Edited version of private advice

Authorisation Number: 1052331986566

Date of advice: 29 November 2024

Ruling

Subject: GST and supplies to non-residents

Question 1

Is the supply that you make to a non-resident entity a GST-free supply under section 38-190 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when you receive income for advertisements?

Answer 1

Yes, the supply that you make to a non-resident entity is GST-free under paragraph (a) in table item 2 of subsection 38-190(1) of the GST Act when you receive income.

This ruling applies for the following period:

XX August 20XX to XX August 20XX

The scheme commenced on:

XX August 20XX

Relevant facts and circumstances

You are an Australian company and you are registered for GST.

You receive revenue from a non-resident entity for advertisements displayed within a mobile application.

The application was developed by overseas developers.

The app is available globally, with all end users located outside of Australia.

The app is available online under your name.

You manage marketing and in-house operations.

The services contract is with a non-resident entity.

The revenue is deposited directly into your Australian bank account.

No GST is collected or noted on the payment advice.

You reimburse the overseas developers' share from the generated revenues.

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

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

Question

Is the supply that you make to a non-resident entity a GST-free supply under section 38-190 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when you receive income for advertisements?

Summary

Your supply to a non-resident entity is GST-free under paragraph (a) in table item 2 of subsection 38-190(1) of the GST Act when you receive advertising income.

Detailed reasoning

Generally, GST is payable on a taxable supply. However, a supply is not a taxable supply to the extent that it is GST-free.

You entered into a contract with a non-resident entity under which you receive a share of advertising revenues earned through the advertisements inserted into the application that you uploaded. Therefore, you make a supply to the non-resident entity by making your application available for advertisements to be placed in it.

GST-free supply

Table item 2 of subsection 38-190(1) of the GST Act (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.

From the information given, paragraph (a) of item 2 is satisfied when you make your supply to Google Asia as:

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

•                your 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.

Accordingly, your supply to the non-resident entity is GST-free under paragraph (a) of item 2 to the extent that the supply is not negated by subsection 38-190(3) of the GST Act.

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 the indirect tax zone; 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.

From the facts given, subsection 38-190(3) of the GST Act does not apply to your supply made to the non-resident entity as you are not required to provide your supply to another entity in Australia.

Your supply is made and provided to the non-resident entity, and is therefore GST-free under paragraph (a) of item 2.