Edited version of private advice

Authorisation Number: 1052159171754

Date of advice: 13 December 2023

Ruling

Subject: GST and supply of online tutoring

Question 1

Is the tuition provided by Entity A through Entity A's online business platform subject to GST under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Supplies of tuition or courses to students that are located in the indirect tax zone (Australia) are taxable supplies and Entity A is liable for the GST on those supplies.

Supplies made to students that are located outside of Australia are GST-free.

Question 2

Is the Entity A making taxable supplies under section 9-5 of the GST Act when it collects services fees or the revenue share from tutors that are not Australian residents?

Answer

No, supplies made by Entity A in relation to services fees or the revenue share are not taxable supplies as they are GST-free.

Question 3

Is the Entity A liable for GST under section 84-10 of the GST Act when it pays for services from entities outside Australia?

Answer

No, acquisitions made by Entity A from entities outside of Australia are not subject to the reverse charge.

This ruling applies for the following periods:

Not applicable

The scheme commences on:

Not applicable

Relevant facts and circumstances

Entity A's online business platform is primarily operated in Europe. Entity A's online business platform is owned by Entity A (Europe) and is managed under licence by Entity A (Australia). Entity A (Australia) pays a licence fee to Entity A (Europe).

The business operates through eCommerce websites and connect students wishing to attain a qualification from the Europe with tutors.

Entity A's online business platform connects students wishing to pass one of the exams with tutors through the website. All courses offered on the Entity A's online business platform belong to the tutor who designed, wrote and recorded the course. Students have contracts with the individual tutors.

Entity A's online business platform acts as a collection agent for predominantly Europe based tutors. Entity A's online business platform provides various services to the tutors including providing the connection (via the website) between tutors and students, maintaining its 'Approved Learning Provider' status, collecting the fees paid to tutors, arranging and paying for third party services that may be used by the tutors. Entity A's online business platform also provides further services to tutors such as video editing and support services on a needs basis for which additional fees are charged.

On occasion, Entity A's online business platform will invoice an Australia resident on behalf of a tutor who is located outside Australia.

Entity A's online business platform acquires services overseas such as advertising and marketing.

Entity A is registered for GST.

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 38-85, 38-190

A New Tax System (Goods and Services Tax) Act 1999 section 84-5, 84-55

Reasons for decision

Question 1

Summary

Supplies of tuition or courses through the Entity A's online business platform made to students that are located in Australia are subject to GST and Entity A is liable for the GST on those supplies.

The supplies are not GST-free as the qualifications are not essential pre-requisites for entry into a particular profession or trade; or to commence the practice of a profession or trade under an Australian law.

Supplies made to students that are located outside Australia are GST-free.

Detailed reasoning

Generally, supplies of goods and services in Australia are subject to GST if the supply is a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). You make a taxable supply if:

•         you make the supply for consideration (payment); and

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

•         the supply is connected with the indirect tax zone (Australia);

•         you are registered, or required to be registered for GST; and

However, a supply is not taxable if it is neither GST-free nor input taxed.

Section 38-85 of the GST Act provides that the supply of certain specified education courses is GST-free as well as 'administrative services directly related to the supply of such a course, but only if they are supplied by the supplier of the course'. The education courses that are GST-free are listed in section 195-1 of the GST Act (the dictionary) and include a tertiary course; an adult and community education course; and professional or trade course amongst others.

For the purposes of the GST Act, a tertiary course must be provided by a higher education institution such as a university that is located in Australia. Although an adult and community education course means a course of study or instruction that is likely to add to the employment related skills of people undertaking the course, it must be a course that is approved by the Student Assistance Minister and provided by an approved supplier. The courses provided by Entity A through the Entity A's online business platform are neither adult and community education courses nor tertiary courses for the purposes of the GST Act.

A professional or trade course is defined as 'a course leading to a qualification that is an essential prerequisite:

•         for entry to a particular profession or trade in Australia; or

•         to commence the practice of (but not to maintain the practice of) a profession or trade in Australia'.

For a supply of to be GST-free under section 38-85 of the GST as a professional or trade course, there must be:

•         a course of study that is more than tuition aimed at successfully completing a

•         the course concludes with a qualification being awarded to a student who is different to tuition

•         an essential prerequisite to enter or commence a profession or trade.

A course of study involves systematic instruction, training or schooling that takes the form of a series of lessons or classes; or a unit or module that forms part of a larger course. To be a course of education, the systematic instruction, training or schooling also needs to have elements of interactive teaching. Factors that indicate interactive teaching include, but are not limited to:

•         delivery of educational instruction through an instructor or teacher;

•         ongoing support and guidance, for example, staff being available to answer questions;

•         assessment of the student's progress;

•         monitoring or supervision; and

•         provision of feedback concerning the student; and

•         assessment of the competency or satisfactory completion at the end of the program of instruction.

The course must lead to a qualification such as a statement of satisfactory completion; a certificate (including a degree or diploma); a licence; or an accreditation. Normally, the qualification would be accepted by Government authorities, a professional or trade association or an employer as suitable evidence that a person has successfully completed the relevant course.

For a course to be a professional or trade course to be GST-free under section 38-85 of the GST Act, the qualification attained upon successful of the course must be an essential prerequisite for entry into, or to commence the practice of, a particular profession or trade. An essential prerequisite is defined by section 195-1 of the GST Act as a qualification that is imposed:

•         by or under an industrial instrument such as an Australian law; or an award, order, determination or industrial agreement in force under an Australian law.

•         by an Australian (national or state based) professional or trade association in certain circumstances.

Paragraph 48 and 49 of the Goods and Services Tax Ruling, Goods and services tax: supplies that are GST-free as professional or trade courses (GSTR 2003/1) explain the meaning of an essential prerequisite:

48. A qualification is an essential prerequisite if it is mandatory for a person to have the qualification before he or she can enter into, or commence the practice of, a particular profession or trade. This necessarily requires the imposition of penalties or sanctions if a person enters into, or commences the practice of, the profession or trade without the relevant qualification.

49. A qualification that is imposed for reasons other than for entry to, or to commence the practice of, a profession or trade, is not an essential prerequisite for the purposes of a professional or trade course. Similarly, a qualification required by an employer or group of employers, but which is not imposed by an industrial instrument, or a professional or trade association at either the national level, or State or Territory level will not be an essential prerequisite.

The courses provided by Entity A through the Entity A's online business platform will not be GST-free because the qualification attained is not an essential prerequisite for entry into a profession. That is, a person wishing to work is not legally required to have this qualification. Furthermore, for GST purposes, a qualification can only be an essential prerequisite if it is imposed by an Australian law or by an Australian association. As the association offer the qualification is not an Australia association, it cannot impose a qualification that would satisfy the definition of an essential prerequisite under the GST Act.

Although courses offered on the Entity A's online business platform are not GST-free as education courses, they will not be subject to GST unless the supply of the course satisfies all of the requirements of section 9-5 of the GST Act and are not otherwise GST-free.

The table in subsection 38-190(1) of the GST Act provides a list of circumstances in which supplies of things, other than goods or real property that are for consumption outside of Australia are GST-free. Under item 2 in the table, a supply would be GST-free if:

•         it is made to a non-resident who is not in the indirect tax zone when the supply occurs; and

•         the supply is neither a supply of work physically performed on goods situated in the indirect tax zone when the work is done nor a supply directly connected with real property situated in the indirect tax zone;

Consequently, any supplies of tuition made by the Entity A's online business platform to students who are located outside Australia are GST-free.

As explained in the Law Companion Ruling, GST on supplies made through electronic distribution platforms (LCR 2018/2), section 84-55 of the GST Act deems the operator of an 'electronic distribution platform' to have made any supplies of 'inbound intangible consumer supplies' to an Australian consumer where the supply is made through the platform.

An electronic distribution platform is defined as a 'service (including a website, internet portal, gateway, store or marketplace)' that 'allows entities [tutors] to make supplies available to end-users [students]' where the supplies are 'made by means of electronic communication'. Entity A, as the operator of the Entity A's online business platform is deemed to be the supplier of courses or tuition to the students.

Consequently, any supplies that are made to students who are located in Australia are caught by these provisions and the supplies made to them will be subject to GST. This is because:

•         the supply of a course will be made for consideration (i.e. payment); and

•         section 84-55 of the GST Act deems the supply to have been made in the course or furtherance of an enterprise that is carried on by the platform operator; and

•         it will be connected with the indirect tax zone as it will be supplied to an Australian consumer (ie Australian resident that is not registered for GST) - as provided by paragraph 9-25(5)(b) of the GST Act; and

•         the deemed supplier (i.e. Entity A as the operator of the Entity A's online business platform) is be registered for GST.

Question 2

Summary

Entity A is making supplies to the tutors in return for the revenue share or service fees. Supplies of these services are not taxable supplies as they are GST-free.

Detailed reasoning

As mentioned above, supplies that are GST-free are not taxable supplies under section 9-5 of the GST Act. Section 38-190 of the GST Act provides that certain supplies of things (other than goods or real property) for consumption outside of Australia are GST-free. The table in subsection 38-190(1) of the GST Act provides a list of the specific requirements for these types of supplies to be GST-free and either item 2 or item 3 may apply to supplies made by Entity A to the tutors in return for Entity A keeping its share of the revenue or charging a service fee.

Item 3 in the table in subsection 38-190(1) of the GST Act provides that a supply is GST-free if:

•         the supply is made to a recipient who is not in the indirect tax zone (Australia) when the supply occurs; and

•         the effective use or enjoyment of the supply takes place outside Australia; and

•         the supply is neither of work physically performed on goods located in Australia, nor directly connected with real property located in Australia.

The arrangement between Entity A and the tutors entitles Entity A to various amounts of the revenue generated when a tutor is engaged by a student. This may be described as the 'revenue share' or may be a separate 'service fee'. In return for these amounts, Entity A provides a range of services which essentially allows the tutors to provide their instruction to the students. In providing the framework and platform as well as associated other services, Entity A is making supplies to the tutors. These supplies will be GST-free to any tutor who is not in the indirect tax zone when the supply occurs. This is because the supply of services by Entity A is used by the tutors in giving instruction and education to their students. The Goods and Services Tax Ruling, Goods and services tax: in the application of paragraph (b) of item 3 in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 to a supply, when does' effective use or enjoyment' of the supply 'take place outside Australia'? (GSTR 2007/2) explains that the place of effective use or enjoyment of a supply is generally the place where the supply is provided to the recipient. As the services provided by Entity A to the tutors are provided to tutors who are located outside Australia, the use or enjoyment of those services also takes place outside Australia.

Consequently, any supplies that Entity A makes to tutors who are located outside Australia are GST-free supplies under item 3 in the table in subsection 38 190(1) of the GST Act as the supplies are neither of work physically performed on goods located in Australia, nor directly connected with real property located in Australia and the recipients (tutors) are not in Australia when the supplies occur.

Question 3

Summary

Because acquisitions that relate to the Entity A's online business platform are made by Entity A for a creditable purpose, they are not subject to the reverse charge.

Detailed reasoning

In some circumstances, the purchaser of a supply may be liable to pay the GST to the Australian Taxation Office - which is known as reverse charging. Section 84-10 of the GST Act requires the recipient to pay the GST payable on supplies that are taxable supplies because of section 84-5 of the GST Act. Relevantly, item 1 in the table in subsection 84-5(1) of the GST Act provides that a supply of something other than goods or real property is a taxable supply if:

•         the supply is not connected with the indirect tax zone (eg the supply occurs outside Australia); and

•         the supply is for consideration (payment); and

•         the recipient is registered, or required to be registered for GST; and

•         the recipient does not acquire the thing supplied solely for a creditable purpose (eg because the acquisition relates to making financial supplies); and

•         the supply is neither GST-free, nor input taxed.

Acquisitions by Entity A that are not acquired solely 'for a creditable purpose' will be subject to reverse charging. Generally, an acquisition is made for a creditable purpose under section 11-15 of the GST Act if:

•         it is made in carrying on an enterprise; and

•         it is not made in relation to making input taxed supplies (such as financial supplies or residential rent); and

•         it is not of a private or domestic nature.

Acquisitions relating to the Entity A's online business platform made by Entity A from entities outside Australia are not subject to the reverse charge. This is because the supplies are made solely for a creditable purpose.