Private ruling: goods and services tax (GST) and connected with Australia
Published: November 2011

Ruling: Q1: Are you liable to pay GST on the supply of the goods/equipment to your Australian customer where the goods are not imported into Australia? | A1: No, you are not liable to pay GST on the supply of the goods to your Australian customer where the goods are not imported into Australia.

Relevant facts and circumstances: You are registered for GST. Your enterprise sells, services and installs certain equipment. You will purchase equipment from the Australian office of an international company to onsell to an Australian customer. You do not act as agent of the Australian office of an international company nor have any association with them but will acquire and pay for the equipment from them for resale to your Australian customer. You only contract with the Australian customer to supply the equipment and do not arrange for the Australian office of an international company to contract with the Australian customer. On receipt of an order and acceptance of a quotation for the equipment from the Australian customer, you place an order for the equipment with your supplier, the Australian office of an international company. The equipment concerned will be manufactured overseas. Neither you, nor your supplier, nor the Australian customer will import the equipment into Australia. Instead the Australian customer requested the goods be shipped directly from a place overseas to another address overseas. You will bill the customer once the order is made and issue an invoice to them. The equipment will not be installed or assembled in Australia by you.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 Section 9-40, | A New Tax System (Goods and Services Tax) Act 1999 Section 9-5 and | A New Tax System (Goods and Services Tax) Act 1999 Section 9-25.

Reasons for decision: Detailed Reasoning - Taxable supply: Section 9-40 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that you must pay the GST payable on any taxable supply that you make. A supply of goods is a taxable supply if all the requirements of section 9-5 of the GST Act are met, including the requirement that the supply is connected with Australia. The requirements under section 9-5 of the GST Act are: (a) you make a supply for consideration; (b) the supply is made in the course or furtherance of an enterprise that you carry on; (c) the supply is connected with Australia; and (d) you are registered, or required to be registered for GST. However, a supply that is GST-free or input taxed is not a taxable supply. In your case, you will make a supply of equipment to your Australian customer for consideration, the supply will be made in the course of your enterprise and you are registered for GST. As the supply of the equipment in question is not imported into Australia, we need to determine whether the supply is connected with Australia. | Detailed Reasoning - Supplies connected with Australia: Section 9-25 of the GST Act sets out the circumstances under which a supply is connected with Australia. In determining whether a supply of goods is connected with Australia a distinction is made in section 9-25 of the GST Act between supplies of goods 'wholly within' Australia (subsection 9-25(1)), supplies of goods 'from' Australia (subsection 9-25(2)), and supplies of goods 'to' Australia (subsection 9-25(3)). Subsections 9-25(1), 9-25(2) and 9-25(3) of the GST Act state: Supplies of goods wholly within Australia (1) A supply of goods is connected with Australia if the goods are delivered, or made available, in Australia to the recipient of the supply. Supplies of goods from Australia (2) A supply of goods that involves the goods being removed from Australia is connected with Australia. Supplies of goods to Australia (3) A supply of goods that involves the goods being brought to Australia is connected with Australia if the supplier either: (a) imports the goods into Australia; or (b) installs or assembles the goods in Australia. Supplies of goods wholly within Australia Goods and Services Tax Ruling GSTR 2000/31 explains when a supply is connected with Australia under section 9-25 of the GST Act and is available at www.ato.gov.au. Paragraphs 45 to 49 of GSTR 2000/31 cover the circumstances when a supply of goods is made wholly within Australia under subsection 9-25(1) of the GST Act. In summary, the ruling provides that in the context of subsection 9-25(1) of the GST Act, goods are delivered in Australia if the goods are physically delivered in Australia. Goods are made available in Australia if the goods are physically made available in Australia. Goods which are delivered or made available in Australia to the recipient may be goods that the supplier has acquired domestically or imported. From the facts in your case, the equipment is manufactured overseas and the shipment of the equipment is delivered directly from an address overseas to another address overseas. As the goods never enter Australia, subsection 9-25(1) of the GST Act is not satisfied because the goods are not delivered, or made available, in Australia to the recipient of the supply. | Detailed Reasoning - Supplies of goods from Australia: Paragraphs 50 to 51 of GSTR 2000/31 cover the situation when a supply of goods is taken out of Australia under subsection 9-25(2) of the GST Act. In summary, the ruling provides that a supply of goods is connected with Australia, if the supply involves those goods being removed from Australia. Removal of goods from Australia is a supply from Australia. Goods removed from Australia means the goods are physically taken out of Australia. In your case the supply of goods does not involve the goods ever being in Australia therefore subsection 9-25(2) of the GST Act is not applicable in your case. | Detailed Reasoning - Supplies of goods to Australia: Paragraphs 52 to 56 of GSTR 2000/31 cover the situation when a supply of goods is brought to Australia under subsection 9-25(3) of the GST Act. In summary, the ruling provides that a supply of goods is connected with Australia if the supply involves those goods being brought to Australia and the supplier either imports the goods into Australia or installs or assembles the goods in Australia. The import of the goods into Australia or the installation or assembly of the goods in Australia is a supply of goods to Australia. While subsection 9-25(3) of the GST Act applies to supplies that involve goods being brought to Australia, a connection with Australia only exists if the supplier either imports the goods into Australia or installs or assembles the goods in Australia. In your case, the supply of goods does not involve the goods ever being in Australia and as such you are not the importer of the goods and will not install or assemble the goods in Australia. Accordingly, subsection 9-25(3) of the GST Act is not satisfied. | Detailed Reasoning - Conclusion: As discussed above a supply will not be a taxable supply if it is not connected with Australia as prescribed in section 9-25 of the GST Act. A supply of goods which does not involve the goods ever being in Australia will not be connected with Australia. Accordingly, when you supply goods which will be manufactured overseas and which are sent directly to another address overseas on instruction from your Australian customer who placed the order, then the supply is not a taxable supply. Consequently, the supply of goods to your clients in Australia is not connected with Australia under section 9-25 of the GST Act. As such, the requirement in paragraph 9-5(c) of the GST Act is not satisfied. Therefore, the supply of goods is not a taxable supply and as such, the supply is not subject to GST.

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