Private ruling: GST and supply of education course
Published: March 2013

Ruling: Q1: Is the supply made by the licensee to a client to attend a GST-free education course GST-free under paragraph 9-30(1)(b) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? Is the supply of marketing and teaching services by the licensee to the licensor a taxable supply where there is no separately identifiable consideration provided by the licensor for these services? | A1: Yes, the supply made by the licensee to a client to attend a GST-free education course is GST-free under paragraph 9-30(1)(b) of the GST Act. No, the supply of marketing and teaching services by the licensee to the licensor is not a taxable supply where there is no separately identifiable consideration provided by the licensor for these services.

Relevant facts and circumstances: The licensee is registered for goods and services tax (GST). The licensee entered into an agreement (Agreement) with the licensor, a Registered Training Organisation (RTO). The Agreement authorises the licensee to market, promote, sell, deliver, facilitate and service the products developed by the licensor. The licensee markets the licensor's courses to various entities or clients (usually bodies corporate or government entities) who will enrol, through the licensee, any number of their staff as appropriate to attend various courses. The licensee has given written authority to the licensor to seek a GST private ruling on their behalf in regard to the supplies to be made under the Agreement. Consequently, the licensor's tax agent has applied for a GST private ruling for the licensee. The licensor's tax agent advised that the facts surrounding the application for a GST private ruling are identical to all previous applications made for other licensees, and to the facts contained in the GST private ruling issued to the licensor. The facts contained in the licensor's private ruling that are relevant to this private ruling are as follows: · The licensor is a Registered Training Organisation and is registered for GST. · When a licensee is signed up by the licensor, the agreement grants the licensee the right and authority to market, promote, sell, deliver, facilitate and service the courses which are accredited to the licensor. · The licensee is registered for GST. · The licensee makes an upfront payment which covers the initial supply of various training materials and services which enable the licensee to establish its training programme. GST is charged on all components of this supply except for the GST-free supply of training provided by the licensor to the licensee. · Where GST is charged, the licensee is entitled to input tax credits. · The licensee markets the licensor's courses to various entities (usually bodies corporate or government entities) which enrol, through the licensee, any number of their staff, as appropriate, to attend various courses. · The enrolment process is conducted online, usually by the licensee, but sometimes by the client. It involves logging onto the licensor's website and inputting the details of each participant into the licensor's database. · When a course is confirmed, participants are advised of the course dates, location, and so on, and an invoice is issued to the client in the name of the licensee. The invoice is for the supply of a right to receive the course which is supplied by the licensor. · Depending on how and where the courses are being run, the licensee or the licensor may contract with facilitators, coaches, and so on, for the provision of services relating to the supply of the courses. Invoices for these services will be inclusive of GST where the supplier is registered for GST. · For each course conducted, the licensor charges the licensee a set percentage of the amount invoiced by the licensee. This percentage is GST-inclusive and represents the supply by the licensor of the rights under the license. · There may be additional charges for further supplies made by the licensor to the licensee in relation to the supply of the course, for example handouts, venues and facilitators. · The balance of the moneys paid by the clients to the licensee represents the profit on the licensee's supply. Regardless of the level of marketing undertaken by the licensee to sign up clients, there is no consideration received from the licensor for this activity. It is considered to be part of the business activities of the licensee. While there are supplies made by the licensee to the licensor, such as marketing and teaching services, there is no separately identifiable consideration for such supplies. If the licensee actively participates in the provision of the courses to the clients (for example, facilitation, coaching and so on), there is no consideration received from the licensor for this activity.

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 paragraph 9-30(1)(b) and | A New Tax System (Goods and Services Tax) Act 1999 section 38-85.

Reasons for decision: Summary: Paragraph 9-30(1)(b) of the GST Act provides that a supply of a right to receive a supply that is GST-free under Division 38 of the GST Act is also a GST-free supply. There is no requirement that the supply of right and the actual supply are made by the same entity. From the facts given, the supply that the licensee makes to the students (participants/clients) under the Agreement is a supply of right to participate in an accredited GST-free education course to be provided by the licensor. Accordingly, the supply made by the licensee to the client to attend a GST-free education course is GST-free under paragraph 9-30(1)(b) of the GST Act. Section 9-5 of the GST Act provides that an entity makes a taxable supply if all of the following requirements are met: · the entity makes the supply for consideration; · the supply is made in the course or furtherance of an enterprise carried on by the entity; · the supply is connected with Australia; · the entity is registered or required to be registered for GST; and · the supply is neither GST-free nor input taxed. As the licensor does not provide consideration for the licensee's supply of marketing and teaching services, one of the requirements above is not met. Therefore, the supply of these services is not a taxable supply