Private ruling: GST and entitlement to input tax credit
Date of advice: 16 April 2019
Published: May 2019

Ruling: Q1: Are you entitled to an input tax credit for the GST included in the price of the supplies made by the partnering organisation (the Partner) under the agreement between you and the Partner? | A1: Yes.

Relevant facts and circumstances: You are registered for GST. You are a registered training organisation (RTO). You deliver accredited training for which you receive funding from the government. You have formed partnership arrangements with other RTOs and other training companies that are not an RTO in different regions to your own. This partnership arrangement is beneficial as not all RTOs can get government funding in their own right, and it offers government subsidised training to students in the other party’s local region. All partnership agreements formalised must be sent to the Government within a specified time and are lawful. Your difficulty is that one partnering RTO (the Partner) has charged you GST. The Partner is a registered RTO. The Partner is registered for GST. You have provided a copy of your agreement with the Partner (the Agreement). The Agreement lists the training courses that are to be delivered by the Partner pursuant to the Agreement. These courses are within the scope of your registration as an RTO. All the courses delivered under the Agreement are government funded. The students also pay a contribution towards the cost of the courses. Once a unit is completed by the student you apply for funding from the State government. Under the Agreement, you are nominated as the RTO in this arrangement and the Partner has accepted you as the RTO for the purpose of the Agreement. You are the RTO that offers the courses to the students. The students are enrolled with you. You apply for and receive the government funding. The students pay the student contribution amounts to you. You oversee and monitor the training and assessment services provided by the Partner on your behalf, and are responsible for ensuring compliance with VET Quality Framework. All paperwork, assessments, compliance documentation etc. that is used by the Partner is yours. On successful completion of the course/training program, you issue qualifications, statements of attainment to the students. Under the Agreement, the Partner is engaged to provide physical and human resources to deliver the nominated training program by its staff on your behalf for a fee. The training is conducted by the Partner but monitored by you at every level including site visits. At the end of each month the Partner invoices you for the services provided. Upon receiving an itemised invoice from the Partner, you pay them the agreed fee for their services.

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 11-5 | A New Tax System (Goods and Services Tax) Act 1999 section 11-20 | A New Tax System (Goods and Services Tax) Act 1999 section 38-85

Reasons for decision: Summary: You are entitled to an input tax credit for the GST included in the price of the delivery of training and assessment services that the Partner supplies to you under the Agreement. | Detailed Reasoning - Detailed reasoning: Section 38-85 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that a supply of an education course is GST-free. The definition of an ‘education course’ is provided in section 195-1 of the GST Act and includes, amongst other things, a tertiary course. To be GST-free as a tertiary course, a course must satisfy the Education Minister's determination under subsection 5D(1) of the Student Assistance Act 1973 ; Student Assistance (Education Institutions and Courses) Determination 2009 (No.2) (Determination 2009). Determination 2009 provides that a vocational education and training program, conducted by either a higher education institution or an RTO, is a tertiary course. Determination 2009 states: ‘vocational education and training program’ means a course that leads to an award of an Australian Qualification Framework (AQF) qualification or a Statement of Attainment, and the course must be: (a) an accredited vocational education and training course; or (b) a sequence of training consisting of one or more subjects or modules where each subject or module is from an accredited vocational education and training course; or (c) a structured approach to the development and attainment of competencies for a particular AQF qualification specified in an endorsed training package. A course is considered to be conducted by an RTO where the enrolment of students is with that body, the RTO takes responsibility for the maintenance of presentation and assessment standards and the qualification stemming from the course is issued by the RTO. Under the Agreement, you are nominated as the RTO in this arrangement and the Partner has accepted you as the RTO for the purpose of the Agreement. The students are enrolled with you. You apply for and receive the government funding. The students pay the student contribution amounts to you. You oversee and monitor the training and assessment services provided by the Partner on your behalf, and are responsible for ensuring compliance with VET Quality Framework. On successful completion of the course/training program, you issue qualifications, statements of attainment to the students. Under the Agreement, the Partner is engaged to provide physical and human resources to deliver the nominated training program by its staff on your behalf for a fee. Upon receiving an itemised invoice from the Partner, you pay the Partner the agreed fee for their services. Based on the facts of this case, the relationship between you and the Partner is such that you are the RTO that offers the courses to the students, oversees the maintenance of the required standards and issues a recognised vocational qualification on completion of the course. Accordingly, you are the supplier of the education courses to the students who are enrolled with you. The Partner is delivering the training and assessment services to the students on your behalf. In this situation, there are two separate supplies. You are supplying the GST-free education courses to the students and the Partner is supplying training and assessment services to you. The Partner is treating the supply of its services to you as taxable supplies and includes GST in the price of their services. Entitlement to input tax credits for services supplied by the Partner Section 11-20 of the GST Act provides that you are entitled to the input tax credit for any creditable acquisition that you make. Section 11-5 of the GST Act provides that an acquisition is a creditable acquisition if: (a) you acquire the thing solely or partly for a use in your business (b) the supply of the thing to you is a taxable supply (c) you provide, or are liable to provide, payment for the supply, and (d) you are registered, or required to be registered for GST. In your case, you meet the requirements of paragraphs 11-5(a), 11-5(c) and 11-5(d) of the GST Act. This is because you acquire the Partners’ services for use in your business, you pay the Partner for their services and you are registered for GST. What is left to determine is whether the Partner is making a taxable supply to you, as required under paragraph 11-5(b) of the GST Act. Taxable supply Whether or not a supply is a taxable supply depends on the supplier’s circumstances. A supplier will make a taxable supply if all of the requirements of section 9-5 of the GST Act are met. Section 9-5 of the GST Act provides that a supplier makes a taxable supply if: (a) the supplier makes the supply for consideration/payment (b) the supply is made in the course of operating the supplier’s business (c) the supply is connected with Australia, and (d) the supplier is 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. Based on the information provided, the services supplied by the Partner to you under the Agreement meet all the requirements of section 9-5 of the GST Act and are therefore taxable supplies. This is because, the Partner supplies its services to you for a fee, the services are supplied in the course of the business that the Partner is carrying on, the supplies are connected with Australia and the Partner is registered for GST. Further, the services supplied by the Partner to you are neither input taxed nor GST-free. As the services supplies by the Partner are taxable supplies, you meet all the requirements of section 11-5 of the GST Act. You can therefore claim an input tax credit for services that the Partner supplies to you provided you hold a tax invoice.