Private ruling: GST and supply of services and goods
Date of advice: 27 April 2016
Published: June 2016

Ruling: Q3: What is the GST status of the sale of goods made to an Australian customer where you are required by the customer to send the purchased goods overseas? Advice Your supply of goods to the Australian customer is GST-free under item 1 in the table in subsection 38-185(1) of the GST Act where you are required by the customer to send the purchased goods overseas. Relevant fact You are an Australian company and registered for GST. The income for your business is derived as followed: 1. Your main trading activity is collecting parcels from Australian customers (individual taxpayers and small business owners) and organising to send these parcels overseas. The customers come to the warehouse where you carry on your business activity, give the parcels to your staff and complete the postal slip. There is no written contract between you and the customers. A freight company will come to collect the parcels from you and charge you for the freight of sending the parcels overseas. For example, you charge your customer $8.50 per kg for the freight and you pay the freight company $6.50 per kg. The parcels are sent overseas by the freight forwarder. 2. You buy products from local shops or local suppliers and store these goods in your warehouse. You sell these goods directly to overseas buyers via a social communication platform. When you sell the goods, you will pack and send directly to an overseas buyer. The goods are exported within 60 days of receipt of payment. 3. You sell goods to an Australian customer and pack and send these goods directly to an overseas entity on behalf of the Australian customer. The goods are exported within 60 days of receipt of payment.


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 subsection 38-185(1) | A New Tax System (Goods and Services Tax) Act 1999 subsection 38-190(1) | A New Tax System (Goods and Services Tax) Act 1999 subsection 38-190(5) | A New Tax System (Goods and Services Tax) Act 1999 subsection 38-355(1) | A New Tax System (Goods and Services Tax) Act 1999 subsection 38-355(2) | A New Tax System (Goods and Services Tax) Act 1999 section 195-1 Detailed reasoning | Note : Where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in section 195-1 of the GST Act. Question 1 | GST is payable on a taxable supply. A supply is a taxable supply under section 9-5 of the GST Act if: (a) you make the supply for consideration; | (b) the supply is made in the course 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, the supply is not a taxable supply to the extent that it is GST-free or input taxed. | Your supply of organising the delivery of the parcel overseas to the Australian customer satisfies paragraphs 9-5(a) to 9-5(d) of the GST Act as: (a) you make the supply for consideration; and | (b) your supply is made in the course of an enterprise that you carry on; and | (c) your supply is connected with Australia as the supply is done through an enterprise that you carry on in Australia; and | (d) you are registered for GST. | However, your supply of organising the delivery of the parcel overseas 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 organising the delivery of the parcel overseas input tax. GST-free supply | Relevant to your supply of organising delivery of the parcel overseas is item 3 in the table in subsection 38-190 (1) and item 7 in the table in subsection 38-355 of the GST Act. | Item 3 in the table in subsection 38-190(1) of the GST Act (item 3) Item 3 appears as follows: | Item | Topic | These supplies are GST-free (except to the extent that they are supplies of goods or *real property) … | 3 | Supplies used or enjoyed outside Australia | a supply: | (a) 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; other than a supply of work physically performed on goods situated in Australia when the thing supplied is done, or a supply directly connected with *real property situated in Australia. | (*denotes a defined term under section 195-1 of the GST Act) Accordingly, for the supply of organising the delivery of the parcel overseas to be GST-free you must satisfy both paragraphs (a) and (b) of item 3, and that the supply is not work physically performed on goods or directly connected with real property in Australia. | Paragraph (a) of item 3 | To be GST-free, paragraph (a) of item 3 requires that the recipient is not in Australia in relation to the supply when the thing supplied is done. A recipient in relation to a supply is the entity to whom the supply was made. It is not a requirement of item 3 that the recipient is a non-resident entity. | Where paragraph (a) of item 3 is not satisfied because the 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 subsections 38-190(4) and 38-190(5) of the GST Act apply. | Your supply of organising the delivery of the parcel overseas is made to an Australian resident when the service is made. In this instance, your supply does not satisfy paragraph (a) of item 3 unless subsection 38-190(4) of the GST Act applies. Subsection 38-190(4) of the GST Act | Subsection 38-190(4) of the GST Act extends the scope of item 3. This subsection provides that a supply to a recipient who is in Australia in relation to the supply is taken for the purposes of item 3, to be a supply made to a recipient who is not in Australia if: | (a) the supply is made under an agreement entered into, whether directly or indirectly, with an Australian resident; and | (b) the supply is provided, or the agreement requires it to be provided, to another entity outside Australia. | The expression 'provided to another entity' in subsection 38-190(4) of the GST Act seeks to identify the entity to whom the supply is provided to. If the supply is made under an agreement with an Australian resident but the thing supplied is provided, or the agreement requires it to be provided to another entity located outside Australia, subsection 38-190(4) of the GST Act applies and the 'not in Australia' requirement in item 3 is satisfied. | Paragraph 38-190(4)(a) of the GST Act | Your supply of organising the delivery of the parcel overseas is a supply under an arrangement entered into with a resident of Australia. Paragraph 38-190(4) of the GST Act is therefore satisfied. | Paragraph 38-190(4)(b) of the GST Act Paragraph 225 in Goods and Services Tax Ruling GSTR 2007/2 states that in the case of delivery or freight services, if goods from one entity are addressed for delivery to another entity, we accept that the delivery or freight services are provided to that addressee entity. | However, this approach does not apply to the delivery of goods that are generically addressed to 'the householder' or are for delivery to the public at large. This approach also does not apply to circumstances where an individual's goods are freighted or moved from one location to another location, for example, where the individual is relocating overseas and the individual's household goods are freighted to an address overseas (paragraphs 338 and 339 in GSTR 2007/2). | Under the arrangement with the Australian resident you are to organise the delivery of the parcel to an overseas entity. In this instance, we accept that your services are provided to the overseas entity. Paragraph 38-190(4)(b) of the GST Act is therefore satisfied Subsection 38-190(4) of the GST Act is therefore satisfied to the extent that it is not negated by subsection 38-190(5) of the GST Act. | Subsection 38-190(5) of the GST Act states: | (5) Subsection (4) does not apply to any of the following supplies: | a) a transport of goods within the indirect tax zone that is part of, or is connected with, the *international transport of the goods; | b) a loading or handling of goods within the indirect tax zone that is part of, or is connected with, the international transport of the goods; | c) a service, done within the indirect tax zone, in relation to the goods that facilitates the international transport of the goods; | Example: the services of a customs broker in processing the information necessary for the clearance of goods into home consumption. | d) insuring transport covered by paragraph (a); | e) arranging transport covered by paragraph (a), or insurance covered by paragraph (d). | Your supply of organising for the parcel to be delivered overseas is in connection to arranging for the international transport of the parcel and this service is done in Australia. In this instance, subsection 38-190(4) of the GST Act is not applicable to your supply by virtue of subsection 38-190(5) of the GST Act. Paragraph (a) of item 3 is therefore not satisfied. | Summary | Your supply of organising for the delivery of the parcel overseas is not GST-free under item 3. | Item 7 in the table in subsection 38-355 of the GST Act (item 7). | Item 7 provides that the arranging of transport will be GST-free where the supply of arranging the international transport of goods covered by item 5 in the table in subsection 38-355 of the GST Act (item 5) is GST-free. | Item 5 provides that subject to subsection 38-355(2) of the GST Act, the international transport of goods is GST-free: (a) from their place of export in Australia to a destination outside Australia; or | (b) from a place outside Australia to their place of consignment in Australia; or | (c) from a place outside Australia to the same or another place outside Australia. | Subsection 38-355(2) of the GST Act provides that paragraphs (a) and (b) of item 5 and item 5A in the table in subsection 38-355(1) do not apply to a supply to the extent that the thing supplied is done in the Australia unless: | (a) the recipient of the supply is a non-resident and is not in Australia when the thing supplied is done in Australia; or | (b) the supply is done by the supplier of the transport of the goods from or to the indirect tax zone (whichever is relevant). | Your supply of organising for the delivery of the parcel overseas is made to your Australian customers. In this instance your supply to Australian customers is not GST-free under item 5 as neither paragraph 38-355(2)(a) or (b) applies. | Your supply of arranging the transport of the goods overseas is therefore not GST-free under item 7. | Summary | Your supply of organising for the parcels to be delivered overseas to your Australian customers is a taxable supply under section 9-5 of the GST Act. You will be liable for GST on the supplies made to the Australian customers. Questions 2 and 3 | Under item 1 in the table in subsection 38-185 (1) of the GST Act (item 1) a supply of goods is GST-free but only if the supplier exports them from Australia before or within 60 days (or such further period as the Commissioner allows) after: (a) the day on which the supplier receives any of the consideration for the supply; or | (b) if, on an earlier day, the supplier gives an invoice for the supply - the day on which the supplier gives the invoice. | Item 1 requires that there is an export and the supplier exports the goods before or within a 60 day period. The location of the recipient of the supply of goods is not relevant. The recipient may be located in Australia at the time the supplier carries out the act of exporting the goods from Australia. | To demonstrate that a supply of goods is a GST-free export, the supplier must have sufficient documentary evidence to show that all of the requirements in item 1 are met. More information on documentary evidence is available in Goods and Services Tax Ruling GSTR 2002/6 which is available from the ATO website at www.ato.gov.au | Question 2 | You advised that the goods sold to the overseas customers are exported within 60 days of receipt of payment. In this instance, your supply of goods to the overseas customers is GST-free under item 1. | Question 3 | You advised that the goods sold to Australian customers and sent to the overseas customers are exported within 60 days of receipt of payment. In this instance, your supply of goods to the Australian customers is GST-free under item 1.


Is your supply of services to Australian customers GST-free where you organise for the parcels collected from the customers to be delivered overseas? | No, your supply of services to Australian customers is not GST-free where you organise for the parcels collected from the customers to be delivered overseas. Your supply to the Australian customers is a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). | What is the GST status of the supply of goods you made to overseas customers where you use a social communication platform to make the sale? | Your supply of goods to overseas customers is GST-free under item 1 in the table in subsection 38-185(1) of the GST Act where you use a social communication platform to make the sale.