Edited version of private advice

Authorisation Number: 1052235125181

Date of advice: 25 March 2024

Ruling

Subject: GST - the supply of services to a non-resident entity

Question 1

Is the supply of services to an overseas entity a taxable supply where you receive commission from the overseas entity for referrals through your website?

Answer

No, the supply of services to an overseas entity is not a taxable supply. The supply will be GST-free under table item 2 in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

Question 2

If your turnover exceeds $75,000 per annum based on commission received from an overseas entity, are you required to be registered for GST?

Answer

Yes, you will exceed the GST turnover test in Division 188 of the GST Act and be required to register for GST.

This ruling applies for the following periods

1 July 2022 to 30 June 2026

Relevant facts and circumstances

You provide affiliate links on your website and social media pages for a non-resident entity. Users on the website click on those links and sign up to provide services to the non-resident entity.

The company that manages the affiliates for the non-resident entity is based in Singapore. It tracks the sign-ups and will automatically raise invoices for the signups.

You can see the basic analytics on signups, clicks, but don't get the details of the persons signing up through the management platform.

The affiliate management company then releases the payment (based on the signups and other conditions being met by the persons who sign up) on a monthly basis, usually on the 1st of the month. It takes 4 to 7 business days for money to arrive in your account. This happens with the other affiliate partners as well.

Your turnover is greater than the $75,000 GST registration threshold.

You are not registered for GST.

The contract and terms and conditions are between you and the non-resident entity.

These terms and conditions can be found on the entity's website.

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 38-190

A New Tax System (Goods and Services Tax) Act 1999 division 188

Reasons for decision

Question 1

GST is payable on a taxable supply.

Section 9-5 of the A New Tax System (Goods and Services tax) Act 1999 (GST Act) states:

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.

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

(* denotes a term defined under section 195-1 of the GST Act)

Based on the facts you provided, you are required to be registered for GST. Even though the supply of services by you to the non-resident entity satisfies all the requirements under section 9-5 of the GST Act, if the supply is GST-free, it is not a taxable supply. There is no provision under the GST Act that makes your supply of affiliate links input taxed.

GST-free supply

Relevant to your supply of online affiliate links is item 2 in the table in subsection 38-190(1) of 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 the non-resident 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.

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

Paragraph (a) of item 2

Based on this, your supply of online services satisfies paragraph (a) of item 2 as:

•         your supply of online affiliate links is made to a non-resident business who is not in Australia in relation to your supply when the supply is done; and

•         your supply of online affiliate links 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.

However, paragraph (a) of item 2 is limited by subsection 38-190(3) of the GST Act.

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

Subsection 38-190(3) of the GST Act

Subsection 38-190(3) of the GST Act provides that without limiting subsection 38-190(2) or (2A), a supply covered by item 2 in that table is not GST-free if:

a)    it is a supply under an agreement entered into, whether directly or indirectly, with a non-resident; and

b)    the supply is provided, or the agreement requires it to be provided to another entity in Australia; and

c)    for a supply other than an input taxed supply - none of the following applies:

                      i.        the other entity would be an Australian-based business recipient of the supply, if the supply had been made to it;

                     ii.        the other entity is an individual who is provided with the supply as an employee or officer of an entity that would be an Australian-based business recipient of the supply, if the supply had been made to it; or

                    iii.        the other entity is an individual who is provided with the supply as an employee or officer of the recipient, and the recipient's acquisition of the thing is solely for a creditable purpose and is not a non-deductible expense.

Based on the information given, subsection 38-190(3) does not apply to your supply as you are supplying and providing the online affiliate links to the non-resident business.

Therefore, your supply of online affiliate links to the non-resident business is GST-free under item 2 in the table in subsection 38-190(1) of the GST Act.

Where a supply is GST-free, no GST is payable on the supply.

Question 2

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.

You advised that your turnover is greater than $75,000 and therefore you are required to be registered.