Private ruling: GST and supply of XYZ services
Date of advice: 6 October 2016
Published: December 2016

Ruling: Is the supply of XYZ services by the Australian company to the non-resident company a GST-free supply under section 38-190 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) based on the material facts provided? | Advice | Yes. The supply of XYZ services by the Australian company to the non-resident company is a GST-free supply under item 2 in the table in subsection 38-190(1) of the GST Act based on the material facts provided.


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 Reason for decision | Note : Where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | GST is payable on a taxable supply. Under section 9-5 of the GST Act, an entity makes a taxable supply if: a) the supply is made for consideration; and | b) the supply is made in the course or furtherance of an enterprise that the entity carries on; and | c) the supply is connected with Australia; and | d) the entity is registered for GST. | However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. | All of the above must be satisfied for your supplies to be taxable supplies. | Your supply of XYZ services to the non-resident company satisfies paragraphs 9-5(a) to 9-5(d) of the GST Act as: a) you make the supply for consideration; and | b) the supply is made in the course of an enterprise that you carry on in Australia; and | c) the supply is connected with Australia as the supply is made through an enterprise that you carry on in Australia; and | d) you are registered for GST. | However, your supply of XYZ services is not a taxable supply to the extent that it is a GST-free or input taxed supply. | There is no provision under the GST Act that makes your supply of XYZ services an input taxed supply. GST-free supply | Relevant to your supply of XYZ services to the non-resident company is item 2 in the table in subsection 38-190(1) of the GST Act (item 2). Item 2 provides that a supply of a thing (other than goods or real property) made to a non-resident is GST-free if it is a supply that is made to a non-resident that 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. | Precondition of item 2 - non-resident is 'not in Australia' | Goods and Services Tax Ruling GSTR 2004/7 provides guidance on when a non-resident is 'not in Australia' for the purposes of item 2. | The requirement that the non-resident in item 2 is not in Australia when the thing supplied is done is a requirement that the non-resident is not in Australia in relation to the supply when the thing supplied is done. | Under paragraph 37 in GSTR 2004/7, we consider that a non-resident company is in Australia if that company carries on business (or in the case of a company that does not carry on business, carries on its activities) in Australia: | a) at or through a fixed and definite place of its own for a sufficiently substantial period of time, or | b) through an agent at a fixed and definite place for a sufficiently substantial period of time. | We consider that it would be reasonable for a supplier to conclude that a non-resident company is in Australia if: | • the company is registered with ASIC; or | • the company has a permanent establishment in Australia for income tax purposes. | Even if a company is in Australia, it may not be in Australia in relation to the supply and so can still satisfy the 'not in Australia'. To work out whether a company is in Australia in relation to the supply, it is necessary to examine the role the presence of the company in Australia plays in relation to the supply when the supply is done (that is, when the services are performed). | A non-resident company is in Australia in relation to the supply if the supply is solely or partly for the purposes of the Australian presence, for example its Australian branch, representative office or agent if it is a non-resident company, or the Australian head office if it is an Australian incorporated company, the company is in Australia in relation to the supply. There is a connection between the supply and the presence in Australia that is not a minor connection. | 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. | If the involvement of the Australian presence is limited to the carrying out of simple administrative tasks on behalf of the company, as a matter of administrative convenience, that involvement is so minor. The connection between the supply and the presence is so minor in nature that it is reasonable to conclude that the presence of the company in Australia is not in relation to the supply. | Tasks of a simple administrative nature include: | • payment of, or arranging for payment of, the supplier's invoice on behalf of the company; | • passing on an e-mail to the company; | • being a point of telephone contact to pass on messages to the company; | • being a mailing address or delivery contact on behalf of the company; | • being a point of contact for a visiting representative of the company; and | • on-forwarding information to the company. | You advised that you communicate with both the director and the Australian consultant (engaged by the non-resident company) and your interactions are more frequent with the consultant because the latter has received a brief to coordinate the non-resident company's activities in relation to the proposed investment. The role of the consultant in relation to your supply is to forward any messages about instructions received from the director to you so that you can provide the XYZ advice to the non-resident company. | In this instance, we consider that your supply of XYZ services is not for the purposes of the consultant and the connection between your supply and the involvement of the consultant is limited to the carrying out of simple administrative tasks on behalf of the non-resident company and the involvement of the consultant is minor. The precondition that the non-resident company is not in Australia in relation to the supply is therefore satisfied. | The next step is to consider whether the other requirements in item 2 are satisfied. Only one of the paragraphs in item 2 needs to be satisfied for the supply to be GST-free under item 2. | Paragraph (a) of item 2 | Your supply of XYZ services to the non-resident company satisfies paragraph (a) of item 2 as: | • your supply is made to a non-resident who is not in Australia in relation to your supply when the service is done; and | • your supply of XYZ services is not considered to be a supply of work physically performed on goods situated in Australia; and | • your supply of XYZ services is not directly connected with real property situated in Australia since there is no supply of real property since XX is intending to acquire the shares in an Australian resident company. | Limitations to item 2 | Having met the requirements of paragraph (a) of item 2, it is necessary to consider subsections 38-190(2), 38-190(2A) and 38-190(3) of the GST Act. From the information received, subsections 38-190(2) and 38-190(2A) are not applicable to the supply of XYZ services because: | • the supply of XYZ advice is not a supply of a right or option to acquire something the supply of which would be connected with Australia and would not be GST-free under subsection 38-190(2) of the GST Act; | • the acquisition of the XYZ advice does not relate ( whether directly or indirectly or wholly or partly) to the making a supply of real property that would be wholly or partly input taxed under subsection 38-190(2A) of the GST Act; and | • You are not required to provide the XYZ advice to another entity in Australia under subsection 38-190(3) of the GST Act despite the fact that you give a copy of the XYZ advice to the consultant when providing the advice to the non-resident company. This is because the consultant is only coordinating your response to the non-resident company and a copy of the advice is provided to the consultant only to keep them aware of the status of your supply of XYZ advice to the non-resident company. Further as advised by you, the consultant does not have the ability to enter into agreements with third parties in such a manner so as to bind the non-resident company. Summary | Based on the material facts given, your supply of XYZ services to the non-resident company is a GST-free supply under item 2 in the table in subsection 38-190(1) of the GST Act.

Reasons for decision: Summary: Note : Where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. GST is payable on a taxable supply. Under section 9-5 of the GST Act, an entity makes a taxable supply if: a) the supply is made for consideration; and b) the supply is made in the course or furtherance of an enterprise that the entity carries on; and c) the supply is connected with Australia; and d) the entity is registered for GST. However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. All of the above must be satisfied for your supplies to be taxable supplies. Your supply of XYZ services to the non-resident company satisfies paragraphs 9-5(a) to 9-5(d) of the GST Act as: a) you make the supply for consideration; and b) the supply is made in the course of an enterprise that you carry on in Australia; and c) the supply is connected with Australia as the supply is made through an enterprise that you carry on in Australia; and d) you are registered for GST. However, your supply of XYZ services is not a taxable supply to the extent that it is a GST-free or input taxed supply. There is no provision under the GST Act that makes your supply of XYZ services an input taxed supply. GST-free supply Relevant to your supply of XYZ services to the non-resident company is item 2 in the table in subsection 38-190(1) of the GST Act (item 2). Item 2 provides that a supply of a thing (other than goods or real property) made to a non-resident is GST-free if it is a supply that is made to a non-resident that 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. Precondition of item 2 - non-resident is 'not in Australia' Goods and Services Tax Ruling GSTR 2004/7 provides guidance on when a non-resident is 'not in Australia' for the purposes of item 2. The requirement that the non-resident in item 2 is not in Australia when the thing supplied is done is a requirement that the non-resident is not in Australia in relation to the supply when the thing supplied is done. Under paragraph 37 in GSTR 2004/7, we consider that a non-resident company is in Australia if that company carries on business (or in the case of a company that does not carry on business, carries on its activities) in Australia: a) at or through a fixed and definite place of its own for a sufficiently substantial period of time, or b) through an agent at a fixed and definite place for a sufficiently substantial period of time. We consider that it would be reasonable for a supplier to conclude that a non-resident company is in Australia if: • the company is registered with ASIC; or • the company has a permanent establishment in Australia for income tax purposes. Even if a company is in Australia, it may not be in Australia in relation to the supply and so can still satisfy the 'not in Australia'. To work out whether a company is in Australia in relation to the supply, it is necessary to examine the role the presence of the company in Australia plays in relation to the supply when the supply is done (that is, when the services are performed). A non-resident company is in Australia in relation to the supply if the supply is solely or partly for the purposes of the Australian presence, for example its Australian branch, representative office or agent if it is a non-resident company, or the Australian head office if it is an Australian incorporated company, the company is in Australia in relation to the supply. There is a connection between the supply and the presence in Australia that is not a minor connection. 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. If the involvement of the Australian presence is limited to the carrying out of simple administrative tasks on behalf of the company, as a matter of administrative convenience, that involvement is so minor. The connection between the supply and the presence is so minor in nature that it is reasonable to conclude that the presence of the company in Australia is not in relation to the supply. Tasks of a simple administrative nature include: • payment of, or arranging for payment of, the supplier's invoice on behalf of the company; • passing on an e-mail to the company; • being a point of telephone contact to pass on messages to the company; • being a mailing address or delivery contact on behalf of the company; • being a point of contact for a visiting representative of the company; and • on-forwarding information to the company. You advised that you communicate with both the director and the Australian consultant (engaged by the non-resident company) and your interactions are more frequent with the consultant because the latter has received a brief to coordinate the non-resident company's activities in relation to the proposed investment. The role of the consultant in relation to your supply is to forward any messages about instructions received from the director to you so that you can provide the XYZ advice to the non-resident company. In this instance, we consider that your supply of XYZ services is not for the purposes of the consultant and the connection between your supply and the involvement of the consultant is limited to the carrying out of simple administrative tasks on behalf of the non-resident company and the involvement of the consultant is minor. The precondition that the non-resident company is not in Australia in relation to the supply is therefore satisfied. The next step is to consider whether the other requirements in item 2 are satisfied. Only one of the paragraphs in item 2 needs to be satisfied for the supply to be GST-free under item 2. Paragraph (a) of item 2 Your supply of XYZ services to the non-resident company satisfies paragraph (a) of item 2 as: • your supply is made to a non-resident who is not in Australia in relation to your supply when the service is done; and • your supply of XYZ services is not considered to be a supply of work physically performed on goods situated in Australia; and • your supply of XYZ services is not directly connected with real property situated in Australia since there is no supply of real property since XX is intending to acquire the shares in an Australian resident company. Limitations to item 2 Having met the requirements of paragraph (a) of item 2, it is necessary to consider subsections 38-190(2), 38-190(2A) and 38-190(3) of the GST Act. From the information received, subsections 38-190(2) and 38-190(2A) are not applicable to the supply of XYZ services because: • the supply of XYZ advice is not a supply of a right or option to acquire something the supply of which would be connected with Australia and would not be GST-free under subsection 38-190(2) of the GST Act; • the acquisition of the XYZ advice does not relate ( whether directly or indirectly or wholly or partly) to the making a supply of real property that would be wholly or partly input taxed under subsection 38-190(2A) of the GST Act; and • You are not required to provide the XYZ advice to another entity in Australia under subsection 38-190(3) of the GST Act despite the fact that you give a copy of the XYZ advice to the consultant when providing the advice to the non-resident company. This is because the consultant is only coordinating your response to the non-resident company and a copy of the advice is provided to the consultant only to keep them aware of the status of your supply of XYZ advice to the non-resident company. Further as advised by you, the consultant does not have the ability to enter into agreements with third parties in such a manner so as to bind the non-resident company. Summary Based on the material facts given, your supply of XYZ services to the non-resident company is a GST-free supply under item 2 in the table in subsection 38-190(1) of the GST Act.

Relevant facts: You are an Australian company and provide XYZ professional advice to your clients. You are registered for the goods and services tax (GST). | You entered into a letter of engagement with a non-resident company in which you agree to supply XYZ services to it. You advised that any sign-off of work, XYZ documents, invoices and any XYZ instructions are obtained from a director of the non-resident company (director) | The non-resident company is not registered for GST. | The non-resident company has entered into an agreement with an Australian consultant for their consulting services as the non-resident company is considering making an investment in Australia. | You liaise and communicate with both - the director and the consultant. Your interactions are more frequently with the consultant than with the director. | The director instructs you as the ultimate authority (sign-off party) and deals with the consultant on all matters that the non-resident company require from the consultant, including providing information to the consultant which the consultant forwards to you to enable you to provide XYZ advice to the non-resident company. | You provide the XYZ advice to the non-resident company through its director as the client and ultimate authority and the advice is copied to the consultant for their information as the consultant has instructions from the non-resident company to co-ordinate the non-resident company's activities in relation to the proposed investment. | You advised that the XYZ advice is not part of the consultant's consulting services. | In regard to the consulting company you stated the following: | • It provides non-exclusive consulting services to the non-resident company and to other entities. | • It does not have the ability to make contracts with customers or other third parties in the non-resident company's name or otherwise in such a manner so as to bind the non-resident company. | • It does not attend to the management of any contracts for the non-resident company as completion of any work under any contracts is managed by the non-resident company outside Australia. | • It operates from a home office pays for all costs associated with the home office. It reserves part of its staff and office for activities related to other clients. | • The home office was and is not acquired for the purposes of enabling the consulting company to carry on any business of the non-resident company. | • The non-resident company does not reimburse the consulting company for any costs associated with the office, staff and any other costs. | • It is remunerated by the non-resident company on an hourly rate and bonuses. | • The non-resident company has little control over the consultant's activities and the consultant does not display the non-resident company's name at the office or on stationery. | • The consulting company recommended you to provide XYZ advice to the non-resident company about the non-resident company's proposed investment. | You have charged and will continue to charge the non-resident company professional fees for your XYZ advice.