including the location of the bank or credit card issuer
• location-related data from third party payment intermediaries
• mobile phone SIM or landline country code
• recipient's country selection
• tracking/geolocation software
• internet protocol (IP) address
• place of establishment of the recipient (for non-individual recipients)
• representations and warranties given by the recipient
• the origin of correspondence, and
• locations, such as Wi-Fi spot, where the physical presence of the person receiving the service at that location is needed.

30. This is not an exhaustive list of evidence that would be relevant to establishing whether a recipient satisfied the residency element.

31. You must consider all the information collected through your usual business systems and processes. There must, on balance, support a conclusion about whether the recipient satisfies the residency element.

The supplies are connected with Australia under paragraph 9-25(5)(d) of the GST Act as users residing in Australia are considered to be 'Australian consumers,' and those supplies will be subject to GST. If you are unable to distinguish which individuals reside in Australia, all supplies you make through the Company X platform will be taxable. You have stated that Company X does not provide you with this information and therefore all supplies you make through Company X will be taxable.

Question 8

Is your supply of services to Company Z taxable?

Under section 9-5 of the GST Act, 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; and

d)    you are registered or required to be registered for GST.

However, a supply is not taxable supply to the extent that it is GST-free or input taxed.

You are carrying on an enterprise of supplying services to Company Z under the terms of the agreement. You receive consideration from Company Z to meet deliverables under the agreement and you are required to be registered as explained in the response to Question 5.

We will need to consider whether the supply is connected with the Australia under paragraph 9-5(c) of the GST Act.

Subsection 9-25(5) of the GST Act provides that a supply of anything other than goods or real property is connected with Australia if:

a)    the thing is done in Australia; or

b)    the supplier makes the supply through an enterprise that the supplier carries on in Australia; or

c)    all of the following apply:

                      i.        neither paragraph (a) nor (b) applies in respect of the thing;

                     ii.        the thing is a right or option to acquire another thing;

                    iii.        the supply of the other thing would be connected with Australia; or

d)    the recipient of the supply is an Australian consumer.

To satisfy whether your supply of services will be connected with Australia, you need to meet one of the listed elements in subsection 9-25(5) of the GST Act. Since you make the supply through your enterprise carried on in Australia, your supply will satisfy paragraph 9-25(5)(b) of the GST Act.

'Australian consumer' is defined under subsection 9-25(7) of the GST Act to mean:

• an entity that is an Australian resident (other than an entity that is an Australian resident solely because the definition of Australia in the *ITAA 1997 includes the external Territories); and
• the entity is not registered or if the entity is registered the entity does not acquire the thing solely or partly for the purpose of an enterprise that the entity carries on.

Note: suppliers must take reasonable steps to ascertain whether recipients are Australian consumers (see section 84-100).

Based on the information provided, we are unable to ascertain whether Company Z is an 'Australian consumer' under paragraph 9-25(5)(d) of the GST Act and therefore the supply will be connected with Australia.

As such your supply of services to Company Z will be a taxable supply unless it is GST-free or input taxed. There are no provisions that make your supply input taxed.

Is your supply of services to Company Z GST-free?

Table item 2 of 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.

Section 195-1 of the GST Act defines non-resident to mean a person who is not a resident of Australia. This section further provides that 'Australian resident' means a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA36). Person includes a company.

The ITAA36 defines 'resident' or 'resident of Australia' to mean a company which is incorporated in Australia, or which, not being incorporated in Australia, carries on business in Australia, and has either its central management and control in Australia, or its voting power controlled by shareholders who are residents of Australia.

Goods and services tax ruling GSTR 2004/7 Goods and services tax: in application of items 2 and 4 and paragraph (b) of item 4 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GSTR 2004/7) provides more information on what a non-resident company in Australia means in relation to a supply covered by item 2.

Paragraphs 37-41 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:

(a) the company is registered with ASIC; or

(b) 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.

Based on the information provided, table item 2 of subsection 38-190(1) is not satisfied as we are unable to establish Company Z residency status. Therefore, your supply of services to Company Z will be taxable in the relevant income years.