Private ruling: Goods and services tax - Education - Education courses
Published: January 2015

Ruling: Q1: Are you, Entity A, making a creditable acquisition pursuant to section 11-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when you make a payment, to a Training Organisation (TO) for the delivery of courses under the specified funding programs? | A1: Your payment to the training organisation will not be for a creditable acquisition where the supply of the courses to you, including the associated administrative services, is GST-free.

Relevant facts and circumstances: You, Entity A are registered for GST. Entity B is part of Entity A. Entity B has two areas of administration. • The first area deals with policy for training and promotional events and • The second area has responsibility for funding the provision of training and assessment. Entity B engages organisations to provide training, and assessment of training. You enter into funding agreements with both registered training organisations (RTO's) from all state jurisdictions and various training organisations (TO's) that are not RTO's. You engage them for delivery of training to various groups or individuals. In this ruling we will refer to both organisations as training organisations (TO's) or differentiate between them as RTO's or non RTO's. The RTO's that you fund are free to charge their students, additional fees. A number of TO's do not charge fees. None of the non RTO's charge additional fees to the students . RTO's are registered and accredited under various Acts. All references to the term 'VET courses' means VET courses defined in the Student Assistance (Education Institutions and Courses) Determination 2009 (No. 2) All the TO's are registered for GST. Where you enter into an agreement with an RTO you enter into a contract. Where you enter into an agreement with a non RTO you enter into a memorandum of agreement (MOA). Details of these agreements were supplied. Funding Program You also supplied copies of three schedules that are attached to the Contract in regards to the three funding programs which are considered in this ruling: The details of the programs are set out below under the various headings of the three schedules. Funding Program 1 (Schedule 1) Funding program 1 delivers either accredited or non accredited training courses. 'Schedule 1 accredited' is used for accredited training under the funding Program. • The accredited courses are to assist the participants in gaining employment. They are generally for members of specific communities. The courses are supplied by RTO's and not broadly advertised. On completion of the training they receive a nationally recognised 'Statement of Attainment' or qualification that lists the competencies achieved. Training courses are delivered through the Australian Qualifications Framework (AQF) and registered by ASQA. The training is based on units of competency and/or qualifications from National Training packages which are also registered by ASQA. Generally these courses are at Certificate I and II courses. All courses or units supplied under this program are VET courses. 'Schedule 1 non-accredited' training: • specifically targets communities in specific communities and can only be used when there is no accredited qualification, course or unit of competency that meets the needs of clients • can be more effectively delivered by local people or resident training organisations that are not RTO's • is more appropriate to achieve the employment and training for participants living in communities. 'Non accredited' means that the course is not a VET course. You supplied a list of examples of non-accredited training. Training needs, identified during community visits by other sources such as RTO's, government agencies, industry bodies or consultants, may be forwarded to a Regional Training Coordinator so they can be followed up directly with the community or organisation. With non accredited training, Entity B can provide funding directly to the training organisation. To get the funding the recipient organisation must be a GST registered business. Payment for non-accredited training is made to the nominated training organisation. Funding Program 2, Schedule 2 'Schedule 2' is used for recurrent funding (training priorities) in relation to general accredited VET activity. Funding is provided for training delivery and other expenses incurred by the public and selected private providers in the delivery of VET. All training delivered under Schedule J is nationally accredited VET courses and are delivered by RTO 's registered with ASQA. Some students are charged fees for these courses at the RTO's discretion. Funding Program 3, Schedule 3 Under this program an RTO is funded to deliver training and assessment to apprentices and trainees who are party to a Training Contract. Each apprentice and trainee is required to have a Training Plan which is negotiated between the training organisation, employer and apprentice/trainee. The program allows employers, together with the apprentices and trainees they employ, to choose which RTO will provide them with nationally accredited training and assessment services and to negotiate key aspects of the training such as where, how and when it is provided. All the courses are VET courses. The program targets registered apprentices in particular whose employers have sought approval for the apprentice to enter the approved training.

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 11-15, | A New Tax System (Goods and Services Tax) Act 1999 Section 38-85, | A New Tax System (Goods and Services Tax) Act 195-1.

Reasons for decision: Summary: Note: In this reasoning, unless otherwise stated, • all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) • all reference materials referred to are available on the Australian Taxation Office (ATO) website www.ato.gov.au • all legislative terms of the GST Act marked with an asterisk are defined in section 195-1 of the GST Act • VET means vocational education training • VET accredited course means either • a course accredited by a body under a delegation from the Australian Skills Quality Authority (ASQA) or • a course accredited by ASQA • the term 'accredited courses' refers to VET courses as defined in the Student Assistance (Educations Institutions and Courses) Determination 2009 (No 2) For your payments to be payments for creditable acquisitions and for you to be able to claim an input tax credit on your acquisitions you need to meet the requirements of sections 11-5 and 11-15 as well as hold a valid tax invoice at the time of lodging your BAS. For the purposes of this ruling it is accepted that if you acquire anything from a training organisation it is likely to be for a creditable purpose because your enterprise activities include 'providing training' and the payments by you are directed at training people who fulfil your criteria. Relevantly we need to examine: A whether there is a supply by the training organisation to yourself and B if so, whether that supply is a taxable supply. | Detailed Reasoning - Are you the recipient of a supply from the training organisation?: If you are a recipient of a supply from the training organisation then: • for the purpose of 11-5(a), you have acquired something, • for the purpose of 11-5(b), a supply has been made to you, and • for the purpose of 11-5(c), the payment by you is consideration for the supply. The meaning of 'supply' is given in section 9-10. It provides that a supply is any form of supply whatsoever. Goods and Services Tax Ruling GSTR 2006/9, Goods and services tax: supplies examine the meaning of 'supply' in the GST Act. The ruling looks at how to identify and characterise supplies in the context of the transactions in which they are made. The ruling sets out a number of propositions. Propositions 13 to 15 deal with multi-party arrangements, commonly known as tripartite arrangements: | Detailed Reasoning - Description: Proposition 13 When A has an agreement with B for B to provide a supply to C, there is a supply made by B to A (contractual flow) that B provides to C (actual flow) (paragraphs 130 to 176) Proposition 14 A third party may pay for a supply but not be the recipient of the supply (paragraphs 177 to 216) Proposition 15 One set of activities may constitute the making of two (or more) supplies (paragraphs 217 to 221) We consider proposition 15 has more relevance to the arrangement between you and the training organisation in relation to the supplies. That is: ' One set of activities may constitute the making of two (or more) supplies'. Paragraph 217 of GSTR 2006/9 provides that you need to examine the contractual or reciprocal relationships between the entities in a tripartite arrangement and this will reveal the number of supplies being made. An examination of the Contracts and the MOAs shows that the training organisation agrees to supply an education course and any administrative services related to that course in return for monetary consideration. Under these contractual arrangements, there is a single activity of supplying an education course to a student that constitutes two supplies. By performing one activity, the training organisation makes a supply of education courses to you as well as to the students. The first supply is between the TO and the student; the second is between the TO and yourself. Example 10 at paragraph 58 of GSTR 2002/1 Goods and Services Tax Ruling GSTR 2002/1 Goods and services tax: supplies that are GST-free as special education courses (GSTR 2002/1) provides an example of a TO who is contracted to supply an education course. Although each education course is different some of the principles and examples are transferable between the different courses. We consider this example to be similar to your factual situation. Who can provide a special education course? Example 10 58. An organisation designs a special program for children and students who are visually impaired. The program satisfies all of the criteria of a special education course. The organisation is contracted by a school to provide this course to its students. The organisation is supplying the school with a special education course and that supply is GST-free. The school is also supplying its students with a GST-free special education course. In your case you contract with a number of organisations to supply various education courses. Those organisations are contracted by you to provide courses to students. In example 10, the course provider is providing a GST-free education course to the students under the agreement with the school; and is also providing a GST-free education course to the school. Therefore where the course supplied by the TO is a GST-free education course then the supply to you will also be a GST-free education course. | Detailed Reasoning - Is the supply of the training course GST-free?: Section 38-85 provides: A supply is GST-free if it is a supply of: 1 an education course; or 2 administrative services directly related to the supply of such a course, but only if they are supplied by the supplier of the course. The definition of education course in section 195-1 relevantly includes: • a tertiary course • an adult and community education course or • a professional or trade course. We will consider each of these courses in turn. | Detailed Reasoning - Tertiary course: The definition of tertiary course in section 195-1 includes 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. Subsection 10(1)(a) of Student Assistance (Education Institutions and Courses) Determination 2009 (No. 2) states that for paragraph 5D(1)(a) of the Student Assistance Act 1973 , a tertiary course is a full time course specified in Column 1 of the table in Schedule 2 to this instrument that is provided by an education institution specified for that course in Column 2 of that table. Schedule 2 includes a VET course (Column 1) provided by a RTO (Column 2). Under the definitions in the Student Assistance (Education Institutions and Courses) Determination 2009 (No. 2) : VET course includes the modules of a VET accredited course VET accredited course includes a course accredited by a body under the delegation from the Australian Skills Quality Authority. (such as a RTO) Where an RTO provides training in a VET course that course will be a GST-free tertiary course as it is an education course as defined in section 195-1. The following program courses are tertiary courses: • all courses under the Funding program 2 • the courses under the Funding program 3 which are not professional or trade courses • the accredited courses under Funding Program 1 which are not a professional or trade course. | Detailed Reasoning - A professional or trade course: A professional or trade course is defined in section 195-1 to mean a course leading to a qualification that is an essential prerequisite for entry to a particular profession or trade in Australia or to commence the practice of (but not maintain the practice of) a profession or trade in Australia. Section 195-1 defines the term 'essential prerequisite as a qualification' in relation to the entry to, or the commencement of the practice of, a particular profession or trade if the qualification is imposed: a) by or under an industrial instrument; or b) if there is no industrial instrument for that profession or trade but there is a professional or trade association that has uniform national requirements relating to the entry to, or the commencement of the practice of, the profession or trade concerned - by that association; or c) if neither paragraph (a) nor (b) applies but there is a professional or trade association in a State or Territory that has requirements relating to the entry to, or the commencement of the practice of, the profession or trade concerned - by that association. In your case where the apprentice training meets the requirements of the definition of 'essential prerequisite as a qualification' as set out in the GST Act it will be GST-free as a professional or trade course. Where it doesn't it will meet the definition of a GST-free tertiary course | Detailed Reasoning - An adult and community education (ACE) course: An adult and community education course means a course of study or instruction that is likely to add to the employment related skills of people undertaking the course and: (a) is of a kind determined by the Education Minister to be an adult and community education course and is provided by, or on behalf of, a body: (i) that is a higher education institution; or (ii) that is recognised, by a State or Territory authority, as a provider of courses of a kind described in the determination; or (iii) that is funded by a State or Territory on the basis that it is a provider of courses of a kind described in the determination; or (b) is determined by the Education Minister to be an adult and community education course. The Education Minister has issued a determination which sets out a number of factors. However for the purpose of this ruling for a course to be an ACE course and therefore GST-free it must amongst other things: (a) not be a course mentioned in paragraph (a) to (k) of the definition of education course in section 195-1 (b) be a course that is available to adults in the general community; and (d) not be a course that is provided by, or at the request of an organisation to the members of that organisation, except an organisation for which membership is open to adults in the general community In this case where the non accredited Funding Program no 1 courses are only available to a target group within a community or are requested by the community organisation for its members, they do not satisfy the requirements of an ACE course therefore it will not be GST-free. Further, it does not satisfy any other definition of a GST-free education course. Therefore these courses will not be GST- free education courses Where the course is not a course that is provided by, or at the request of an organisation to the members of that organisation and is available to adults in the general community then that course subject to meeting the other requirements of an ACE course will be GST-free. | Detailed Reasoning - Conclusion: Where the courses supplied are GST-free education courses including the associated administrative services as set out above then the payment you make to the training organisation will not be for a creditable acquisition, pursuant to section 11-5. However where the courses are not GST-free your payment will be for a creditable acquisition.

Reasons for decision: These reasons for decision accompany the Notice of private ruling . While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.