Private ruling: GST and supply of legal services
Published: January 2012

Ruling: Q1: What is the GST status of the supply of legal services by the Australian entity to an individual who is not a citizen of Australia? Advice From the information received, the individual was in and outside Australia at the time the Australian entity supplied the legal services to them. Where the individual was in Australia at the time the legal advice was provided, the supply of legal services to them by the Australian entity is a taxable supply under section 9-5 of the A New Tax System (goods and Services Tax) Act 1999 (GST Act). Where the individual was not in Australia at the time the legal advice was provided, the supply of legal services to them by the Australian entity is GST-free under Item 2 in the table in subsection 38-190(1) of the GST Act. The Australian entity therefore needs to apportion the consideration they receive for the taxable and GST-free supplies they have made to the individual and is liable to pay GST on the taxable supplies.


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 subsection 38-190(1)

Reasons for decision: Summary: GST is payable on taxable supplies. A supply is a taxable supply under section 9-5 of the GST Act if: (a) you make the supply for consideration; (b) the supply is made in the course or furtherance of an enterprise that you carry on; (c) the supply is connected with Australia; and (d) you are registered or required to be registered for GST. However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. All the requirements in section 9-5 of the GST Act need to be satisfied for the supply to be a taxable supply. From the information received, your supply of legal services satisfies paragraphs 9-5(a) to 9-5(d) of the GST Act as: (a) you make the supply for consideration; (b) the supply is made in the course or furtherance of an enterprise (business) that you carry on; (c) the supply is connected with Australia as the supply is made from a business that you carry on in Australia; and (d) you are registered for GST. However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. There is no provision in the GST Act that makes your supply of legal services input taxed. The next step is to determine whether your supply is GST-free. | Detailed Reasoning - GST-free: Subsection 38-190(1) of the GST Act specifies the circumstances where the supply of things other than goods or real property for consumption outside Australia is GST-free. Relevant to your supply of legal services to the individual is item 2 in the table in subsection 38-190(1) of the GST Act (Item 2). Item 2 provides that a supply is GST-free if the supply is made to a non-resident who is not in Australia when the thing supplied is done and: (a) the supply is neither a supply of work physically performed on goods situated in Australia nor a supply directly connected with real property situated in Australia; or (b) the non-resident acquires the thing in carrying on their enterprise but is not registered or required to be registered for GST. For a supply to be within the scope of Item 2, the supply must be made to a non-resident who is not in Australia when the thing is done. The expression 'not in Australia' requires that the non-resident is not in Australia in relation to the supply. In the case of supplies made to an individual, we consider the physical location of the individual establishes whether that individual is in Australia when the thing supplied is done. An individual is in Australia if that individual is physically in Australia. An individual is in Australia in relation to the supply if the individual is involved with the supply while in Australia. Accordingly, your supply of services to the individual when they were not in Australia is GST-free under paragraph (a) of Item 2 as: § the individual is a non-resident and was not in Australia in relation to the supply when the service was made; and § the supply was neither a supply of work physically performed on goods situated in Australia nor a supply directly connected with real property situated in Australia. Further, your supply of services may also be GST-free under paragraph (b) of Item 2 if the individual was not registered or required to be registered for GST. However, the scope of Item 2 is limited by subsection 38-190(3) of the GST Act which provides that a supply covered by Item 2 is not GST-free if: § it is a supply under an agreement entered into, whether directly or indirectly with a non-resident; and § the supply is provided or the agreement requires it to be provided, to another entity in Australia. From the information received, subsection 38-190(3) of the GST Act is not applicable as the individual was not requesting you to provide your supply of legal services to another entity in Australia. For more information on Item 2 and subsection 38-190(3) of the GST Act please refer to the Goods and Services Tax Rulings GSTR 2003/7, 2004/7 and 2005/6 which are available at www.ato.gov.au | Summary: Your supply of legal services to the individual is a combined supply of taxable and GST-free supplies. Where the individual was in Australia, your supply of legal services to them is a taxable supply under section 9-5 of the GST Act. Where the individual was not in Australia, your supply of legal services to them is GST-free under item 2. You therefore need to apportion the consideration you receive for the taxable and GST-free supplies you have made to the individual and are liable to pay GST on the taxable supplies.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Relevant facts: You supply legal service through a business you carry on in Australia and the legal business is registered for the goods and services tax (GST). | You act for an individual, a non-resident of Australia, in relation to a personal injuries claim. The individual was in Australia when you received instructions from them. The individual stayed in Australia for some time and then went back to their home country. | You advised that at the time of the supply of the legal services, the individual was mostly outside Australia and when they were in Australia they received your legal services as well.