Private ruling: GST and supply of access to online content
Published: July 2012

Ruling: Q1: Will your supply of access to the online contents in your website to your subscribers in Australia be a taxable supply? | A1: Yes, your supply of access to the online contents in your website to your subscribers in Australia will be a taxable supply.

Relevant facts and circumstances: You are registered for goods and services tax (GST). You will be launching an online subscription based website which offers exclusive online access to a variety of digital contents. You will not supply the contents in tangible form. The website, which has been built by Australian website developers, will be hosted in the foreign country. Most of the contents will be written and created by contractors living outside Australia. These contractors will not have direct access to the subscribers. You will offer different levels of subscriptions namely. Each level offers access to different types of content for a specified number of times. There is no joining fee. A subscriber will only pay a specified amount in foreign currency according to the level of their subscription. There is no additional charge for downloading the contents. All subscriptions fees will be paid via an online payment facility using the user's credit card. The fees collected remain outside Australia until the end of the week when they are transferred to your bank account. A subscriber cannot upload their contents to the website. Initially, they may not even be able to post comments on the site but this may change in the future. A subscriber will be required to enter their full name, country (and state where applicable) of residence, email address and credit card details into the secure website. You estimate that 80-90% of all subscriptions will be taken out by individuals. Approximately 15% of all subscribers will be Australian residents Corporations, schools and other organisations will also have the ability to subscribe. In this case, each organisation will be given a number of subscriber identities to use as part of their monthly subscription and shared among a group of their employees, colleagues, and so on. The terms and conditions of subscription will be the same for all subscribers. The only difference is that discount will be offered to organisations.

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 and | A New Tax System (Goods and Services Tax) Act 1999 section 38-190.

Reasons for decision: Summary: GST is payable on taxable supplies. Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states: 'You make a taxable supply if: · you make the supply for *consideration; and · the supply is made in the course or furtherance of an *enterprise that you *carry on; and · the supply is *connected with Australia; 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.' (*denotes a term defined in section 195-1 of the GST Act). The supply of access to the online contents in your website is a supply for GST purposes. You will make the supply for consideration in the form of subscription fees. You will make the supply in the course or furtherance of your enterprise. You are registered for GST. As such, the requirements in paragraphs 9-5(a), 9-5(b) and 9-5(d) of the GST Act will be satisfied. What is left to determine is whether your supply of access to the subscribers in Australia is connected with Australia. | Detailed Reasoning - Connected with Australia: For the purpose of determining whether a supply is connected with Australia, section 9-25 of the GST Act makes a distinction between a supply of goods, a supply of real property, and a supply of anything other than goods or real property. From the facts given, the supply of access to the online contents in your website is not a supply of goods as you will not supply the online contents in tangible form. The supply is not a supply of real property; and it is not a supply of rights as the customers will only access and/or download the online contents but not obtain intellectual property rights. Therefore, the supply is a supply of things other than goods or real property (but not a supply of rights). Subsection 9-25(5) of the GST Act provides that a supply of anything other than goods or real property is connected with Australia if: · the thing is done in Australia; or · the supplier makes the supply through an enterprise that the supplier carries on in Australia; or · all the following apply: · neither paragraph (a) nor (b) applies in respect of the thing; · the thing is a right or option to acquire another thing; · the supply of the other thing would be connected with Australia. Under paragraph 9-25(5)(b) of the GST Act, a supply is connected with Australia if the supplier makes the supply through an enterprise that it carries on in Australia. According to subsection 9-25(6) of the GST Act, an enterprise is carried on in Australia if the enterprise is carried on through: · a permanent establishment (as defined in subsection 6(1) of the Income Tax Assessment Act 1936 ); or · a place that would be such a permanent establishment if paragraph (e), (f) or (g) of that definition did not apply. Based on the information provided, you will make the supply of access to the online contents in your website through the enterprise that you carry on in Australia. Thus, the supply will be connected with Australia. The requirement in paragraph 9-5(c) of the GST Act will be satisfied. As all the requirements of section 9-5 of the GST Act will be satisfied, your supply of access to the online contents in your website to the subscribers in Australia will be a taxable supply unless it is GST-free or input taxed. There is no provision in the GST Act under which your supply would be input taxed. Therefore, we must determine whether your supply would be GST-free. | Detailed Reasoning - GST-free supply: The supply of things, other than goods or real property, for consumption outside Australia is GST-free if the supply is covered by any of the items in the table in subsection 38-190(1) of the GST Act. Item 3 in the table is the only item that is relevant to your circumstances. Under item 3, a supply is GST-free if: · it is made to a recipient who is not in Australia when the thing supplied is done; and · the effective use or enjoyment of which takes place outside Australia. Item 3 does not apply to a supply of work physically performed on goods situated in Australia when the thing supplied is done, or a supply directly connected with real property situated in Australia. | Detailed Reasoning - Recipient not in Australia: For the purpose of item 3, we consider that the expression 'not in Australia' requires that the recipient is not in Australia in relation to the supply. A resident individual who is physically in Australia when the thing supplied is done is in Australia in relation to the supply. A company is in Australia in relation to the supply if the supply is solely or partly for the purposes of the Australian presence. If the supply is not for the purposes of the Australian presence but that Australian presence is involved in the supply, the company is in Australia in relation to the supply, except where the only involvement is minor. You advised that a subscriber is required to provide their country which, unless there is evidence to the contrary, will be their physical location. Thus, for individuals who are physically in Australia when you process and accept their subscription applications (thereby supplying them access to the online contents), the requirement in paragraph (a) of item 3 will not be satisfied. You advised that entities other than individuals will also have the ability to subscribe. These entities who indicate Australia as their physical location will be in Australia as they will be involved in the supply which will be for their purposes. Similarly, the requirement in paragraph (a) will not be satisfied. (Refer to Goods and Services Tax Ruling GSTR 2004/7, available from www.ato.gov.au, for more information on when particular types of entity are 'not in Australia when the thing supplied is done'.) | Detailed Reasoning - Effective use or enjoyment outside Australia: As the requirement in paragraph (b) of item 3 refers to the 'effective' use or enjoyment of the supply, it is necessary to inquire as to the entity that has the actual use or enjoyment of the supply. The recipient of the supply is the entity to which the supply is made. A supply made to a recipient entity may be provided to another entity. If a supply is made to a recipient and provided to another entity, that other entity has the actual use or enjoyment of the supply. If a supply is provided to an individual who is in Australia when the thing supplied is done, the effective use or enjoyment of the supply does not take place outside Australia. Based on the nature of your supply, the recipient entity will also be the entity to which the supply will be provided. That is, a subscriber to which you will make the supply of access to the online content will also be the entity who will have use or enjoyment of that access. Thus, your supply made and provided to the subscribers in Australia will not be used or enjoyed outside Australia. The requirement in paragraph (b) of item 3 will not be satisfied. For subscribers who are not individuals, your supply may be considered to be provided to their associates, employees, students, and the like. However, these associates, employees, or students will most likely be physically located where the organisations are located. Thus, your supply provided to the employees, associates or students of subscribers in Australia will not be used or enjoyed outside Australia. The requirement in paragraph (b) of item 3 will not be satisfied. (Refer to Goods and Services Tax Ruling GSTR 2007/2, available from www.ato.gov.au, for more information on when 'effective use or enjoyment' of the supply takes place outside Australia.) As the requirements of item 3 will not be satisfied, your supply of access to the online contents in your website to subscribers in Australia will not be GST-free under section 38-190 of the GST Act. The supply will be a taxable supply.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.