Private ruling: Goods and services tax and education courses
Date of advice: 27 February 2020
Published: April 2020
Ruling period: 6 December 20XX to 30 June 20XX
Date scheme commenced: 6 December 20XX

Ruling: Q1: Is the Entity making a creditable acquisition pursuant to section 11-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when the Entity makes a payment to a Registered Training Organisation (RTO) for the delivery of the Program pursuant to the Program Agreement? | A1: Program A No, the Entity is not making creditable acquisitions in relation to its acquisition of education courses under Program A as these education courses are GST-free adult and community education (ACE) courses. Program B Yes, the Entity is making creditable acquisitions in relation to its acquisition of education courses under Program B but only to the extent that the Service Providers meet the requirements of all the positive limbs of section 9-5 of the GST Act. | Q2: Is the Entity making a creditable acquisition pursuant to section 11-5 of the GST Act when the Entity makes a payment to a training organisation for the delivery of trial programs? | A2: Yes, the Entity is making creditable acquisitions in relation to its acquisition of supplies under the trial programs but only to the extent that the Service Providers meet all the requirements of all the positive limbs of section 9-5 of the GST Act. The supply provided to the Entity by the Service Providers under the trial programs do not fall within the definition of GST-free education courses under section 38-85 and section 195-1 of the GST Act.

Relevant facts and circumstances: The Entity is registered for GST. In the XX Budget, the Australian Government provided funding for the Program and the trial programs. The Entity administers the Program and the trial programs as part of its enterprise. The Entity will outsource the delivery of the Program and the trial programs through contracting arrangements with Service Providers as follows: · Registered Training Organisation (RTO) for the Program, and · other training providers for the trial programs. The Entity will enter into contracts with Service Providers for the delivery of both the Program and the trial programs to eligible clients. The Program A draft copy of the Program Agreement has been provided with this private ruling application. The Program Guidelines provide a framework for administering the Program. A copy of the Program Guidelines has been provided with this private ruling application. The trial programs As at the date of issue of this private ruling, the Entity does not, as yet, have an agreement in place. However, the Entity has issued guidelines for the trial programs (trial guidelines) which provide a framework for administering the trial programs. A copy of the trial guidelines have been provided with this private ruling application. Further information Pursuant to a request for further information on 24 February 2020, the Entity confirmed the following: The Program · Program B is a course of study that is provided by the RTO and delivered to employees of the particular employer. It would be in conjunction with the RTO and it may be at the request of an employer or a group of employees. · An RTO may deliver accredited training or they may use units of competency to form a separate course that is more tailored to the needs of employees. If it is a tailored course it is more likely to be non-accredited. The trial programs · The Service Providers for the trial programs do not need to be an RTO however they must be a "training provider". · The Service Providers develop training delivery models for the trial programs. · Some of the Service Providers will be providing education courses directly to the Participants while others may subcontract this function.

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 11-20 | 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 A New Tax System (Goods and Services Tax)(Adult and Community Education Courses) Determination 2016 section 5 and section 6

Reasons for decision: Summary: You are entitled to an input tax credit under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when you make a 'creditable acquisition'. To be 'creditable' an acquisition must meet the requirements that are set out in section 11-5 of the GST Act. It states: (a) you acquire anything solely or partly for a * creditable purpose; and (b) the supply of the thing to you is 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. It is not in contention that the Entity will satisfy the requirements of paragraph 11-5(c) and 11-5(d) of the GST Act. However what remains to be considered is whether the Entity has 'acquired' the relevant services from the Service Providers and whether the relevant acquisition is a 'taxable supply'. Goods and Services Tax Ruling GSTR 2006/9, Goods and services tax: supplies (GSTR 2006/9) examine the meaning of 'supply' in the GST Act. GSTR 2006/9 looks at how to identify and characterise supplies in the context of the transactions in which they are made. GSTR 2006/9 provides a number of propositions which focus on analysing the various arrangements in which supplies are made. Paragraph 115 of GSTR 2006/9 provides that in arrangements involving more than two entities, referred to as 'tripartite arrangements', analysis may reveal: · a supply made to one entity but provided to another entity; · two or more supplies made; or · a supply made and provided to one entity and consideration paid by a third party. Further, paragraph 116 of GSTR 2006/9 provides that as with two party transactions, the GST consequences of tripartite arrangements turn on identifying: · one or more supplies; · consideration; · a nexus between the supply and the consideration, and · to whom the supply is made. Consistent with the principles discussed in GSTR 2006/9 we consider the Program Agreement presents a tripartite arrangement between the Entity, the Service Provider and the Participants. Therefore the issue to be determined in this case is whether the supply made by the Service Providers is an acquisition for the Entity, and if so, the GST character of that supply. Proposition 13 in GSTR 2006/9 explains that 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) (see paragraphs 130 to 134 of GSTR 2006/9). Accordingly, consistent with proposition 13 we consider that under the Program Agreement, the supply is made by the Service Provider to the Entity. That is, pursuant to the terms of the Program Agreement the Service Providers agree to supply (and the Entity acquires) the required education course to the Participants. On the basis that the acquisition is made in furtherance of the Entity's enterprise, we accept that the Entity satisfies section 11-5(a) of the GST Act. Therefore what now needs to be considered is whether the supply to the Entity is a taxable supply. Section 9-5 of the GST Act defines taxable supplies. The four positive limbs of section 9-5 of the GST Act provide that you make a taxable supply where: · you make the supply for consideration; and · the supply is made in the course or furtherance of an enterprise that you carry on; and · the supply is connected with the indirect tax zone; and · you are registered or required to be registered. The two negative limbs of section 9-5 of the GST Act provides that a supply is not a taxable supply to the extent that it is GST-free under Division 38 of the GST Act or input taxed under Division 40 of the GST Act. From the facts presented there are no relevant input taxed supplies. Section 38-85 provides: A supply is GST-free if it is a supply of: (a) an *education course; or (b) administrative services directly related to the supply of such a course, but only if they are supplied by the supplier of the course. *as defined in section 195-1 The definition of an education course in section 195-1 of the GST Act includes (g) an adult and community education course (ACE course) with a further definition at section 195-1 of the GST Act which states: 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 *Student Assistance 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 Student Assistance Minister to be an adult and community education course. Therefore to be a GST-free ACE course, the Service Providers will need to supply education courses that will be likely to add to the employment related skills of the Participants and also be of a kind determined by the Student Assistance Minister to be an ACE course. | Detailed Reasoning - Likely to add to employment related skills: Goods and Services Ruling GSTR 2000/27, Goods and services tax: adult and community education courses; meaning of "likely to add to employment related skills" (GSTR 2000/27), provides guidelines in respect of the matters that the Commissioner will take into account in determining whether an ACE course is likely to add to the employment related skills of persons undertaking the education course. In particular, paragraph 17 of GSTR 2000/27 states: 17. A course will 'add' to the employment related skills if the intended outcome of the course is to develop, increase, advance or improve the employment related skills of the people undertaking the course. This includes gaining basic skills such as literacy and numeracy, building upon existing skills and developing skills in new areas. The Program Guidelines provides that the aim of the Program is to support eligible Australians with a means to develop their language, literacy, numeracy and digital literacy (LLND) skills to help them to up-skill or re-skill for new roles, to obtain and retain secure employment and to undertake further education and training. Given this, we accept that education courses provided under the Program are likely to add to the employment related skills of the Participants. | Detailed Reasoning - Determination by the Student Assistance Minister: A New Tax System (Goods and Services Tax)(Adult and Community Education Courses) Determination 2016 (the Determination) determines the kind of courses that are adult and community courses for the definition of an ACE course. Section 5 of the Determination states: | Detailed Reasoning - Kind of courses determined to be adult and community education courses: (1) For paragraph (a) of the definition of adult and community education course in section 195-1 of the Act, a course of study or instruction of the kind mentioned in subsection 5(2) of this determination is determined to be an adult and community education course. (2) For subsection 5(1) of this determination, the course of study or instruction must: (a) not be a course mentioned, in paragraph (a), (b), (c), (d), (f), (h), (i), (j) or (k) of the definition of education course in section 195-1 of the Act; and (b) be a course that is available to adults in the general community; and (c) not be a course that is provided by, or at the request of an employer to the employees of that employer; 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; and (e) not be a course that is provided by way of private tuition to an individual. To meet the requirement of a GST-free ACE education course, the Program will need to meet all the requirements of paragraphs (a) to (e) of subsection 5(2) of the Determination listed above. The Program Guidelines state that the Service Providers undertaking the Program will be eligible to submit applications to deliver one or more of two project types being Program A and Program B. We are satisfied that education courses provided under Program A will meet the requirements of section 5 of the Determination. Therefore the supply of the Program to the extent that it relates to Program A, will be the provision of a GST-free ACE course to the Entity. Accordingly the Entity is not making creditable acquisitions in relation to its acquisition of education courses made under Program A. In relation to Program B, the Program Guidelines provide that this project type is developed in collaboration with the employer or industry organisation to deliver training for a workplace. Further the Entity has confirmed that this project type is to be delivered to employees of a particular employer and may be at the request of an employer or the employees. Therefore education courses provided under Program B will not meet the requirement of paragraph (c) and possibly paragraph (d) of subsection 5(2) of the Determination. We therefore consider that education courses provided under Program B will not meet the definition of a GST-free ACE course. As such, these education courses do not come within the negative limbs of section 9-5 of the GST Act and therefore will not be a GST-free supply to the Entity. It remains to be determined if the education courses provided under Program B will come within the positive limbs of section 9-5 of the GST Act and therefore be taxable supplies made by the Service Providers to the Entity. In order to determine if education courses provided under Program B are taxable supplies to the Entity, the Service Providers will need to meet the four positive limbs of section 9-5 of the GST Act in relation to their supply of these education courses. To the extent that Service Providers meet the requirements of the positive limbs of section 9-5 of the GST Act in relation to their supply of education courses provided under Program B, the Service Providers will be making taxable supplies to the Entity and hence to this extent the Entity will be making creditable acquisitions pursuant to section 11-5 of the GST Act in relation to these education courses. | Detailed Reasoning - Question 2: As per Question 1, the issue to be determined in the case of the trial programs is whether the supply made by the Service Providers is an acquisition by the Entity, and if so, the GST character of that supply. In relation to the trial program, a sample of the agreement to be entered into by the Entity and the Service Providers is not yet available as at the date of making this private ruling. As such this ruling is based on the facts as per the trial guidelines and on responses from the Entity to a further information request. The trial guidelines provide that the trial programs aim to, in addition to improving the LLND skills of community members, identify and develop systemic approaches to LLND skills training delivery in certain communities and inform future program delivery, new funding arrangements and/or changes to existing programs. Service Providers will be expected to deliver the trial programs which include the development and delivery of a training model and to participate in a co-design process. That is, the supply to be made by the Service Providers to the Entity under the trial programs extends beyond providing education courses to Participants. Each Service Provider is expected to lead a co-design process with key stakeholders including local community members, employers and providers of services in the relevant community to ensure ongoing involvement of communities in design, implementation and evaluation activities. Service Providers must work with the local community providers to ensure that undertaking training through trial programs is an approved activity. Pursuant to a further information request, the Entity confirmed that the Service Providers are responsible for the development of the LLND training delivery models. This is as opposed to the mere provision of an education course to a Participant. Further, the Service Providers may provide education directly to the Participants or may sub contract this function. We accept that there is a supply made by the Service Providers to the Entity. However the character of this supply is the provision of services in relation to the consultation, development and delivery of training models to achieve the aims of the trial programs. This supply does not fall within the definition of a GST-free education course as set out in section 38-85 and section 195-1 of the GST Act and hence it will not fall within the negative limbs of section 9-5 of the GST Act. In order to determine if the supply of the trial programs is a taxable supply to the Entity, the Service Providers will need to meet the four positive limbs of section 9-5 of the GST Act in relation to their supply of the trial programs. To the extent that Service Providers meet the requirements of the positive limbs of section 9-5 of the GST Act in relation to their supply of the trial programs, the Service Providers will be making taxable supplies to the Entity and hence the Entity will be making creditable acquisitions pursuant to section 11-5 of the GST Act in relation to the trial programs.