Private ruling: GST and government and other
Published: March 2014

Ruling: Q1: Are the funds paid by you to a training provider under the x program funding agreement consideration for a GST-free supply to you under section 38-85 of the A New Tax System (Goods and Services) Act 1999 (GST Act)? | A1: Yes. | Q2: Are the funds paid by you to a training provider under the y program funding agreement consideration for a GST-free supply to you under section 38-85 of the GST Act? | A2: Yes.

Relevant facts and circumstances: You are a state government department. You are registered for goods and services tax (GST). You administer 2 programs, program x and program y, which involve you entering into funding agreements with suppliers for the delivery of services to eligible third parties. The funding agreements (agreement x and agreement y) in respect of each of the programs you administer set out the terms and conditions under which the services are delivered and clearly set out that the payments made by you are for the delivery of those services to a third party.

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 38-85 | A New Tax System (Goods and Services Tax) Act 1999 section 195-1

Reasons for decision: Detailed Reasoning - Issue 1: Are the funds you pay under the x agreements consideration for a supply to you?: The funds that you pay to a supplier under the x program funding agreement are consideration for a supply to you. While the agreements indicate the payment is in connection with the delivery of services to eligible third parties, you are not providing third party consideration for the supply of services. This is because you are not making the payment to the supplier on behalf of the eligible third party for a liability owed by the third party to the supplier. An example of third party consideration for a supply made to an entity other than to the payer of that consideration is Example 10A at paragraphs 210A to 212D of Goods and Services Tax Ruling GSTR 2006/9: supplies (GSTR 2006/9). Under the agreements, you are engaging the supplier to supply services to eligible third parties. By supplying services to the eligible third party, the supplier is also supplying services to you. This is analogous to the circumstances discussed at paragraph 42 and the example at paragraph 58 of Goods and Services Tax Ruling GSTR 2002/1: supplies that are GST-free as special education courses (GSTR 2002/1). 42. You may provide a special education course to children or students with disabilities on behalf of a GST-registered third party (for example a school, hospital or rehabilitation provider). The supply that you make to that third party is still the supply of a special education course. 58. An organisation designs a special program for children and students who are visually impaired. The program satisfies all of the criteria of a special education course. The organisation is contracted by a school to provide this course to its students. The organisation is supplying the school with a special education course and that supply is GST-free. The school is also supplying its students with a GST-free special education course. The supply of services under the agreements, involve a reciprocal relationship between you and the supplier, as well as a reciprocal relationship between the supplier and the eligible third party. It is an arrangement where the supplier, by performing one set of activities, makes a supply of services to you as well as to the third parties. This is an application of Proposition 15 in GSTR 2006/9 at paragraphs 217 to 221 where one set of activities may constitute the making of two (or more) supplies. While there may be a number of other things that may answer the statutory definition of a supply made under the agreements these are not supplies for which the consideration has the relevant nexus. This is because the terms of the agreements make it clear that the payments are made for the delivery of training services. Therefore, such supplies are not taxable supplies under section 9-5 because they are not made for the consideration provided. | Detailed Reasoning - Issue 2: Is the supply of services made to you under the agreements GST-free?: The supplies of the services made to you are GST free because they satisfy the requirements of section 38-85. Section 38-85 provides that a supply is GST-free if it is a supply of; a) an education course, or b) administrative services directly related to the supply of such a course, but only if they are supplied by the supplier of the course. The term 'education course' is defined in section 195-1 to include, amongst other things, a tertiary course and a professional or trade course. You advised that the services offered under the x program include either tertiary courses or professional or trade courses and as such satisfy the definition of an education course for the purposes of paragraph 38-85(a). Paragraph 76 of Goods and Services Tax Ruling GSTR 2001/1 explains that administrative services directly related to a GST-free education course relevantly includes enrolment services, examination arrangements and assessments of students including re-assessment of results where a student has failed, processing academic results and record keeping. Assessment services supplied by the supplier of the course constitute administrative services that are directly related to the course and are GST-free under paragraph 38-85(b). | Detailed Reasoning - Issue 1: Are the funds you pay under the y agreements consideration for a supply to you?: The funds that you pay to a supplier under the y program funding agreement are consideration for a supply to you. While the agreements indicate the payment is in connection with the services provided to eligible third parties, you are not providing third party consideration for the supply. This is because you are not making the payment to the supplier on behalf of the eligible third party for a liability owed by the third party to the supplier. An example of third party consideration for a supply made to an entity other than to the payer of that consideration is Example 10A at paragraphs 210A to 212D of GSTR 2006/9. Under the agreements, you are engaging the supplier to supply services to a eligible third parties. By supplying services to the eligible third party, the supplier is also supplying services to you. This is analogous to the circumstances discussed at paragraph 42 and the example at paragraph 58 of GSTR 2002/1. 42. You may provide a special education course to children or students with disabilities on behalf of a GST-registered third party (for example a school, hospital or rehabilitation provider). The supply that you make to that third party is still the supply of a special education course. 58. An organisation designs a special program for children and students who are visually impaired. The program satisfies all of the criteria of a special education course. The organisation is contracted by a school to provide this course to its students. The organisation is supplying the school with a special education course and that supply is GST-free. The school is also supplying its students with a GST-free special education course. The supply of services under the agreements involves a reciprocal relationship between you and the supplier, as well as a reciprocal relationship between the supplier and the eligible third party. It is an arrangement where the supplier, by performing one set of activities, makes a supply of services to you as well as to the eligible third party. This is an application of Proposition 15 in GSTR 2006/9 at paragraphs 217 to 221 where one set of activities may constitute the making of two (or more) supplies. While there may be a number of other things that may answer the statutory definition of a supply made under the agreements these are not supplies for which the consideration has the relevant nexus. This is because the terms of the agreements make it clear that the payments are made for the delivery of services. Therefore, such supplies are not taxable supplies under section 9-5 because they are not made for the consideration provided. | Detailed Reasoning - Issue 2: Is the supply of services made to you under the y program GST-free?: The supply of services is GST-free because it satisfies the requirements of section 38-85. Section 38-85 provides that a supply is GST-free if it is a supply of; a) an education course, or b) administrative services directly related to the supply of such a course, but only if they are supplied by the supplier of the course. The term 'education course' is defined in section 195-1 to include, amongst other things, a tertiary course and a professional or trade course. You advised that the services offered under the y program include either tertiary courses or professional or trade courses and as such they satisfy the definition of an education course for the purposes of paragraph 38-85(a). Paragraph 76 of GSTR 2001/1 explains that administrative services directly related to a GST-free education course relevantly includes enrolment services, examination arrangements and assessments of students including re-assessment of results where a student has failed, processing academic results and record keeping. Assessment services supplied by the supplier of the course constitute administrative services that are directly related to the course and are GST-free under paragraph 38-85(b).