Edited version of private advice

Authorisation Number: 1052169004613

Date of advice: 2 October 2023

Ruling

Subject: Supplies to non-residents

Question 1

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

Answer 1

Yes, you must register for GST as you have a GST turnover of more than $75,000.

Question 2

Is your supply of services to Entity B a GST-free supply under section 38-190 of the GST Act?

Answer 2

Yes, your supply of services is GST-free under section 38-190 of the GST Act to the extent that the non-resident is not in Australia when your services are performed.

This ruling applies for the following period:

1 July 2022 to 30 June 2027

The scheme commenced on:

1 July 2022

Relevant facts and circumstances

You are an entity located in Australia and you provide services as part of your business activities. You are not a non-profit body.

You are not registered for GST and have not previously registered for GST

Your GST turnover is above $75,000.

You have entered into an agreement with Entity B for the supply of your services.

Entity B is a non-resident located outside Australia.

Under the agreement, you will find clients in the specified market for Entity B to sell its products.

Entity B will pay you a commission for your services, based on each sale contract made with a client.

Under the agreement, the services you provide:

•                     are not required to be provided to anyone in Australia

•                     do not relate to residential properties in Australia

•                     are not directly connected with property in Australia

•                     do not consist of work performed on goods located in Australia.

Entity B is not registered or required to be registered for GST and does not have any employees or presence in Australia in relation to the supply of the services when you perform your services.

Relevant legislative provisions

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

A New Tax System (Goods and Services Tax) Act 1999 subsection 38-190(1)

A New Tax System (Goods and Services Tax) Act 1999 subsection 38-190(3)

A New Tax System (Goods and Services Tax) Act 1999 subsection 188-10(1)

Reasons for decision

Question 1

Section 23-5 of the GST Act provides that you are required to be registered if:

(a) you are carrying on an enterprise; and

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

Currently, the registration turnover threshold is $75,000.

You must register for GST when you start a new business and expect your GST turnover to reach the registration turnover threshold (or more) in the first year of operation.

According to subsection 188-10(1) of the GST Act, your GST turnover meets a particular turnover threshold if:

(a) your current GST turnover is at or above the turnover threshold, and the Commissioner is not satisfied that your projected GST turnover is below the turnover threshold; or

(b) your project GST turnover is at or above the turnover threshold.

Your current GST turnover at a time during a particular month is the sum of the values of all the supplies that you have made, or are likely to make, during that month and the previous 11 months.

Your projected GST turnover at a time during a particular month is the sum of the values of all the supplies that you have made, or are likely to make, during that month and the next 11 months.

Your GST turnover is your total business income (including GST-free sales), minus:

•                     GST included in sales to your customers

•                     sales to associates that aren't for payment and aren't taxable

•                     sales not connected with an enterprise you run

•                     input-taxed sales you make

•                     sales not connected with Australia.

Therefore,as you have a GST turnover of more than $75,000, you must register for GST.

Question 2

Section 38-190 of the GST Act discusses when the supplies of things other than goods or real property, for consumption outside Australia are GST-free.

Specific to the supplies you make to the non-resident Entity B is item 2 in the table in subsection 38-190(1) of the GST Act.

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 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 is 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 services to a non-resident over a period of time 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 company to the non-resident entity will be GST-free.

In your case, the supply of your services to the non-resident entity will be GST-free under item 2 in the table in subsection 38-190(1) of the GST Act to the extent that the non-resident entity is not in Australia in relation to the supply when your services are performed.