Private ruling: GST and supply of consultancy services
Published: October 2015

Ruling: Q1: Is your supply of consultancy services to the Australian company GST-free under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when the services are performed overseas? Advice Yes, your supply of consultancy services to the Australian company is GST-free under item 3 in the table in subsection 38-190(1) of the GST Act when the services are performed overseas. Relevant fact You are registered for the goods and services tax (GST) and your business activity is consultancy services (services). You have a contract with an Australian company in which you agreed to perform any technical representative work required by the Australian company from home base or on location as applicable and agreed between you and the Australian company. For your services you receive a daily a fee, an hourly rate for work at home, an allowance for any day away from home. For all expenses you incur due to travel (for example travel and lodging) including but not limited to business phones and faxes, you will bill the direct cost to the Australian company. The Australian company is contracted by an overseas company as its representative and, you are contracted by the Australian company to be the onsite technical representative at the overseas location. You communicate directly with the overseas company as required and the Australian company receives a copy of the reports when submitted to the overseas company. You submit invoice to the Australian company for your consultant daily rate, per-diem allowance and incurred expenses (airfare, accommodation, transport and so on).


Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 S ection 38-190

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 the indirect tax zone (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. From the information received your supply of services to the Australian 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 of services is connected with Australia as the services are done through an enterprise that you carry on in Australia; and d) you are registered for GST. However, your supply will not be a taxable supply to the extent that it is GST-free or input taxed. There is no provision under the GST Act that makes your supply of services input taxed. GST-free supply Relevant to your supply of services that are performed overseas is item 3 in the table in subsection 38-190(1) of the GST Act (item 3). Item 3 applies to a supply of a thing, other than a supply of goods or real property, which is made to a recipient who is not in Australia when the thing supplied is done. Under Item 3 a supply, other than a supply of work physically performed on goods situated in Australia where the thing supplied is done, or a supply directly connected with real property situated in Australia, is GST-free where it is: a) a supply that is made to a recipient who is not in Australia when the thing supplied is done; and b) the effective use or enjoyment of which takes place outside Australia. Paragraph (a) of item 3 Item 3 may apply irrespective of whether the recipient is a resident or non-resident of Australia. 'Recipient' is defined in section 195-1 of the GST Act and means in relation to a supply, the entity to which the supply was made. This means that even if the recipient of a supply is an Australian resident, the supply may be GST-free under item 3 if the resident entity is not in Australia when the thing supplied is done and the other requirements of item 3 are met. If a supply is made to a recipient who fails the 'not in Australia' requirement in paragraph (a) of item 3, it is necessary to consider whether subsection 38-190(4) of the GST Act applies. Subsection 38-190(4) of the GST Act extends the scope of item 3 by treating a supply that is made to a recipient who is in Australia in relation to the supply as being made to a recipient who is not in Australia if: • the supply is made under an agreement entered into, whether directly or indirectly, with an Australian resident; and • the supply is provided, or the agreement requires it to be provided, to another entity outside Australia. Subsection 38-190(4) of the GST Act, by means of the expression 'provided to another entity' seeks to identify the entity to which the item 3 supply actually flows. For example, if a supply of a service is made to an Australian resident recipient who is in Australia in relation to the service and that service is rendered to or received by another entity at the time it is performed; the supply is provided to that other entity. If that other entity is outside Australia, subsection 38-190(4) of the GST Act treats the supply as being made to a recipient who is not in Australia. In your case your contract is with an Australian company located in Australia. However your agreement with the Australian company requires you to provide your services to a non-resident located outside Australia. In this instance you are considered to have made your supply to a recipient who is not in Australia under subsection 38-190(4) of the GST Act. You therefore satisfy the requirement in paragraph (a) of item 3 by virtue of subsection 38-190(4) of the GST Act. For more information on paragraph (a) of item 3 refer to Goods and Services Tax Ruling GSTR 2004/7 which is available from the legal database of www.ato.gov.au Paragraph (b) of item 3 In determining where a supply is used or enjoyed it is first necessary to establish the entity to which the supply is provided (the providee entity). Having determined the providee entity it is then necessary to consider whether use or enjoyment of the supply by that providee entity takes place outside Australia. In your case you are required to provide your services to the overseas company. In this instance the use or enjoyment of your supply of services by the overseas company takes place outside Australia. Paragraph (b) of item 3 is therefore satisfied. For more information on paragraph (b) of item 3 refer to Goods and Services Tax Ruling GSTR 2007/2. Limit to subsection 38-190(4) of the GST Act Subsection 38-190(5) of the GST Act limits the scope of subsection 38-190(4) of the GST Act. Subsection 38-190(5) of the GST Act provides that subsection 38-190(4) of the GST Act does not apply to any of the following supplies: a) a transport of goods within Australia that is part of, or is connected with, the international transport of the goods; b) a loading or handling of goods within Australia that is part of, or is connected with, the international transport of the goods; c) a service, done within Australia, in relation to the goods that facilitates the international transport of the goods; d) insuring transport covered by paragraph (a); e) arranging transport covered by paragraph (a), or insurance covered by paragraph (d). In your case, subsection 38-190(5) of the GST Act is not applicable. Your supply of services to the Australian company is GST-free under item 3 when it is provided to the overseas company and performed overseas. When you invoice the Australian company for your daily rate, per-diem allowance and incurred expenses, GST will not be payable on the supply.