Private ruling: Goods and services tax (GST) and international project management services
Date of advice: 16 July 2015
Published: July 2015

Ruling: Q1: Is GST payable on your supply of project management services to X? | A1: If you are registered or required to be registered for GST, GST will be payable on the fees you charge X, but only to the extent that the fees are reasonably apportionable to work performed in Australia (either by your staff or by Y's staff). If you expect that your fees that are reasonably apportionable to the work performed in Australia would be $75,000 or more in a year, you will be required to be registered for GST. However, see information below regarding reverse charging. If you expect that your fees that are reasonably apportionable to the work performed in Australia would be less than $75,000 in a year, you will not be required to be registered for GST. You are entitled to be registered for GST regardless of your turnover. If you are not registered or required to be registered for GST, GST will not be payable on the fees you charge. | Q2: Are you entitled to an input tax credit on your purchase of services from Y? | A2: If you are registered or required to be registered for GST, you will be entitled to an input tax credit on your purchase of services from Y. Otherwise, you are not entitled to an input tax credit.

Relevant facts and circumstances: You are not registered for GST. You are an overseas company. You do not have a branch or office in Australia. You have two contracts (contract 1 and contract 2) for the provision of project management services to X, which is in Australia. The two contracts flow from an overarching agreement. X is registered for GST. Details of contract 1: Format is e-mail, phone and if required short term on site works. Details of contract 2: You have engaged an Australian entity (Y) to service the bulk of the work. You can also service this contract work from overseas. Y is based in Australia and performs work in Australia and it is registered for GST. The total turnover on the contracts if they run full term will more than likely be over $75,000. Monies are paid into a personal bank account in Australia from which Y will be paid and the balance will then be transferred to overseas. You carry the full burden of delivery of the services and could fully complete the contracts without Y, however for practical reasons it helps to have an onsite contact with the skills etc.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 subsection 7-1(1) | A New Tax System (Goods and Services Tax) Act 1999 section 9-5 | A New Tax System (Goods and Services Tax) Act 1999 subsection 9-25(5) | A New Tax System (Goods and Services Tax) Act 1999 subsection 9-25(6) | A New Tax System (Goods and Services Tax) Act 1999 section 9-40 | A New Tax System (Goods and Services Tax) Act 1999 section 11-5 | A New Tax System (Goods and Services Tax) Act 1999 section 11-15 | A New Tax System (Goods and Services Tax) Act 1999 section 11-20 | A New Tax System (Goods and Services Tax) Act 1999 section 83-5 | A New Tax System (Goods and Services Tax) Act 1999 section 83-30 | A New Tax System (Goods and Services Tax) Act 1999 subsection 83-35(1) | A New Tax System (Goods and Services Tax) Act 1999 Division 188

Reasons for decision: Summary: If you are registered or required to be registered for GST, GST will be payable on the fees you charge X, but only to the extent that the fees are reasonably apportionable to work performed in Australia (either by your staff or by Y's staff). GST is payable under such circumstances, because you would meet the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). | Detailed Reasoning - Detailed reasoning: GST is payable on your taxable supplies. You make a taxable supply where you satisfy the requirements of section 9-5 of the GST Act, which states: You make a taxable supply if: (a) you make the supply for *consideration; and (b) the supply is made in the course or furtherance of an *enterprise that you *carry on; and (c) the supply is *connected with Australia; and (d) 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 the GST Act) You meet the requirements of paragraphs 9-5(a) and 9-5(b) of the GST Act. This is because: • you will supply services to PTA for consideration (fees), and • these supplies will be made in the course or furtherance of an enterprise that you carry on. There are no provisions of the GST Act under which your supplies of services to PTA are GST-free or input taxed. Therefore, what remains to be determined is whether your supplies of services to X will be connected with Australia and whether you will be registered or required to be registered for GST. | Detailed Reasoning - Connected with Australia: In accordance with subsection 9-25(5) of the GST Act, a supply of something other than goods or real property (for example, services) is connected with Australia if: (a) the thing is done in Australia, or (b) the supplier makes the supply through an enterprise that the supplier carries on in Australia. Subsection 9-25(6) of the GST Act provides that an enterprise is carried on in Australia if the enterprise is carried on through a permanent establishment that the supplier has in Australia. Paragraph 65 of Goods and Services Tax Ruling GSTR 2000/31 states: 65. If the 'thing' being supplied is a service, the supply of that service is typically done where the service is performed. If the service is performed in Australia, the service is done in Australia and the supply of that service is connected with Australia under paragraph 9-25(5)(a). This is the case even if the recipient of the supply is outside Australia. Paragraph 226 of GSTR 2000/31 discusses the situation where a supply is partly connected with Australia. It states: 226. The intention of the legislation is that supplies that are not connected with Australia will be outside the GST system. Where a supply is of the one kind and part of the supply is connected with Australia and part is not connected with Australia, the supply is connected with Australia to the extent that part of the supply is connected with Australia. The concept of apportionment is widely applied in taxation law in determining source of income and in determining the extent to which expenditure is incurred in gaining or producing assessable income: Ronpibon Tin NL v. F C of T (1949) 78 CLR 47. You are based overseas. Your supply of the services under contract 1 will be connected with Australia, but only to the extent that your staff are in Australia to deliver the services. Therefore, you will meet the requirement of paragraph 9-5(c) of the GST Act to that extent. Your supply of the services under contract 2 will be connected with Australia to the extent that your staff or Y's staff perform the services in Australia. Therefore, you will meet the requirement of paragraph 9-5(c) of the GST Act to that extent. | Detailed Reasoning - GST registration: Section 23-5 of the GST Act provides that an entity is required to be registered for GST if: (a) the entity is carrying on an enterprise, and (b) the entity's GST turnover meets the registration turnover threshold ($75,000). Section 23-10 of the GST Act provides that an entity is entitled to be registered for GST if they carrying on an enterprise (whether or not the entity's GST turnover is at, above or below the registration turnover threshold). You are carrying on an enterprise. Therefore, you meet the requirement of paragraph 23-5(a) of the GST Act. Division 188 of the GST Act sets out the rules for determining whether an entity's GST turnover is $75,000 or more. Only supplies that are connected with Australia are included in the GST turnover calculation, and only to the extent that the supplies are connected with Australia. If you expect that your fees that are reasonably apportionable to the work performed in Australia (either by your staff or by Y's staff) would be $75,000 or more in a year, you will meet the GST registration turnover threshold. Hence, under such circumstances, you would meet the requirement of paragraph 23-5(b) of the GST Act. Under such circumstances, you would be required to be registered for GST, because you would meet both requirements of section 23-5 of the GST Act. If you expect that your fees that are reasonable apportionable to the work performed in Australia will be less than $75,000 a year, you will not meet the registration turnover threshold. Under such circumstances, you would not be required to be registered for GST, because you would not meet the requirement of paragraph 23-5(b) of the GST Act. However, in any case, you are entitled to be registered for GST because you are carrying on an enterprise. If you are registered or required to be registered for GST, you will meet the requirement of paragraph 9-5(d) of the GST Act. Under such circumstances, GST will be payable on the fees you charge X, but only to the extent that they are reasonably apportionable to work performed in Australia, because you would meet all of the requirements of section 9-5 of the GST Act to that extent. If you are not registered or required to be registered for GST, you will not meet the requirement of paragraph 9-5(d) of the GST Act. Under such circumstances, GST would not be payable on the fees you charge at all, because you would not meet all of the requirements of section 9-5 of the GST Act. | Detailed Reasoning - Reverse charging: Section 83-5 of the GST Act provides that in certain circumstances, a non-resident supplier can reverse charge the GST liability on their supply, to the recipient of the supply. The GST on a taxable supply is payable by the recipient of the supply, and is not payable by the supplier, if: (a) the supplier is a non-resident; and (b) the supplier does not make the supply through a permanent establishment in Australia; and (c) the recipient is registered or required to be registered for GST; and (d) the supplier and recipient agree that the GST on the supply be payable by the recipient. You will meet the requirements of section 83-5 of the GST Act if your supply of services to X is subject to GST and X and you agree that your GST liability be payable by X. In accordance with section 83-30 of the GST Act, even if you are required to be registered for GST for the purposes of section 9-5 of the GST Act, the Australian Taxation Office need not register you for GST if your GST turnover would not meet the registration turnover threshold but for your taxable supplies for which the GST liabilities are reverse charged. If reverse charging applies, you are not required to issue a tax invoice to X. For information on non-residents registering for GST, type in GST registration information for a non-resident in the search box of www.ato.gov.au For guidelines on calculating GST turnover, type in GSTR 2001/7 into an internet search engine. | Summary: Y's supply of services to you is not GST-free under section 38-190 of the GST Act, because consumption of these services will take place in Australia. If you are registered or required to be registered for GST, you will be entitled to an input tax credit on your purchase of services from Y, because you would meet all of the requirements of section 11-5 of the GST Act. Otherwise, you are not entitled to an input tax credit. | Detailed Reasoning - Detailed reasoning: You are entitled to input tax credits on your creditable acquisitions. You make a creditable acquisition where you meet the requirements of section 11-5 of the GST Act, which states: You make a creditable acquisition if: (a) you acquire anything solely or partly for a *creditable purpose; and (b) the supply of the thing to you is a *taxable supply, and (c) you provide, or are liable to provide, *consideration for the supply; and (d) you are *registered, or *required to be registered. | Detailed Reasoning - Acquisition for creditable purpose: Subsection 11-15(1) of the GST Act states: You acquire a thing for a creditable purpose to the extent that you acquire it in *carrying on your *enterprise. Subsection 11-15(2) of the GST Act states: However, you do not acquire the thing for a creditable purpose to the extent that: (a) the acquisition relates to making supplies that would be*input taxed; or (b) the acquisition is of a private or domestic nature. You will acquire Y's services in carrying on your enterprise. This acquisition will not relate to making supplies that would be input taxed and would not be of a private or domestic nature. Hence, you will acquire Y's services for a creditable purpose. Therefore, you meet the requirement of paragraph 11-5(a) of the GST Act. | Detailed Reasoning - Receiving a taxable supply: Y will meet the requirements of paragraph 9-5(a) to 9-5(d) of the GST Act. This is because: • Y will supply their services for consideration • Y will supply their services in the course or furtherance of an enterprise that they carry on • Y's supply of services to you will be connected with Australia (as Y will perform their services in Australia and through their permanent establishment in Australia), and • Y is registered for GST. There are no provisions of the GST Act under which Y's supply of services to you is input taxed. Item 2 in the table in subsection 38-190(1) of the GST Act (item 2) provides that a supply of something other than goods or real property is GST-free if the supply is made to a non-resident who 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. However, subsection 38-190(3) of the GST Act provides that a supply covered by item 2 is not GST-free if: (a) it is a supply under an agreement entered into with a non-resident, and (b) the supply is provided to another entity in Australia. Y will supply services to a non-resident - you. In accordance with paragraph 37 of Goods and Services Tax Ruling GSTR2004/7, you are not in Australia for the purposes of item 2 because your business establishment is based outside Australia. Paragraphs 59 and 60 of Goods and Services Tax Ruling GSTR 2005/6 explain the exclusion at subsection 38-190(3) of the GST Act. They state: 59. The word 'provided' is used in subsection 38-190(3) to contrast with the term 'made' in item 2. In the context of section 38-190, the contrasting words indicate that if a non-resident contracts for a supply to be provided to another entity, the place of consumption should be determined with regard to the entity to which the supply is provided, not the entity to which the supply is made. 60. The example in the Explanatory Memorandum accompanying the Bill that introduced subsection 38-190(3) illustrates this. In that example, non-resident parents contract for the supply of education services to be provided to their children in Australia. The contractual flow of the services is to the parents, while the actual flow of the services is to the children. The supply is made to the parents (non-residents) and provided to another entity, each child, in Australia. Although Y will supply services to you - a non-resident company without a branch/office in Australia, pursuant to an agreement between Y and you, Y will provide/deliver these services to a third party which is in Australia (X). Therefore, Y's supply of services to you is not GST-free under item 2. There are no provisions of the GST Act under which this supply is GST-free. Therefore, as all of the requirements of section 9-5 of the GST Act are met, Y will make a taxable supply to you. Hence, you meet the requirement of paragraph 11-5(b) of the GST Act. | Detailed Reasoning - Consideration: You will provide consideration for Y's supply. Therefore, you meet the requirement of paragraph 11-5(c) of the GST Act. | Detailed Reasoning - GST registration: If you are registered or required to be registered for GST, you will meet the requirement of paragraph 11-5(d) of the GST Act. Therefore, if you are registered or required to be registered for GST, you will meet all of the requirements of section 9-5 of the GST Act. Hence, under such circumstances, you will be entitled to an input tax credit on your purchase of Y's services. If you are not registered or required to be registered for GST, you will not meet the requirement of paragraph 11-5(d) of the GST Act. Therefore, under such circumstances, you not be entitled to an input tax credit because you will not meet all of the requirements of section 11-5 of the GST Act.