Private ruling: GST and supplies of assets and services to a non-resident
Date of advice: 1 April 2020
Published: May 2020

Ruling: Q1: Were the supplies you made to the non-resident company (Purchaser) under the Asset Sale Agreement (ASA) taxable supplies under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: No. You have made two distinct supplies to the Purchaser under the ASA: 1. A supply that is in relation to rights when you sold the business names listed in the Schedule of the ASA to the Purchaser. The assets listed under item 2 in the Schedule were associated rights that were incidental to the supply of the business names since it was under these business names that you made the supply of online services. The sale of these assets under item 2 contributed to the proper performance of the ASA contract to supply the dominant part of the supply which was the business names. The supply of the business names was GST-free under paragraph (b) of item 4 in the table in subsection 38-190(1) of the GST Act. 2. A supply of services when the Trustee supplied the services related to the post assistance requirements in the ASA. The supply of the services was GST-free under paragraph (a) of item 2 in the table in subsection 38-190(1) of the GST Act.


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

Reasons for decision: Summary: 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. | Detailed Reasoning - Characterisation of supplies: Before we determine the GST status of your supplies under the ASA we need to characterise the supply you have made. After considering all the information given, we consider you made two distinct supplies to the Purchaser under the ASA: 1. A supply that was made in relation to rights when you assigned your business names that were registered with ASIC (item 1 in the Schedule) to the Purchaser. The supply of the assets listed under item 2 in the Schedule were associated rights that were incidental to the supply of the business names since it was under these business names that you made the supply of online services. The sale of these assets contributed to the proper performance of the contract to supply the dominant part of the supply which was the business names. 2. A supply of services when you supplied the services related to the post assistance requirements in the ASA. We will now consider the GST status of each supply. | Detailed Reasoning - GST status of the supply of rights: GST is payable on a taxable supply. Under section 9-5 of the GST Act a supply is a taxable supply if: a) the supplier makes the supply for consideration; and b) the supplier makes the supply through a business that it carries on; and c) the supply is connected with Australia; and d) the supplier is 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 rights to the purchaser satisfies paragraphs 9-5(a) to 9-5(d) of the GST Act as: a) you made the supply for consideration; and b) you make the supply through a business that you carry on in Australia; and c) the supply of rights is connected with Australia as it is made through a business that you carry on in Australia; and d) you are registered for GST. However, your supply of rights is not a taxable supply to the extent that it is GST-free or input taxed. Your supply of rights is not input taxed under the GST law. | Detailed Reasoning - GST-free supply: Relevant to your supply of rights to the purchaser is item 4 in the table in subsection 38-190(1) of the GST Act (item 4). Under item 4 a supply that is made in relation to rights is GST-free if: a) the rights are for use outside Australia; or b) the supply is to an entity that is not an Australian resident and is outside Australia when the thing supplied is done. Only one of the paragraphs in item 4 needs to be satisfied for the supply of the business names to be GST-free. Where one of the paragraphs in item 4 is satisfied the supply of the business names is GST-free to the extent that subsection 38-190(2) of the GST Act does not negate the GST-free status. Goods and Services Tax Ruling GSTR 2004/7 provides guidance on paragraph (b) of item 4. Regarding when a non-resident is in Australia in relation to the supply, paragraphs 243-1 to 243 state the following: 241. We consider, therefore, that a non-resident company is in Australia for the purposes of item 2 and paragraph (b) of item 4 if that company carries on business (or in the case of a company that does not carry on business, carries on its activities) in Australia: a) at or through a fixed and definite place of its own for a sufficiently substantial period of time; or b) through an agent at a fixed and definite place for a sufficiently substantial period of time. 242. In addition to producing an outcome that is more aligned with the policy intent to tax supplies consumed only in Australia, this approach also means that guidance on the application of these criteria for presence in Australia of a non-resident company can be found in the jurisdictional case law. 243. This approach is also supported by the broader framework of section 38-190. If a supply is made to a non-resident company that is not in Australia (because it does not have a presence in Australia as determined under the test in paragraph 241) but the supply is provided to a representative in Australia such as an employee, the presence of that employee in Australia is addressed by means of subsection 38-190(3). That subsection negates the GST-free status that would otherwise apply to an item 2 supply, if that supply is provided to another entity in Australia, such as an employee. Thus, although presence of the non-resident company in Australia is determined by whether the company is carrying on business in Australia, another provision takes into account the presence of representatives in Australia if the non-resident company does not carry on business in Australia. From the facts given the Purchaser did not carry on any business activity in Australia at the time the ASA was settled. The Purchaser had a representative to fly out to Australia to finalise the settlement of the purchase. We do not consider the presence of the representative in Australia makes the Purchaser having a presence in Australia and carrying on a business activity in Australia. This is because the ASA was between you and the Purchaser, a non-resident who was not in Australia at the time of the supply and the representative was not carrying on the purchaser's business in Australia when in Australia. Accordingly, paragraph (b) in item 4 is satisfied since the supply of rights was made to a non-resident who was not in Australia in relation to the supply when the supply was done. However, your supply of rights to the Purchaser is GST-free under item 4 to the extent that subsection 38-190(2) of the GST Act does not negate the GST-free status. There is no need to consider paragraph (a) in item 4 as paragraph (b) is satisfied. | Detailed Reasoning - Subsection 38-190(2) of the GST Act: Subsection 38-190(2) of the GST Act provides that a supply covered by any of items 1 to 5 in the table in subsection 38-190(1) is not GST-free if it is the supply of a right or option to acquire something the supply of which would be connected with Australia and would not be GST-free. Subsection 38-190(2) of the GST Act does not apply as the supply of the business names is just a right and not a right or option to receive another thing. Your supply of the business names is GST-free under paragraph (b) of item 4. | Detailed Reasoning - 2. Supply of services: GST is payable on a taxable supply. A supply is a taxable supply under section 9-5 of the GST Act where all the requirements in that section are met. Your supply of services satisfies the requirements in paragraphs 9-5(a) to 9-5(d) of the GST Act as: a) you make the supply for consideration; and b) you make the supply through a business that you carry on in Australia; and c) the supply of services is connected with Australia as it is made through a business that you carry on in Australia; and d) you are registered for GST. However, your supply of services is not a taxable supply to the extent that it is GST-free or input taxed. Your supply of services is not input taxed under the GST law. Relevant to your supply of services made to the Purchaser is item 2 in the table in subsection 38-190(1) of GST Act (item 2). Item 2 provides that a supply of a thing (other than goods or real property) made to a non-resident is GST-free if the non-resident 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. Only one of the paragraphs in item 2 needs to be satisfied. From the information given your supplies of services to the Purchaser satisfied paragraph (a) in item 2 as: · you made your supply of services to a non-resident company who was not in Australia in relation to the supply at the time the supply is done; and · the supply of services was neither a supply of work physically performed on goods situated in Australia when the work was done, nor was a supply that was directly connected with real property situated in Australia. The supply of services you made to the Purchaser is GST-free under paragraph (a) in item 2 to the extent that the supply is not negated by subsection 38-190(3) of the GST Act. There is no need to consider paragraph (b) in item 2 as paragraph (a) is satisfied. | Detailed Reasoning - Subsection 38-190(3) of the GST Act: Subsection 38-190(3) of the GST Act provides that without limiting subsection 38-190(2) or (2A), a supply covered by item 2 in that table is not GST-free if: a) it is a supply under an agreement entered into, whether directly or indirectly, with a non-resident; and b) the supply is provided or the agreement requires it to be provided to another entity in Australia; and c) for a supply other than an input taxed supply - none of the following applies: i. the other entity would be an Australian-based business recipient of the supply, if the supply had been made to it; ii. the other entity is an individual who is provided with the supply as an employee or officer of an entity that would be an Australian-based business recipient of the supply, if the supply had been made to it; or iii. the other entity is an individual who is provided with the supply as an employee or officer of the recipient, and the recipient's acquisition of the thing is solely for a creditable purpose and is not a non-deductible expense. You advised that your services after the completion of the ASA were provided to representatives of the Purchasers who were located outside Australia at the time of the supply. In this instance subsection 38-190(3) does not apply to the services provided to these representatives. However, you did provide your services to a representative of the Purchaser in Australia for a short time. In this instance we need to consider the requirements in subsection 38-190(3) of the GST Act when you assisted the representative of the Purchaser in Australia. | Detailed Reasoning - Paragraphs (a) and (b) in subsection 38-190(3) of the GST Act: Paragraphs (a) and (b) in subsection 38-190(3) of the GST Act are satisfied as you made your supply of services to the Purchaser and provided them to the representative in Australia. The next step is to consider the requirements in paragraph (c). Paragraph (c) of subsection 38-190(3) of the GST Act Only one of the requirements in paragraph 38-190(3)(c) needs to apply for the GST-free supply under item 2 to be negated under subsection 38-190(3) of the GST Act. Requirements (i) and (ii) in paragraph 38-190(3)(c) of the GST Act do not apply to the supply of services that you made to the Purchaser and provided to the representative since these paragraphs relate to supplies that are provided to GST registered Australian businesses. Requirement (iii) When you supply your services to the representative in Australia, the acquisition made by the representative was for a creditable purpose since the representative was acquiring the services on behalf of the Purchaser and for the Purchaser's business purposes. In this instance requirement (iii) does not apply to your supply of services made to the Purchaser and provided to the Purchaser's representative. Since the requirements in paragraph 38-190(3)(c) do not apply to the supply of services you made to the supplier and provided to the representative, subsection 38-190(3) of the GST Act does not negate the GST-free status of your supply of services you made to the purchaser under item 2. | Summary: Your supply of services made to the Purchaser is GST-free under paragraph (a) of item 2.

Relevant facts: You are an Australian resident and registered for GST. The business activities you carried on were the operation of a website and the provision of online advertising services through the website. | You used two business names in the operation of the website and the provision of online advertising through the website. These business names were registered to your name with the Australian Securities Investment Commission (ASIC). | You have entered into an Asset Sale Agreement (ASA) with a non-resident company (Purchaser) where you agreed to sell to the Purchaser the assets listed in the Schedule in the ASA and assume the obligations under the terms in the ASA. The Purchaser agreed to pay consideration for its purchase of the assets from you and the assumption of the obligations under the terms in the ASA. | In addition to the sale of the assets listed in the Schedule in the ASA, under the ASA you were required to provide post-completion assistance to the Purchaser. The post-completion assistance you provided was reflected in the consideration paid by the Purchaser for the assets. | The Purchaser is an overseas registered limited company and not a resident of Australia. The purchaser is currently not registered for GST. | Prior to the acquisition of the assets under the ASA, the Purchaser did not undertake any business activities in Australia. The Purchaser does not have any subsidiary companies in Australia. | The assets listed in Schedule 1 of the ASA are as followed: | 1. The two business names you used in carrying on your business activities | 2. The contracts you have in place when supplying online services | The two business names listed under item 1 in the Schedule were registered to your business with ASIC. You owned both business names and utilised these business names up to and including the date of completion of the ASA in the operation of your business. | The two business names were not distinct and separate businesses but rather business names used in the operation of the business activities of the website and the provision of online services through the website. | Under the ASA you assigned all your rights and obligations you had under these contracts related to the assets listed under item 2 in the Schedule to the Purchaser. | You agreed in the ASA to provide post completing services to the Purchaser for a short period from Completion Date. The post completing services were provided to the representatives of the Purchaser who were all located overseas at the time of the supply. | The Purchaser designated a representative to fly out to Australia for the settlement of the contract. You assisted the Purchaser's representative in answering enquiries for no more than two days after settlement. After the Purchaser's representative left Australia, the enquiries were handled by the Purchaser's representative. After that time, you provided assistance with questions from the Purchaser's representative when requested, however, the enquiries were responded to directly by the Purchaser's representative. | The interaction between you and the Purchaser's representatives included all aspects involved in the operation of the website: email enquiries, existing accounting software, the operation of the website and its functionality and features, as well as the policies of the website. Your technical advisor provided support to the Purchaser's technical representative.