Edited version of private advice

Authorisation Number: 1052294810621

Date of advice: 25 September 2024

Ruling

Subject: GST - taxable supply

Question

If an agent engages you to provide services to a non-resident, is this a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999?

Answer

No, this is not a taxable supply if the non-resident is not registered or required to be registered for GST, acquires the thing in carrying on their enterprise and is outside the indirect tax zone when the service is supplied.

This ruling applies for the following periods:

All periods ending on or after 1 July 20XX

Relevant facts and circumstances

You are an Australian Private Company.

You are registered for GST.

You carry on an enterprise of consulting relating to property in Australia. You provide various types of testing and reports in relation to property.

You were engaged by an agent on behalf of a non-resident entity's business to carry out testing on a property and report on the findings.

The agent was carrying on their own business when they engaged you, and not the non-resident's entity's business in Australia.

The agent provided the advice received from you to the non-resident entity, however the agent requires the non-resident entity's approval before binding them.

The non-resident entity is not domiciled in Australia.

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

Reasons for decision

Section 9-5 of the GST Act defines a taxable supply as follows:

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;

(d)           and 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.

You carry on an enterprise of consulting relating to property in the indirect tax zone (Australia). You provide various types of testing and reports in relation to property. You provide these supplies to for consideration. You are registered for GST.

This supply of services by you meets paragraphs 9-5(a) to 9-5(d) of section 9-5 of the GST Act, therefore it is a taxable supply unless it is GST-free or input taxed. There is no provision in the GST Act under which the supply would be input taxed.

Under subsection 38-190(1) of the GST Act certain supplies of things, other than goods or real property, for consumption outside the indirect tax zone are GST-free.

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

(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 for GST.

The supply is directly connected with real property situated in the Australia, therefore the requirements of Item 2(a) are not met and a supply will only be GST-free if it meets the requirements of Item 2(b).

The Goods and Services Tax Ruling GSTR 2004/7 Goods and services tax: in the application of items 2 and 3 and paragraph (b) of item 4 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999: when is a 'non-resident' or other 'recipient' of a supply 'not in Australia when the thing supplied is done'? when is 'an entity that is not an Australian resident' 'outside Australia when the thing supplied is done'? confirms at paragraph 296 that if an agent is carrying their own business and not the non-residents business then the non-resident company will be considered (in most circumstances) not in Australia:

296. We consider that, if the agent does not have the power to bind the non-resident company without seeking the company's approval before binding that company, it is more likely that the agent is carrying on the agent's own business, unless the circumstances are similar to those discussed at paragraphs 302 to 310. If the agent is carrying on the agent's own business and not the non-resident company's business in Australia, the non-resident company is not in Australia.

You have been engaged by an agent for a non-resident. You provide advice the non-resident via the agent. The agent has no delegated authority to make decisions and is carrying on their own business when engaging you. At no time does the agent carry on the business of the non-resident.

Furthermore GSTR2004/7 states at paragraph 37 a non-resident company is in Australia in relation to the supply (item 2 and paragraph (b) of item 4) when:

37. A non-resident company is in Australia if that company carries on business (or in the case of a company that does not carry on business, carries on its activities) in Australia:

(a) at or through a fixed and definite place of its own for a sufficiently substantial period of time; or

(b) through an agent at a fixed and definite place for a sufficiently substantial period of time.

The non-resident does not carry on their business in Australia for any period of time, nor are their enterprises carried on in Australia by an agent. Therefore, as the non-resident and is outside Australia when the service is supplied, and acquires the thing in carrying on their enterprise, and is not registered or required to be registered for GST the requirements of Item 2(b) in the table in subsection 38-190(1) are met. Therefore, the supply will be GST-free.