Private ruling: Goods and services tax (GST) and non-resident services performed in Australia
Date of advice: 5 July 2018
Published: September 2018

Ruling: Q1: Are you required to be registered for GST? | A1: No. | Q2: Is GST payable on your supply of X services to Australian mining and mineral exploration companies? | A2: No.

Relevant facts and circumstances: You are not registered for GST. You are an overseas company. You are not a resident of Australia. You run a X consultancy business based in an overseas country. You supply X consulting services to Australian based mining/mineral exploration companies. These customers are registered for GST. You estimate you will receive over A$75,000 in fees from Australian consulting work in the (specified financial year). You send your employees to Australia to do consulting projects. Your employees would work in Australia from (number) to (number) days a year, depending on the project. An assignment with a given Australian mining/mineral exploration company generally takes a certain number of weeks. Your employees would work at multiple exploration areas in Australia in a given year. Your employees usually work on a project in Australia and return multiple times during the year. You do not have your own office in Australia. An Australian customer makes available a particular office to enable your employees to do any office based component of the work while in Australia. An office in Australia is used periodically, generally for a (number of) days every (number of months) during the field season and up to a (number of) weeks in a particular weather season. Employees are generally based at an exploration camp which is a field base where the bulk of the work is done. The different sites where exploration drill holes are being drilled are visited daily - generally these are within a (number of kilometres) radius of the camp. You have one open ended contract with an Australian company, which will run over a number of Australian financial years.

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 9-25 | A New Tax System (Goods and Services Tax) Act 1999 section 9-26 | A New Tax System (Goods and Services Tax) Act 1999 section 9-27 | A New Tax System (Goods and Services Tax) Act 1999 section 23-5 | A New Tax System (Goods and Services Tax) Act 1999 Division 188

Reasons for decision: Summary: As you do not have GST turnover of A$75,000 or more a year, you are not required to be registered for GST. | Detailed Reasoning - Detailed reasoning: An entity is required to be registered for GST if it meets the requirements of section 23-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), which states: You are required to be registered under this Act if: (a) you are *carrying on an *enterprise; and (b) your *GST turnover meets the *registration turnover threshold. (*As defined in section 195-1 of the GST Act). The registration turnover threshold is $75,000. You are carrying on an enterprise of providing X consultancy services. Therefore, you meet the requirement of paragraph 23-5(a) of the GST Act. An entity’s GST turnover meets a particular turnover threshold if the requirements of subsection 188-10(1) of the GST Act are met, which states: You have a GST turnover that meets a particular *turnover threshold if: (a) your *current GST turnover is at or above the turnover threshold, and the Commissioner is not satisfied that your *projected GST turnover is below the turnover threshold; or (b) your projected GST turnover is at or above the turnover threshold. Section 188-15 of the GST Act sets out the method for calculating current GST turnover. Subsection 188-15(1) of the GST Act states: Your current GST turnover at a time during a particular month is the sum of the *values of all the supplies that you have made, or are likely to make, during the 12 months ending at the end of that month, other than: (a) supplies that are *input taxed, or (b) supplies that are not for *consideration (and are not *taxable supplies under section 72-5): or (c) supplies that are not made in connection with an *enterprise that you *carry on. In accordance with paragraph 188-15(3)(a) of the GST Act, any supply that is not connected with the indirect tax zone (Australia) is excluded from the calculation of current GST turnover. Section 188-20 of the GST Act sets out the method for calculating projected GST turnover. Subsection 188-20(1) of the GST Act states: Your projected GST turnover at a time during a particular month is the sum of all of the *values of all the supplies that you have made, or are likely to make, during that month and the next 11 months, other than: (a) supplies that are *input taxed; or (b) supplies that are not for *consideration (and are not *taxable supplies under section 72-5); or (c) supplies that are not made in connection with an *enterprise that you *carry on. In accordance with paragraph 188-20(3)(a) of the GST Act, any supply that is not connected with Australia is excluded from the calculation of projected GST turnover. | Detailed Reasoning - “Connected with Australia”: As only supplies connected with Australia are included in the GST turnover calculations, we need to consider whether your supplies of services are connected with Australia. An intangible supply, such as a supply of a service, is connected with Australia if the requirements of subsection 9-25(5) of the GST Act are met, which states: A supply of anything other than goods or *real property is connected with the indirect tax zone if: (a) the thing is done in the indirect tax zone; or (b) the supplier makes the supply through an *enterprise that the supplier *carries on in the indirect tax zone; or (c) all of the following apply: (i) neither paragraph (a) nor (b) applies in respect of the thing: (ii) the thing is a right or option to acquire another thing; (iii) the supply of the other thing would be connected with the indirect tax zone: or (d) the *recipient of the supply is an *Australian consumer. (Paragraph 9-25(5)(c) of the GST Act is not relevant to your circumstances) However, there is an overriding rule in section 9-26 of the GST Act. Section 9-26 of the GST Act provides that a supply is not connected with the indirect tax zone if: (a) the supplier is a *non-resident; and (b) the supplier does not make the supply through an enterprise that the supplier carries on the indirect tax zone; and (c) the supply is of something other than goods or real property (d) the thing is done in the indirect tax zone; and (e) the recipient is an *Australian-based business recipient of the supply. Subsection 9-26(2) of the GST Act defines Australian-based business recipient. It states: An entity is an Australian-based business recipient of a supply made to the entity if: (a) the entity is *registered; and (b) an *enterprise of the entity is *carried on in the indirect tax zone; and (c) the entity’s acquisition of the thing supplied is not solely of a private or domestic nature. | Detailed Reasoning - The thing is done in Australia: When your employees perform work in Australia, the thing supplied is done in Australia, as the services are performed in Australia (in accordance with paragraph 65 of Goods and Services Tax Ruling GSTR 2000/31) Therefore, your supplies of these services meet paragraph 9-25(5)(a) of the GST Act. However, we need to consider the overriding rule in section 9-26 of the GST Act as you are a non-resident. | Detailed Reasoning - Supplies to Australian consumers: Supplies to Australian consumers are connected with Australia under paragraph 9-25(5)(d) of the GST Act. ‘Australian consumer’ is defined in subsection 9-25(7) of the GST Act, which states: An entity is an Australia consumer of a supply made to the entity if: (a) the entity is an *Australian resident (other than an entity that is an Australian resident solely because the definition of Australia in the *ITAA 1997 includes the external Territories); and (b) the entity: (a) is not *registered; or (b) if the entity is registered – the entity does not acquire the thing supplied solely or partly for the purpose of an enterprise that the entity *carries on. Your Australian customers are not ‘Australian consumers’ as they are registered for GST and they acquire your services for the purpose of an enterprise that they carry on. | Detailed Reasoning - Whether you make supplies through an enterprise that you carry on in Australia: Section 9-27 of the GST Act defines the meaning of ‘enterprise of an entity is carried on in the indirect tax zone’ It states: (1) An *enterprise of an entity is carried on in the indirect tax zone if: (a) an enterprise is *carried on by one or more individuals covered by subsection (3) who are in the indirect tax zone; and (b) any of the following applies: (i) the enterprise is carried on through a fixed place in the indirect tax zone; (ii) the enterprise has been carried on through one or more places in the indirect tax zone for more than 183 days in a 12 month period; (iii) the entity intends to carry on the enterprise through one or more places in the indirect tax zone for more than 183 days in a 12 month period. (2) It does not matter whether: (a) the entity has exclusive use of a place; or (b) the entity owns, leases or has any other claim or interest in relation to a place. (3) This subsection covers the following individuals: (a) if the entity is an individual – that individual; (b) an employee or *officer of the entity; (c) an individual who is, or is employed by, an agent of the entity that: (i) has, and habitually exercises, authority to conclude contracts on behalf of the entity; and (ii) is not a broker, general commission agent or other agent of independent status that is acting in the ordinary course of the agent’s business as such an agent. For a supply to be connected with Australia under paragraph 9-25(5)(b) of the GST Act, it is necessary that: ● the entity carries on an enterprise in Australia under section 9-27 of the GST Act; and ● the supply is made ‘through’ that enterprise. Under section 9-27 of the GST Act, an enterprise of an entity is carried on in Australia if the enterprise is carried on by one or more specified individuals who are in Australia, and ● the enterprise is carried on through a fixed place in Australia; or ● the enterprise has been carried on through one or more places in Australia for more than 183 days in a 12 month period, or ● the entity intends to carry on the enterprise through one or more places in Australia for more than 183 days in a 12 month period. In your case, your employees do not spend more than 183 days in Australia each year. Also, you do not carry on your enterprise through a fixed place in Australia for the purposes of section 9-27 of the GST Act as explained below: Law Companion Ruling LCR 2016/1 at paragraphs 37 to 39 explains when an enterprise is carried on through a fixed place. The term ‘fixed place’ is not defined in the GST Act, but is interpreted consistently with the term ‘fixed place’ in the permanent establishment articles in Australia’s tax treaties and the similar term used in the definition of ‘permanent establishment’ in subsection 6(1) of the Income Tax Assessment Act 1936 , as explained in Taxation Ruling TR 2002/5. A fixed place must have an element of permanence, both geographic and temporal, and requires a stable or continual connection between the enterprise and the place that is more than temporary or transitory in nature. That is, the enterprise must be linked to a particular place, through which the habitual pursuit of business activities occurs, for a particular period. While permanence may still exist where an enterprise operates in Australia for a period of less than six months, in your case, the nature of your enterprise activities do not have a sufficient element of permanence at any particular place in Australia, considering the following circumstances together: ● you do not retain your own ongoing place of business in Australia ● the location of work in Australia is not limited to one single address over the course of a year ● the work sites in Australia can change from one assignment to another; and your employees would work at multiple Australian exploration areas in a year ● there is a web of work sites in Australia, that is: ● base camps set up in different exploration fields ● various drill sites within a (number) kilometre radius of each base camp ● offices, where your staff work for only brief periods of time over the course of a year. Since sufficient permanence at any particular place in Australia does not exist, you do not carry on your enterprise through a fixed place in Australia for the purposes of section 9-27 of the GST Act. As you do not meet either of the 183 day tests or the fixed place test, the supplies made by you do not satisfy paragraph 9-25(5)(b) of the GST Act. Hence, your supplies are not connected with Australia under that provision. | Detailed Reasoning - Conclusion: Although you are performing services for Australian based companies in Australia, the overriding rule in section 9-26 of the GST Act applies in relation to your supplies of these services as: ● you (as the supplier) are a non-resident; and ● you do not supply the services through an enterprise that you carry on in Australia; and ● services are not goods or real property; and ● the services are performed in Australia; and ● the customers are Australian-based business recipients. Therefore, your supplies to Australian based mining and mineral exploration companies are not connected with Australia. Hence, your turnover from supplies to these companies is not included in calculating your GST turnover. Your turnover from work done outside Australia is also not from supplies connected with Australia. Therefore, your GST turnover is zero. As you do not meet the requirement of paragraph 23-5(b) of the GST Act, you are not required to be registered for Australian GST. | Detailed Reasoning - Question 2: GST is payable on taxable supplies. Section 9-5 of the GST Act states: 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; 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. GST is not payable on your supplies of services to Australian based mining and mineral exploration companies, as: ● your supplies of these services are not connected with Australia; and ● you are not registered or required to be registered for GST.