Private ruling: GST and the supply of a training course
Date of advice: 24 October 2016
Published: February 2017

Ruling: Q1: Are the training courses that you supply GST-free under section 38-85 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: Yes.

Relevant facts and circumstances: ● You are an entity and you are registered for the goods and services tax (GST). ● You have an agreement with a registered training organisation (RTO) for the delivery of the RTO's approved specified training courses and assessment by you to students, under the RTO's accreditation status. ● The training course leads to an assessment conducted by the trainers and assessors employed by you. ● Successful assessment and completion of those courses will lead to the issuing of competency certificates and nationally recognised Statements of Attainment from within the scope of the RTO's registration, thus meeting the course and regulatory requirements. ● Under the terms of the agreement: ● The specified courses are within the RTO's scope of registration. ● The RTO will provide an auspicing service to you, to enable the delivery of the specified courses. Auspicing arrangements must adhere relevant requirements. ● Pre-enrolment material must all be approved by the RTO prior to being made available to the general public. ● On completion of the course, you must submit all relevant paperwork to the RTO. ● You are an independent contractor with the RTO. ● There will be no contractual relationship arising between your employees and the RTO as a result of the relationship between you and the RTO. ● You provide the premises, and the necessary equipment; and employ the trainers and assessors to deliver the courses and assess the students. All trainers and assessors must be first approved and inducted by the RTO. ● Each trainer and assessor has a Confirmation of alignment certifying that they are aligned with the RTO to provide the specified training and assessment and are approved by the relevant authority to conduct the assessment for the RTO. ● You deliver the specified training courses to students who require that training as a pre-requisite for entry into that prescribed occupation. ● You do not provide the training courses as refresher courses to individuals who are already licence holders. ● You issue a Certificate of Competency to the successful student. ● You then send the relevant documentation to the RTO for review and sign off by the RTO. ● Once approved, the RTO issues a Statement of Attainment to the student, certifying that the student has undertaken and successfully complete the course. ● The Statement of Attainment is a statutory requirement to receive the required licence to work in that prescribed occupation in the relevant State and the State Legislation imposes penalties for failure to comply with that requirement. ● The Statement of Attainment and Certificate of Competency are used by the student to apply for the required licence with the relevant authority. The licence that is obtained is a prerequisite for working in that prescribed occupation. ● You charge the student a fee (set by you) for the training and assessment. ● Once the student has been assessed and certified, you pay a fee per student to the RTO. The fee to the RTO covers the course materials and the provision of the certification to the student. ● The RTO issues a tax invoice to you for the students who have been assessed and passed the competencies.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 38-85 | A New Tax System (Goods and Services Tax) Act 1999 section 195-1

Reasons for decision: Summary: Section 38-85 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that the supply of an education course is GST-free. The definition of 'education course' in section 195-1 of the GST Act includes a 'professional or trade course'. You are an independent contractor and not an agent of the RTO in the delivery and assessment of the RTO's approved training courses to students. Your employees deliver the training and assessment and the RTO validates the delivery and assessment conducted by your staff. You control the fees charged to the students. Hence, you are the entity supplying the course to the students. To be a 'professional or trade course' as defined in section 195-1 of the GST Act, the course that you supply must: 1. lead to a qualification; and 2. that qualification must be an 'essential prerequisite' for entry to, or to commence the practice of (but not to maintain the practice of) a particular profession or trade in Australia. In relation to the entry to, or the commencement of the practice of a particular profession, section 195-1 of the GST Act provides that a qualification will be an 'essential prerequisite' where: ● the course is a legal requirement for example a law, regulation or industrial agreement, or ● the course is a requirement imposed by a professional or trade association, either nationally or on a State basis. Goods and Services Tax Ruling GSTR 2003/1 (available at www.ato.gov.au) explains the meaning of 'professional or trade course' in section 195-1 of the GST Act. First requirement GSTR 2003/1 provides that, having established that you supply a course, you then need to decide whether the course leads to a qualification. We consider that the words 'leading to' require a causal connection between the course that is undertaken and the qualification that is ultimately obtained. We also consider that a causal connection exists where there is a sufficiently direct and demonstrable link or connection between the course and the qualification. The qualification must result from, and will follow successful completion of, the course. GSTR 2003/1 explains that documents that are qualifications or that provide evidence of a qualification include a statement of satisfactory completion, a certificate (including a degree or diploma), a licence or an accreditation. The first requirement will be satisfied where such documentation is awarded to the students undertaking a course upon successful completion of all of the units or modules that make up the course. A course must provide the requisite skills and knowledge for an individual to attain the qualification at the conclusion of the course. Second requirement A qualification is an essential prerequisite if it is mandatory for a person to have the qualification before they can enter into, or commence the practice of, a particular profession or trade. This necessarily requires the imposition of penalties or sanctions if a person enters into or commences the practice of, the profession or trade without the relevant qualification. The qualification must be a legal requirement, for example a law, regulation or industrial agreement to be one imposed by a professional or trade organisation, either nationally or on a State basis. 'Trade' has a wide meaning involving the recognition of a category or body of practical vocational skills of some difficulty and some generality. The word 'trade' is applicable to any skilled handicraft. It includes the operation of particular pieces of equipment or machinery. Whether the operation of a particular piece of equipment is considered a trade will depend on the facts such as the type of equipment and the particular skills required for operating the equipment. Based on the information received, you will satisfy both requirements. Consequently, the specified training course and assessment package delivered by you will be the supply of a professional or trade course under the GST Act. The supply will therefore be a GST-free supply of an education course under section 38-85 of the GST Act when provided by you to the students, under the auspice of the RTO. No GST is payable on a supply that is GST-free.