Edited version of private advice

Authorisation Number: 1052294234161

Date of advice: 30 August 2024

Ruling

Subject: GST - supply of online tutoring

Question 1

Is Entity A responsible for GST under section 84-55 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) on the supply of tuition or courses through Entity A's website to students that are located in Australia?

Answer

Entity A is not responsible for GST under section 84-55 of the GST Act on the supply of tuition or courses through Entity A's website to students that are located in Australia.

Supplies delivered through Entity A's website are not considered to be inbound intangible consumer supplies made by means of electronic communication as additional services are required to be provided by the individual tutors that are considered to be more than incidental.

As Entity A is not responsible for GST on supplies of tuition or courses, the individual tutors remain liable for the GST on supplies they make to recipients in Australia where all the requirements of section 9-5 of the GST Act are met.

Question 2

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

Answer

No, as acquisitions from entities outside Australia are not subject to reverse charges, because Entity A acquires them for creditable purposes.>

Relevant facts and circumstances

Entity A carries on an enterprise of providing online tutoring and courses through its own online business platforms.

All the online business platforms connect students studying toward the primary membership qualification of an overseas association with tutors.

All courses and material offered on Entity A's platforms belong to the tutor who designed, wrote and recorded the course. The tutor is free to withdraw their course at will.

Entity A contracts with, and acts as a money collection agent, a website hosting company and a service provider for predominantly overseas based tutors.

Tutors have responsibility for the creation and maintenance of their courses, which are delivered through Entity A's platforms and WhatsApp.

Where a student enrols in a course with an individual tutor, the contract is between the individual tutor and the student and not with Entity A. However, this contract will provide that Entity A acts as a guarantor to students buying through Entity A's platforms that their tutor will fulfill their contractual obligations.

Tutors must contract with their students using the standard terms and conditions set by Entity A.

Tutors decide on both the public price at which their courses are offered for sale on Entity A's platforms and on any discounted fees actually charged to students:

Tutors must meet quality standards and pass rates as set by Entity A to facilitate continued registration of courses.

Whatever price a student pays to enrol on a course, the tutor is charged a commission by Entity A.

Entity A provides various services to the tutors including:

•         maintaining Entity A's platforms.

•         collecting student fees on behalf of tutors.

•         managing the registration.

•         create and maintain tutor quality control systems, student feedback systems, student complaints system, standard student/tutor contract etc.

•         arranging and paying for third party services for the tutors not resident of Australia.

Tutors use a number of interlocking systems to deliver courses, such as:

•         Video content, pdfs, quizzes, and other learning materials hosted on Entity A's platforms.

•         Responding to queries by students on a one-to-one basis or via a group on WhatsApp.

•         Webinars via Zoom or Sessions.

•         Direct contact with students by WhatsApp voice call

•         Local or cloud based marking systems, usually following the download of a student assignment from the 'study site', and then the re-upload of that marked assignment on the 'study site'.

All courses provided through all platforms operated by Entity A and delivered by individual tutors involve direct tutor support to individual students, in the form of a WhatsApp query service.

Some students who buy courses on Entity A's platforms are resident of Australia, and therefore Entity A may invoice and collect monies from such students on behalf of tutors resident outside Australia.

Entity A acquires services overseas such as advertising and marketing, some of which it resells to non-Australian based tutors.

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 11-15

A New Tax System (Goods and Services tax) Act 1999 section 38-85

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

A New Tax System (Goods and Services tax) Act 1999 sections 84-5, 84-10, 84-55, 84-70

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

Does Division 165 apply to this private ruling?

Division 165 of the A New Tax System (Goods and Services Tax) Act 1999 is a general 'anti-avoidance' rule that can apply in certain circumstances if you or another entity obtains a GST benefit from a scheme that you entered into or carried out for the main purpose of obtaining a GST benefit, or allowing another to obtain one.

It may also apply in some cases where the GST benefit arises as a principal effect of a particular scheme. An entity can get a 'GST benefit' under the GST, Luxury Car Tax or Wine Equalisation Tax laws.

If Division 165 applies, the benefit can be cancelled. For example, we might increase the net amount for a particular tax period.

Unless your private ruling specifically discusses Division 165, we have not considered the application of the anti-avoidance provisions to your case.

If you want us to rule on whether Division 165 applies in your circumstances, contact your contact officer to find out what details we will need to make the private ruling.

Reasons for decision

In this reasoning:

•         all legislative references are to the A New Tax System (Goods and Services) Tax Act 1999, unless otherwise stated.

•         The 'indirect tax zone' is defined in section 195-1 of the GST Act and is hereafter referred to as 'Australia'

Question 1

Summary

Entity A is not responsible for GST under section 84-55 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) on the supply of tuition or courses through Entity A's websites to students that are located in Australia.

Supplies delivered through Entity A's websites are not considered to be inbound intangible consumer supplies made by means of electronic communication as additional services are required to be provided by the individual tutors that are considered to be more than incidental.

As Entity A is not responsible for GST on supplies of tuition or courses, the individual tutors remain liable for the GST on supplies they make to recipients in Australia where all the requirements of section 9-5 of the GST Act are met.

The supplies of tuition or courses 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

You are liable to pay goods and service tax (GST) on any taxable supply you make.

Under section 9-5 of the A New Tax System (Goods and services Tax) Act 1999 (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 (Australia); 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.

The supply of tuition or courses is not an input taxed supply under any provision of the GST Act. However, the supply may be GST-free under Division 38. This is discussed further below, under the heading 'Supply of education courses'.

The Entity A's platforms do not satisfy the EDP rules under section 84-70 and Entity A is not liable to pay GST on the supplies made through the platforms.

The individual tutors remain liable for the GST on supplies they make to recipients in the Indirect Tax Zone where all the requirements of section 9-5 are met.

Supply of education courses

Section 38-85 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 (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 the tutors and Entity A through the Entity A's platforms 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 as a professional or trade course, there must be:

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

•         the course concludes with a qualification being awarded to a student which 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;

•         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, 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 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.

Paragraphs 48 and 49 of the Goods and Services Tax Ruling, Goods and services tax ruling 2003/1: 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 or the tutors through Entity A's platforms will not be GST-free because the qualification attained is not an essential prerequisite for an entry into a profession in Australia. 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.

Although courses offered on Entity A's platforms 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 and are not otherwise GST-free.

Supplies to non-residents.

The table in subsection 38-190(1) provides a list of circumstances in which supplies of things, other than goods or real property that are for consumption outside Australia are GST-free.

Item 2 in the table in subsection 38-190(1) provides that a supply made to a non-resident who is not in Australia when the thing supplied is done would be GST-free if:

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, or

b)         the non-resident acquires the thing in carrying on their enterprise but is not registered or required to be registered.

Where the requirements of paragraphs (a) or (b) of item 2 are satisfied, the supply will be GST-free.

Consequently, any supplies of tuition or courses made by the tutors or LOP via Entity A's platforms to students who are located outside Australia are GST-free.

Supply made through an electronic distribution platform

Section 84-55 provides that an operator of an electronic distribution platform (EDP) would be treated as the supplier if an inbound intangible consumer supply is made through the EDP. The operator of the platform instead of the supplier is treated for GST purposes as:

(a)         having made the supply; and

(b)         having done so for the consideration for which it was made; and

(c        ) having done so in the course or furtherance of an enterprise that the operator carries on.

Section 84-65 provides that a supply of anything other than goods or real property is an inbound intangible consumer supply if the recipient is an Australian consumer, unless:

(a)         the thing is done wholly in Australia; or

(b)         the supplier makes the supply wholly through an enterprise that the supplier carries on in Australia.

Section 84-70 provides the meaning of an EDP. A service (including a website, internet portal, gateway, stores or marketplace) is an EDP if:

(a)         the service allows entities to make supplies available to end-users; and

(b)         the service is delivered by means of electronic communication; and

(c)         any of the supplies that are inbound intangible consumer supplies are to be made by means of electronic communication.

All of the above three rules under section 84-70 must be satisfied for a platform to be considered to be an EDP.

It is relevant to consider whether the supplies of tuition and courses provided by the tutors through the Entity A's platforms would satisfy all of the requirements under section 84-70.

Law Companion Ruling 2018/2: GST on supplies made through electronic distribution platforms (LCR 2018/2) explains how GST will apply to supplies made through an EDP.

Subsection 84-70(a) - The service allows entities to make supplies available to end-users.

Paragraph 24 and 25 of LCR 2018/2 explain that an EDP service which allows buyers to make an offer for an item, and/or which allows merchants to accept orders by buyers will satisfy the first requirement under section 84-70. This includes situations where an end-user can click a button to make an offer to buy goods at a particular price where this is converted into a message to the merchant.

The supply of tuition and courses provided by tutors from outside Australia to students in Australia will satisfy this requirement when the students enrol on the Entity A's platforms. The tutors as merchants can accept the request for enrolment directly from the students and a contract is executed between the tutors and students once the enrolment is accepted.

Subsection 84-70(b) - The service is delivered by means of electronic communication.

Paragraphs 33 to 36 of LCR 2018/2 state:

33. Electronic communication is defined to mean:

(a)         a communication of information in the form of data, text or images by means of guided and/or unguided electromagnetic energy, or

(b)         a communication of information in the form of speech by means of guided and/or unguided electromagnetic energy, where the speech is processed at its destination by an automated voice recognition system.

34. This requirement will be satisfied where the service is delivered by fully automated electronic communication, such as by a website, an automated email or an automated pre-recorded telephone call.

35. Where human intervention is involved, the service can still be delivered (and supplies can still be made) by means of electronic communication, but this will depend on whether the human involvement is incidental or optional to the service. A service will not be an EDP if it is carried out primarily through human interaction, such as via a call centre.

36. Incidental communications by employees or assistance in helping the end-user to use the service will not affect whether the service is delivered by means of electronic communication. For example, if the service involves a 'click to chat' option or call centre that a recipient can use to make enquiries before purchasing via an online checkout, the service will still be delivered by electronic communication.

The tutors are responsible for the supply of their courses. The courses are delivered through the Entity A's platforms and whatsapp. Tutors also use a number interlocking systems to deliver the courses such as video content, pdfs, quizzes and other learning materials hosted on Entity A's platforms.

Although it is considered that the tuition or courses are delivered by means of various electronic communication, it is important to determine the level of human intervention involved in delivering the tuition or courses. That is whether the tutors' involvements in delivering the courses are incidental or optional.

As part of the supply of tuition or courses made by tutors through the Entity A's platforms, the following additional services are provided by the tutors to the students under the contract entered between the tutors and students via the Entity A's platforms:

•         Responding to queries by students on a one-to-one basis or via a group on WhatsApp.

•         Webinars via Zoom or Sessions.

•         Direct contact with students by WhatsApp voice call

•         Local or cloud based marking systems, usually following the download of a student assignment from the 'study site', and then the re-upload of that marked assignment on the 'study site'

According to the facts, the students enter into a contract with the tutors and not with Entity A. The tutors have the responsibility to fulfill the obligations under the contract they enter with students. Although the tuition and the courses are provided using the Entity A's platforms, additional services are provided by tutors to students on one-to-one basis. The additional services provided by the tutors such as responding to questions from students, interacting with students directly by WhatsApp voice call and/or webinars via Zoom or Sessions and marking the assignments by downloading and uploading are considered as human involvement in supplying the tuition or the whole course.

It is considered that the level of involvement by tutors is more than incidental to the supply of services provided by the tutors. Therefore, it is our view based on the facts provided that the services delivered by tutors will not satisfy the requirement of subsection 84-70(b).

Subsection 84-70(c) - Supplies that are inbound intangible consumer supplies are to be made by means of electronic communication.

The last requirement is that, if the supply is an inbound intangible consumer supply, the supply must be made (that is, delivered) by electronic communication. This means the EDP rules for inbound intangible consumer supplies only apply to digital products or digital services.

Paragraphs 51 to 53 of LCR 2018/2 state:

51. An EDP operator will automatically be responsible for GST on inbound intangible consumer supplies made through their platform, if the supplies are made by means of electronic communication, such as supplies of digital products or digital services. Examples of these supplies include:

•        the supply of an online game

•        streaming of a video

•        the supply of an e-book

•        an online subscription to a newspaper.

52. Although the supply must be made by electronic communication, it is not necessary that a supply be delivered through the platform itself. For example, if a supply is made through an EDP, but the digital product or service supplied is delivered through an email from the merchant to the recipient, the requirement will still be met.

53. The EDP rules for inbound intangible consumer supplies apply only to digital supplies. If a customer purchases something which entitles the customer to a specific supply in the future, then that future supply must be a digital service or digital product for the EDP rules to apply. For example, if the operator of a theme park in Australia issues digital confirmation of a booking, this will not be a supply made by electronic communication as the access to the theme park is not a supply made by electronic communication. By contrast, a supply of an online streaming subscription is a supply made by electronic communication, as the online streaming is a supply by electronic communication.

Since the supply of tuition and courses by tutors made through the LOP platforms does not satisfy the second requirement under section 84-70, it is considered that the supply would also not satisfy the third requirement. The rules for EDP will only apply to those supplies of inbound intangible consumer supplies if those supplies are either digital products or digital services. As explained in paragraphs 52 and 53 of LCR 2018/2, the delivery of the supply should be made by means of electronic communication.

Therefore, the Entity A's platforms do not satisfy the EDP rules under section 84-70 and Entity A is not liable to pay GST on the supplies made through the platforms.

The individual tutors remain liable for the GST on supplies they make to recipients in the Indirect Tax Zone where all the requirements of section 9-5 are met.

Question 2

Summary

Supplies made by Entity A in relation to service fees or the revenue share are not taxable supplies as they are GST-free under item 3 in the table in Subsection 38-190(1) of the GST Act.

Detailed reasoning

As mentioned above, supplies that are GST-free are not taxable supplies under section 9-5.

Section 38-190 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) 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) 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 Australia 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) 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

The acquisitions that relate to the Entity A's platforms are made by Entity A for a creditable purpose, therefore 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 requires the recipient to pay the GST payable on supplies that are taxable supplies because of section 84-5.

Relevantly, item 1 in the table in subsection 84-5(1) 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 (e.g. 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 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 platforms 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.