Private ruling: Goods and services tax (GST) and supply of training and internship program
Date of advice: 27 September 2018
Published: November 2018

Ruling: Q1: Is GST payable on your supplies of programs to residents that include Australian based training and an overseas internship? | A1: Yes. GST is payable on your supply of a program, but only on the Australian based training part of the program. You must apportion the program price between the Australian based training and the overseas internship and calculate the GST accordingly. The GST amount would be 1/11 th of the portion of the program price that relates to the Australian based training.

Relevant facts and circumstances: You are registered for GST. You report GST on a quarterly basis. Your business has certain objectives. You offer an overseas internship program to tertiary students (who are residents of Australia) in foreign countries. Students are charged an all-inclusive fee, which includes a specified amount for GST. The service includes: ● a training course in Australia ● an internship overseas, organised by you or your subsidiaries – this is wholly enjoyed overseas You have a fixed place of business in Australia, that is, an office that you lease. You also have a place of business in foreign countries, but this is dependent on the business registration requirements of the foreign countries. You hire venues off-site (not at your Australian office) to deliver the Australian based training. Your customers engage you online or at your place of business. Your employees finalise your Service Agreements with your customers. Part of the work in organising internships is completed by your employees in Australia. The training in Australia does not lead to a qualification and is not a requirement for any trade or profession. You are not a ‘Registered Training Organisation’. You are not a university. You are not a higher education institution (as defined in Student Assistance (Education Institutions and Courses) Determination 2009 (No. 2)). You are not a higher education provider (as defined in A New Tax System (Goods and Services Tax) (Tertiary Courses) Determination 2017). The Australian-based training part of the program is not a Masters or Doctoral level course. The Australian-based training part of the program is not an ‘Open Learning’ course. The Australian-based training part of the program is not an undergraduate or postgraduate accredited higher education course.

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 9-25 | A New Tax System (Goods and Services Tax) Act 1999 section 9-27 | A New Tax System (Goods and Services Tax) Act 1999 Division 19 | A New Tax System (Goods and Services Tax) Act 1999 section 29-20 | A New Tax System (Goods and Services Tax) Act 1999 subsection 29-70(2) | A New Tax System (Goods and Services Tax) Act 1999 section 38-85 | A New Tax System (Goods and Services Tax) Act 1999 section 38-190 | A New Tax System (Goods and Services Tax) Act 1999 Division 142 | A New Tax System (Goods and Services Tax) Act 1999 section 195-1

Reasons for decision: Summary: Your supply of the program is partly GST-free under Item 3 in the table in subsection 38-190(1) of the GST Act, which deals with services and other intangibles, the effective use or enjoyment of which takes place outside Australia. | Detailed Reasoning - Detailed reasoning: GST is payable on taxable supplies Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states: You make a taxable supply if: (a) you make the supply for *consideration; and (b) the supply is made in the course or furtherance of an *enterprise that you *carry on; and (c) the supply is *connected with the indirect tax zone; and (d) you are *registered, or *required to be registered. However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed. (*Defines a term defined in section 195-1 of the GST Act) The indirect tax zone is Australia. You meet the requirements of paragraphs 9-5(a), 9-5(b), 9-5(c) and 9-5(d) of the GST Act, that is: ● you supply your program for consideration (the fees for these services); and ● you supply the program in the course or furtherance of an enterprise that you carry on; and ● your supply of the program is connected with Australia; and ● you are registered for GST. Your supplies of the program are not input taxed. Therefore, what remains to be determined is whether the supply of the program is GST-free. Item 3 in the table in subsection 38-190(1) of the GST Act (Item 3) provides that a supply of something (other than goods or real property) is GST-free provided that the recipient is not in the indirect tax zone when the thing supplied is done, and (a) effective use or enjoyment takes place outside the indirect tax zone; and (b) the supply is neither a supply of work physically performed on goods situated in the indirect tax zone when the work is done nor a supply directly connected with real property situated in the indirect tax zone. However, there are a number of exclusions from GST-free treatment under item 3, as set out in subsections 38-190(2) and 38-190(2A) of the GST Act. | Detailed Reasoning - Supply of overseas internships to Australian resident individuals: Paragraphs 222 and 223 of GSTR 2004/7 provide guidance on determining whether a resident individual is ‘in Australia’ when the thing supplied is done. They state: | Detailed Reasoning - Resident individuals: 222. Like non-resident individuals, an Australian resident individual is in Australia if the individual is physically located in Australia when the thing supplied is done. | Detailed Reasoning - Example 8 - resident individual who is not in Australia: 223. An Australian tourist is arrested in New Zealand for possession of an illegal substance. While in New Zealand waiting for her trial, she receives legal advice from an Australian solicitor. She is not in Australia when the thing supplied is done for the purposes of item 3. However, the supply is only GST-free if the other requirements of item 3 are satisfied . Where you supply an overseas internship to an individual who is a resident of Australia, the resident individual is not in Australia for the purposes of Item 3. Our approach to determining the place of effective use or enjoyment of a supply Paragraph 45 of Goods and Services Tax Ruling GSTR 2007/2 states: 45. In our view, a supply is for consumption, and thus used or enjoyed, outside Australia if there is provision of the supply to the providee entity outside Australia. Paragraph 281 of GSTR 2007/2 states: 281. If a resident individual's presence outside Australia is integral to, as distinct from being merely coincidental with, the provision of the supply, we consider that the supply is provided to that individual outside Australia. As the supply is provided to the individual outside Australia, effective use or enjoyment of the supply takes place outside Australia. Paragraph (b) of item 3 is satisfied. The supply is GST-free under item 3 if the other requirements of item 3 are satisfied. (See Flowchart 2, page 34 of the Ruling section.) The presence of your resident customers overseas is integral to these providees receiving the supplies of the overseas internships. Therefore, the effective use and enjoyment of the supply of the overseas internship takes place outside Australia. Your supply of an overseas internship is not a supply of work physically performed on goods and is not directly connected with real property. The exclusion at subsection 38-190(2) of the GST Act is not relevant as it deals with supplies of rights and options. The exclusion at subsection 38-190(2A) of the GST Act is not relevant as it deals with supplies of things, the acquisition of which relates to making supplies of real property. Therefore, your supply of overseas internships to customers who are residents of Australia is GST-free under item 3. Hence, GST is not payable on your supplies of the overseas internships. | Detailed Reasoning - Training delivered in Australia: GST-free education provision A supply of an education course as defined in section 195-1 of the GST Act is GST-free under paragraph 38-85(a) of the GST Act. Section 195-1 of the GST Act lists ‘professional or trade courses’ and ‘tertiary courses’ as education courses for the purposes of the GST Act (amongst various other type of courses). The Australian based training in your case is not a professional or trade course as defined in section 195-1 of the GST Act as it does not lead to a qualification that is an essential prerequisite to enter, or commence the practice of, a profession or trade in Australia. Your Australian based training is not a tertiary course as defined in section 195-1 of the GST Act as it is not any of the following types of courses etc: (a) a course of study or instruction that is a tertiary course determined by the *Education Minister under subsection 5D(1) of the Student Assistance Act 1973 for the purposes of that Act; or (aa) a course of study or instruction at Masters or Doctoral level and supplied by a *higher education institution or a *non-governmental higher education institution; or (b) any other course of study or instruction that the Education Minister has determined is a tertiary course for the purposes of the GST Act. Student Assistance (Education Institutions and Courses) Determination 2009 (No. 2) is the determination relating to paragraph (a) of the definition of tertiary course. The determinations made for the purposes of paragraph (b) of the definition of tertiary course are as follows: ● A New Tax System (Goods and Services Tax) (Tertiary Courses) Determination 2017 ● A New Tax System (Goods and Services Tax) (Flying School Training Courses) Determination 2004 These three determinations can be found on the internet. Your supply of the training delivered in Australia is not one of the types of education courses specified in the GST Act. Your supply of the training delivered in Australia is not GST-free. Therefore, GST applies to this training as all of the requirements of section 9-5 of the GST Act are met. | Detailed Reasoning - Mixed supply: Goods and Services Tax Ruling GSTR 2001/8 discusses ‘mixed supplies’. Paragraph 16 of GSTR 2001/8 defines ‘mixed supplies’. It states: 16. In this Ruling the term 'mixed supply' is used to describe a supply that has to be separated or unbundled as it contains separately identifiable taxable and non-taxable parts that need to be individually recognised. Paragraph 25 of GSTR 2001/8 explains how to calculate GST on a ‘mixed supply’. It states: 25. GST is payable on a mixed supply that you make, but only to the extent that the supply is taxable. You need to apportion the consideration for a mixed supply between the taxable and non-taxable parts to find the consideration for the taxable part. Your supply of the program in question to residents is a ‘mixed supply’. It is a taxable supply, but only to the extent of the Australian based training component of the program. GST is payable at 1/11 th of the part of the total fee for the program that is reasonably apportionable to the Australian based training. | Detailed Reasoning - Re-issuing tax invoices and recovering GST amounts incorrectly paid to the ATO: Subsection 29-70(2) of the GST Act set out when a tax invoice must be issued to a customer. Division 142 of the GST Act provides that if a GST return contains an excess GST amount (that is, the GST liability amount reported is overstated), there are certain limitations on the ability of the taxpayer to recover these excess GST amounts paid to the Australian Taxation Office (ATO). You are required to issue a replacement tax invoice to show the corrected GST amount if the customer requests/requested you to issue a tax invoice unless you reported the originally calculated GST amount in a prior GST return and passed on the excess GST amount to the customer. The revised tax invoice should show GST equal to 1/11 th of the part of the program price that is reasonably apportionable to the training that is delivered in Australia. You should cancel the corresponding original tax invoice if you are issuing a revised tax invoice. If the amounts of GST you have reported in a past GST return for the supplies of the program in question were in excess of what were the correct amounts, and you have passed on the burden of these excess GST amounts to your customers, the excess GST amounts you have reported are treated as having being payable, unless and until you refund to your customers these excess amounts. If you have reported an excess GST amount in a GST return, but you subsequently reimburse the relevant customer for this amount, you will have a decreasing adjustment. You would claim such adjustments by reporting the excess GST amounts as positive figures at label 1B of the GST return for the tax period in which you reimburse the customers for the excess GST. You would need to issue an adjustment note to a customer and keep a copy of the adjustment note in order to claim a decreasing adjustment relating to that customer (unless the excess GST amount relating to the customer is $75 or less). See Goods and Services Tax Ruling GSTR 2013/2 for guidance on how to set out an adjustment note (type in GSTR 2013/2 into an internet search engine). If you have not passed on the burden of the excess GST amounts to your customers, you can recover the excess GST amounts you have paid to the ATO by making appropriate corrections in appropriate GST returns. This would involve reducing the label 1A amounts of GST returns. Type in ‘ Correcting GST errors’ into an internet search engine. Goods and Services Tax Ruling GSTR 2015/1 provides further guidance on Division 142 of the GST Act including factors to assist a taxpayer in determining whether they have passed on the burden of excess GST amounts to customers (type in GSTR 2015/1 into an internet search engine).