Edited version of private advice

Authorisation Number: 1052321627870

Date of advice: 26 November 2024

Ruling

Subject: GST - supply of the grant of intellectual property rights

Question

Is X supply of the grant of intellectual property rights for consumption outside Australia under a scholarship agreement with an overseas organisation (industry partner) GST-free under section 38-190 of A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes, the supply of the grant of intellectual property rights to the industry partner for consumption outside Australia under a scholarship agreement is a GST-free supply as per item 4 in the table in subsection 38-190(1) of the GST Act.

Relevant facts and circumstances

You are registered for GST.

You engage with an industry partner to provide funding to the university for the purposes of a nominated student conducting (solely or as part of a team) a research project.

The research project is performed in Australia through you and by the student.

The scholarship agreement is made in Australia under Australian jurisdiction.

The agreement is not intended to create a partnership, joint venture, or a relationship of agency between the university and industry partner.

The industry partner is not a resident of Australia with no connection to Australia.

Any rights given to the industry partner under the agreement will be consumed entirely outside of Australia.

In return for providing the funding, the industry partner:

•         Receives periodic reports on the progress of the research project.

•         Maintains ownership of any background intellectual property it owns and provides for use in the research project.

•         Receives rights to the new intellectual property created either by way of ownership or a perpetual licence.

•         Receives rights to commercialise the intellectual property in collaboration with the University subject to the ownership of the intellectual property referred to above.

The industry partner also agrees to provide the following in-kind support:

•         Nominate an industry supervisor to help guide the student in the research project. The supervision will not physically take place in Australia.

•         Offer their facilities for the student to attend for the purposes of the research project. This is rarely taken up and the entirety of the project is typically conducted in Australia.

You are responsible for the supervision of the student.

Ownership of any copyright and moral rights in academic documentation (e.g. thesis) created in the research project vests in the student.

Students are in Australia and are not an employee of the university.

The industry partner is based overseas and is not registered for GST.

You also have similar agreements in place with Australian industry partners.

Payments received from the Australian industry partners are inclusive of 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 38-190

Reasons for decision

a)    the supply is made for consideration; and

b)    the supply is made in the course of the enterprise that the supplier carries on; and

c)    the supply is connected with Australia; and

d)    the supplier is registered or required to be registered for GST.

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

When you supply a grant of intellectual property rights for consumption outside Australia under a scholarship agreement with an overseas industry partner you satisfy paragraphs (a) to (d) in section 9-5 of the GST Act as:

a)    you make your services for consideration; and

b)    you make your services through an enterprise that you carry on; and

c)    the supply of services is connected with Australia as the services are done through an enterprise that you carry on in Australia; and

d)    you are registered for GST.

Accordingly, your supply of a grant of intellectual property rights for consumption outside Australia under a scholarship agreement with an overseas based industry partner is a taxable supply unless it is GST-free or input taxed.

There is no provision under the GST Act that makes your supply of rights input taxed.

Supply of rights to the overseas industry partner

After considering your agreement with the industry partner we consider you are making a supply of rights to the industry partner.

Your supply of rights to the overseas based industry partner satisfies paragraphs (a) to (d) in section 9-5 of the GST Act. However, your supply of rights is not a taxable supply where it is GST-free or input taxed under the GST law.

Your supply of rights is not input taxed under the GST law.

GST-free supply

Relevant to your supply of a grant of intellectual property rights to an overseas based industry partner is item 4 in the table in subsection 38-190(1) of the GST Act (item 4).

Item 4 provides that a supply that is made in relation to rights is GST-free if:

a)    the rights are for use outside Australia; or

b)    the supply is to an entity that is not an Australian resident and is outside Australia when the thing supplied is done.

Based on the information provided, your supply of grant of intellectual property rights to an overseas industry partner satisfies paragraph (a) and (b) of item 4 as:

•         Any rights given to the industry partner under the agreement will be consumed entirely outside of Australia.

•         The industry partner is not a resident of Australia with no connection to Australia, and is not in Australia at the time the supply is done.

Therefore, as your supply of a grant of intellectual property rights under a scholarship agreement with an overseas based industry partner is for use outside Australia, your supply of rights is GST-free under paragraph (a) and (b) of item 4. You do not need to collect GST on the supply, but you will include this supply of rights in your annual turnover when calculating your GST turnover for GST purposes.

Supply of rights to Australian industry partners

Where you make the supply of rights to an industry partner in Australia, your supply of rights is not GST-free where the rights are for use in Australia. You will need to collect GST on the supply, and you will include this supply of rights in your annual turnover when calculating your GST turnover for GST purposes.