Edited version of private advice

Authorisation Number: 1052292760964

Date of advice: 16 August 2024

Ruling

Subject: GST-free supplies

Question

Are your supplies made to X GST-free?

Answer 1

Yes, your supplies to X are GST-free.

This ruling applies for the following period:

YYY to ZZZ

The scheme commenced on:

WWW

Relevant facts and circumstances

On 1 July 20ZZ you commenced providing services of computer game development work to X in the capacity of a sole trader. The work performed for X comprises programming, Y creation and attendance at meetings (via online calls). It is performed entirely from your home, on your own computer.

X is a non-resident company, based in Q, USA. You provide services to no other business. You invoice X for the services you perform at an hourly rate.

You have been registered for GST since ZZ.

The work you supply to X is then reviewed, changed, and altered by X before being published as a final product, released, and then distributed by X to consumers world-wide.

Relevant legislative provisions

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

Reasons for decision

Section 38-190 of the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act) provides that certain supplies of things other than goods or real property are GST-free.

Of those things, two are relevant to your circumstances.

The first is Item 2 in the table to subsection 38-190(1). This item provides that a supply will be GST-free if it is a supply made to a non-resident who is not in the indirect tax zone (i.e., Australia) when the thing supplied is done and:

a)            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; 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.

In our view, your supplies to X satisfy paragraph (a) of Item 2, if not paragraph (b) as well. Given the facts as stated as applying to your circumstances, it is also our view that subsection 38-190(3) does not override the satisfaction of Item 2 to your supplies. This is on the basis that you only make your supplies to X and not also or either to "another entity in the indirect tax zone" (paragraph 38-190(3)(b)).

The second relevant type of supplies to your circumstances is Item 3 in the same table. This item provides that a supply will be GST-free if it is a supply:

a)            that is made to a recipient who is not in the indirect tax zone when the thing supplied is done; and

b)            the effective use or enjoyment of which takes place outside the indirect tax zone;

other than a supply of work physically performed on goods situated in the indirect tax zone when the thing supplied is done, or a supply directly connected with real property situated in the indirect tax zone.

In our view, your supplies to X also satisfy Item 3. In that regard, the 'effective use and enjoyment' test in paragraph (b) extends only to the recipient of your supplies, being X. The fact that X subsequently supplies the finished products to consumers around the world, including potentially Australia, is not relevant to the test.