Private ruling: GST and supply of education course under an agreement with a registered training organisation
Date of advice: 11 September 2018
Published: November 2018

Ruling: Q1: Are you making a taxable supply when you provide training courses under an agreement with a registered training organisation (RTO)? | A1: Yes

Relevant facts and circumstances: ● You are a sole trader providing training courses and registered for GST. ● You have entered into a third party agreement (agreement) with a registered training organisation (RTO) to provide the training courses. ● The RTO will provide nationally recognized courses and few awareness courses. The RTO provides the accreditation for the nationally recognized training and issues the certificates of completion. ● The RTO grants licence to you to use the RTO’s property and to exercise the rights in or to the Licenced Property in the manner set out in the agreement. ● You will provide and perform the following services as per the agreement: ● Implement training and assessment strategies and practices ● Supply equipment and plant ● Provide services ● Support learners ● Participate in the student identifier scheme ● Marketing materials for courses. ● You must ensure that together with your employees and sub-contractors you hold the requisite licences and qualifications outlined in the agreement to legally perform the services. ● The relationship between you and the RTO is that of principal and third party/contractor. Nothing is to be construed as constituting you or any of your employee and the RTO as partners, or employer and employee. ● You are liable to pay all personnel for services under the agreement. You must pay all payroll; tax and relevant insurances due in respect of the personnel who provide services under the agreement as required. ● You pay the RTO the relevant fees as per the agreement. ● The RTO will issue invoices addressed to you and shall include: ● the title of services provided; ● the Third party/Contractors and RTO’s full name; ● details of the work that has been performed and to which the charges relate; ● all things necessary to ensure that the invoice is also a tax invoice for the purposes of any relevant GST which may apply, enabling input tax credits to be claimed; and ● all the other relevant information for a valid tax invoice. ● You will supply any equipment necessary to perform the services at your own expense.

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

Reasons for decision: Summary: GST-free education course Under section 38-85 of the GST Act supply of an education course is GST-free. An education course is defined in section 195-1 of the GST Act to include, amongst other things, a tertiary course, a professional or trade course and an adult and community education (ACE) course. These are the only types of education courses from the definition in section 195-1 of the GST Act that could be relevant to your situation. Tertiary Course A tertiary course is defined to mean: (a) a course of study or instruction that is a tertiary course determined by the Education Minister under subsection 5(D)(1) of the Student Assistance Act 1973 for the purposes of that Act; or (b) any other course of study or instruction that the Education Minister has determined is a tertiary course for the purposes of the Act. The Student Assistance (Education Institutions and Courses) Determination 2009 (No.2) (SAA Determination) states that a course is a tertiary course for the purposes of the Student Assistance Act 1973 (SAA) if it is: ● Specified in the Determination to be a tertiary course, and ● Conducted by an education institution specified for that course. The Education Minister has determined that you must be a registered training organisation or a tertiary institution to enable you to conduct the tertiary course. As you are neither of these, the supply of training courses provided by you is not a tertiary course. Professional or trade course Professional or trade course means a course leading to a qualification that is an essential prerequisite: (a) for entry to a particular profession or trade in Australia; or (b) to commence the practice of (but not to maintain that practice of) a profession or trade in Australia. Goods and Services Tax Ruling GSTR 2003/1 provides the Commissioner’s view as to what supplies are GST-free supplies of professional or trade courses. Paragraph 48 of GSTR 2003/1 provides that a qualification is an essential prerequisite if it is mandatory for a person to have the qualification before he or she 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 qualifications. Based on the information provided, it is our view that the supply of training courses provided by you is not a professional or trade course. Adult and community education course Goods and Services Tax Ruling GSTR 2000/27 explains which supplies of adult and community education courses are GST-free under subdivision 38-C of the GST Act. An adult and community education course is 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 course 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 or a kind described in the determination; (b) is determined by the Education Minister to be an adult and community education course. Paragraph 11 of GSTR 2000/27 provides that for a course to be a GST-free adult and community course under paragraph (a), the following three requirements must be satisfied: (i) The course must be a course of study or instruction that is likely to add to the employment related skills of people undertaking the course; and (ii) The course must be of a kind determined by the Education Minister to be an adult and community education course; and (iii) The course must be provided by a body that is either a higher education institution or by a body that is recognised or funded by a State or Territory authority to conduct adult and community education courses as described in the Education Minister’s determination. In this case, you made an agreement with the RTO to provide the accredited courses to your students. You are not a body that is either a higher education institution or a body that is recognised or funded by a State or Territory authority to conduct the courses. The meaning of RTO is not provided in the GST Act but is outlined in SAA Determination as: Registered training organisation mean an organisation that is registered by the relevant State or Territory training recognition authority in accordance with the Australian Quality Training Framework to provide one or more vocational education and training programs. Based on the facts provided, your students pay the fees to you directly and you pay the RTO for the supply of education courses under the agreement. As explained above, you are not a higher education institution or RTO and therefore the supply of training courses provided by you will not satisfy the requirements of education courses under section 38-85 of the GST Act. Taxable supply Section 9-5 of the GST Act provides that you make a taxable supply if you make the supply for consideration; the supply is made in the course or furtherance of an enterprise that you carry on; the supply is connected with the indirect tax zone; and 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. The supply of education is not input taxed under any provisions of the GST Act. The supply of education course by you does not satisfy the requirements of a GST-free education course under section 38-85 of the GST Act. You receive consideration from the students for the supply of education course; the supply is made in carrying on your enterprise of providing training; the supply is connected with the indirect tax zone and you are registered for GST. Therefore, the supply of training course satisfies all of the requirements of a taxable supply and subject to GST.