Private ruling: GST and supply of software development services to a non-resident
Date of advice: 28 January 2021
Published: March 2021

Ruling: Q1: Is GST payable on your supply of the software development services to a non-resident company (X) where the microservices that you develop are not used either directly or indirectly in the indirect tax zone? (The indirect tax zone means Australia). | A1: No. Your software development services to X are GST-free under item 2 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) (item 2) because: | Q2: Is GST payable on your supply of the software development services to the non-resident company where the microservices that you develop are used indirectly in the indirect tax zone? | A2: No. Your software development services to X are GST-free under item 2 because: You are not making the supply of providing access to use the microservices that you develop; therefore, it would not matter if the microservices are used by entities who may be in Australia. Additionally, you are not providing anything to entities who are in Australia. You are only making a GST-free supply of software development services to X.

Relevant facts and circumstances: You are registered for GST. You operate as a freelancer doing software development. All work is cloud based. You develop optimisation microservices as a software developer for a non-resident company, X which does not have a presence in the indirect tax zone. A microservice is a self-contained and independently developed software program running in a cloud that is capable of performing requests and providing responses. Example usage: A customer of X wishes to optimise their (certain type of assets). They use a web application which makes multiple HTTP requests to a single microservice (currently hosted overseas). The microservice interprets the requests and forwards the requests to various other microservices (all currently hosted overseas). Each microservice that receives a request will act according to its own logic and may make requests to all other microservices (including the optimisation microservices you develop). You expect to generate AUD $75,000 or more in GST-exclusive gross revenue from your supplies to X over the 12 month period beginning with (date). You are contracted as a software developer. The contract requires you to support X's programmers' team and create software components in the domain of (a certain domain). There is the literal creation and editing of the program i.e. software components, as well as the support which includes reviewing parts of the program created by others, giving technical advice to others (residents of foreign countries) regarding usage, and monitoring the performance of the program to ensure correct functionality. This all falls under the umbrella term of software development. All intellectual property rights on the programs that you develop belong to X. The microservices that you develop may be used indirectly within the indirect tax zone or they may not be used directly or indirectly within the indirect tax zone. You perform your services in the indirect tax zone only.

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


your software development services are not goods or real property; and | your customer is a non-resident which is not in the indirect tax zone for the purposes of item 2; and | the supply of the software development services is not a supply of work physically performed on goods situated in the indirect tax zone when the work is done; nor is the supply directly connected with real property situated in the indirect tax zone; and | your customer's acquisition of your services does not relate to the making of input taxed supplies of real property situated in the indirect tax zone; and | you are not providing, and are not required to provide, the software development services to another entity who is in the indirect tax zone.