Private ruling: GST educational course transactions
Published: November 2013

Ruling: Q1: Is the fee to the first Registered Training Organisation (RTO) considered to be GST free as per the GST legislation? | A1: Yes, the supply you made to students to attend accredited education courses both within your RTO scope and outside your RTO scope are GST-free. | Q2: Is the percentage paid to RTO2 by RTO1 subject to GST? | A2: Yes the percentage paid to RTO2 by RTO1 is a taxable supply.

Relevant facts and circumstances: You are an RTO and are registered for Goods and Services Tax (GST). You are registered as an RTO in the state, allowing you to conduct training and assessments in your state and to issue certificates as part of your RTO registration. You entered into an arrangement with RTO2 also registered in the state as a RTO and registered for GST, to present training course to interested Australian students. Under your arrangement for an agreed fee, RTO2 provides services to enable training conducted by you to be nationally recognised, students that complete the modules / units will receive their certificate of competency, statement of attainment and or qualifications from RTO2. RTO2 makes the final decision and issues the formal qualifications in its name. The arrangement identified above, is for RTO2 to provide you with a service of training your suitable qualified trainers / assessors (facilitators). Under the arrangement, RTO2 will oversee the training and assessment processes of the facilitators and verify their qualifications. Your facilitators are provided with all necessary materials and competency training resources approved by RTO2. Under the arrangement, you complete the student enrolment forms, training plans, consultation record for each student, manage and complete all enrolled student training and assessment records and submit paperwork to RTO2. Under the arrangement, you are responsible for the coordination, delivery and distribution of all the training materials to the students and to deliver the training outside of your RTO scope. The arrangement provides that each party enters the Agreement as an independent contractor. You only invoice RTO2 for 75% of the 'funded' payments received by RTO2. For each course outside your RTO scope which you deliver you receive 100% of the fee from the student. RTO2 charges you a set percentage of this fee collected You currently receive a tax invoice from RTO2 for the percentage fee paid and RTO2 issues the qualification certificate of attainment to the student. You currently receive a tax invoice from RTO2 for the percentage fee paid and RTO2 issues the qualification or certificate of attainment to the student.

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 38-85 | A New Tax System (Goods and Services Tax) Act 1999 Section 11-5 | A New Tax System (Goods and Services Tax) Act 1999 Section 11-20 | A New Tax System (Goods and Services Tax) Act 1999 Section 195 | Student Assistance Act 1973 subsection 5D(1). | Vocational Education and Training Act 1996

Reasons for decision: Summary: An education course is GST-free under section 38-85 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). To be GST-free as a tertiary course, a course must satisfy the Education Minister's determination under subsection 5D(1) of the Student Assistance Act 1973 . The Student Assistance (Education Institutions and Courses) Determination 2009 (No. 2)(Determination) states 'a sequence of training consisting of one or more subjects or modules where each subject or module is from an accredited vocational education and training course' (emphasis added). Paragraph 4 of Goods and Services Tax Ruling GSTR 2001/1 Goods and services tax: supplies that are GST-free for tertiary education courses (GSTR 2001/1) explains, an accredited course, conducted by an RTO is a tertiary course. When the accredited course is supplied by an RTO within its accredited scope the course will be GST-free. Paragraph 9-30 (1) (b) of the GST Act provides that a supply of rights to receive a supply that is GST-free under Division 38 of the GST Act is also a GST-free supply. Furthermore, there is no requirement that the supply of a right and the actual supply are made by the same entity. From the facts presented, the supply that you make to students under the arrangement (outside your scope) is a supply of rights to participate in an accredited education course and in these cases the certifications are issued by the accredited RTO2 to the student. Accordingly the supply being made to you for the rights to allow the students to attend the accredited education course when they are outside your scope will also be GST-free under paragraph 9-30(1) (b) of the GST Act. You are entitled to an input tax credit under section 11-20 of the GST Act when you make a 'creditable acquisition'. To be 'creditable', an acquisition must meet four requirements that are set out in section 11-5 of the GST Act, namely: (a) you acquire anything solely or partly for a 'creditable purpose'; and (b) the supply of the thing to you was a taxable supply; and (c) you provide, or are liable to provide, consideration for the supply; and (d) you are registered, or required to be registered for GST. The existence of a 'supply' itself is an essential element in determining whether the fee paid to RTO2 is a taxable supply under section 9-5 of the GST Act. Section 9-10 of the GST Act discusses the meaning of the word 'supply' for GST purposes. Paragraph 9-10(2) (b) of the GST Act states that amongst other things a supply includes a supply of services. We need to determine if there is a 'supply' being made to you leading to a taxable supply and if you are acquiring that 'supply' from the other RTO then we need to determine if it is a 'creditable acquisition'. The arrangement between you and RTO2 is for RTO2 to provide training to your facilitators. Under this arrangement you are acting as an independent contractor, separate from RTO2. The supply of facilitating training by RTO2 to you is for an agreed percentage of the fee collected from the student. From the facts presented, your facilitators acquired training. RTO2 is making a taxable supply, you are liable under the agreement for the agreed fee and you are registered for GST. Therefore, you satisfy section 11-5 of the GST Act. You will be making a creditable acquisition when your facilitators receive training from RTO2 and you pay for it with the percentage of the fee collected from the students. You will be entitled to claim your input tax credit for any creditable acquisitions you make under section 11-20 of the GST Act. The GST charged to you for services provided by RTO2 can be attributed to your Business Activity Statement when you hold a valid tax invoice. | Detailed Reasoning - Other information: RTO2 is required to issue you with a tax invoice for any taxable supplies they make. You will be eligible to claim any input tax credits charged to you when you hold a valid tax invoice from them. General information about what needs to be included on a tax invoice is available by conducting a search on our web site. You can locate the publication titled Valid tax invoices and GST credits on our home page www.ato.gov.au The ATO view in relation to preparing a tax invoice for retained amounts is outlined in Goods and Services Tax Ruling GSTR 2013/1 Goods and services tax: tax invoices (GSTR 2013/1). This ruling is available from our web site. Paragraph 29-30 of GSTR 2013/1 is relevant to RTO2 to set out their tax invoice in relation to the percentage of the fee retained by you. It states: | Detailed Reasoning - The price of what is supplied: 29. A tax invoice must contain enough information to enable the price of what is supplied to be clearly ascertained. | Detailed Reasoning - Retention payments: 30. If a supply is made under a contract where the recipient has retained part of the contract price pending full and satisfactory performance of the contract, or until the end of a defects liability period, the price of what is supplied is the total consideration payable including the retention amount. The tax invoice must contain enough information to enable the total price of this supply to be clearly ascertained. However, the tax invoice can also show the net amount payable while still satisfying this requirement. For example, the tax invoice may set out the price of what is supplied, separately show the retention amount, and show a net amount payable.