Private ruling: Goods and services tax (GST) and supply of a right to attend GST-free education courses
Date of advice: 14 June 2017
Published: October 2017

Ruling: Q1: Is the supply of a right by you (Licensee) to your clients to attend a GST-free education course in Australia, GST-free under subsection 9-30(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: Yes, the supply of the right by the Licensee to its clients to attend a GST-free education course in Australia is GST-free under subsection 9-30(1) of the GST Act. | Q2: Is the supply of marketing and teaching services by the Licensee to XXX Pty Ltd (XXX) a taxable supply where there is no separately identifiable consideration provided by XXX to the Licensee for the supply? | A2: No, the supply of marketing and teaching services by the Licensee to XXX is not a taxable supply where there is no separately identifiable consideration provided by XXX to the Licensee for the supply.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You (Licensee) are an Australian entity which is registered for goods and services tax (GST). XXX Pty Ltd (XXX) is a Registered Training Organisation (RTO) which is registered for GST. XXX has entered into a licence agreement with the Licensee. Under the agreement, XXX grants the Licensee the rights and authority to market, promote, sell, deliver, facilitate and service the various training courses developed by XXX. The Licensee markets the XXX courses to various entities or clients (usually body corporates or government entities) who enrol, through the Licensee, any number of their staff as appropriate to attend various courses. The Licensee makes an upfront payment which covers the initial supply of various training materials and services which enables the Licensee to commence operation. For each course conducted, XXX charges the Licensee a set percentage of the amount invoiced by the Licensee to the client. This amount is GST-inclusive and represents the supply by XXX of the rights under the license. GST is charged on all components of this supply except for the GST-free supply of training courses provided by XXX to the Licensee. The enrolment process for the courses is conducted on line, by the Licensee or its clients. The process involves logging onto XXX's website and inputting the details of each participant into XXX's database. When a course is confirmed, participants are advised of the course dates, location etc. and the invoice is issued to the client in the name of the Licensee. The invoice is for the supply of a right to receive the education course supplied by XXX. Depending on how and where the courses are being run, the Licensee or XXX may contract with facilitators, coaches, etc. for the provision of services in relation to the supply of the courses. Invoices for these services are inclusive of GST where the supplier is registered for GST. There may be additional charges for further supplies made by XXX to the Licensee in relation to the supply of the course including handouts, venues, facilitators etc. The Licensee also supplies marketing and teaching services to XXX. Regardless of the level of marketing undertaken by the Licensee to sign up clients, there is no consideration paid by XXX to the Licensee for the supply of marketing and training services. It is considered to be part of the Licensee's business activities. If the Licensee actively participates in the provision of the courses (facilitation, coaching etc.) to the clients, there is no consideration paid by XXX to the Licensee.

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 9-30 | A New Tax System (Goods and Services Tax) Act 1999 section 38-85

Reasons for decision: Detailed Reasoning - Taxable supply: GST is payable on a taxable supply. Section 9-5 of the GST Act states : You make a taxable supply if: (a) you make the supply for consideration; and (b) the supply is made in the course or furtherance of an enterprise that you carry on; and (c) the supply is connected with the indirect tax zone (Australia); and (d) 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 the right by the Licensee to its clients to attend a GST-free education course in Australia will be taxable if all the requirements in section 9-5 of the GST Act are satisfied. Based on the facts given, the supply of the right by the Licensee to its clients to attend a GST-free education course in Australia satisfies paragraphs 9-5(a) to (d) of the GST Act, as follows: a) the Licensee makes the supply of the right by the Licensee to its clients to attend a GST-free education course in Australia for consideration by way of payments; b) the Licensee makes the supply in the course of carrying on its enterprise; c) the supply is connected with Australia; and d) the Licensee is registered for GST in Australia. However, a supply is not a taxable supply to the extent that it is GST-free or input taxed. | Detailed Reasoning - Input taxed supply: There are no provisions in the GST Act under which the supply of the right by the Licensee to its clients to attend the GST-free education course in Australia would be input taxed. | Detailed Reasoning - GST-free: We need to determine whether the supply of the right by the Licensee to its clients to attend a GST-free education course in Australia is GST-free. Under subsection 9-30(1) of the GST Act a supply is GST-free if: ● it is GST-free under Division 38 of the GST Act or under a provision of another Act, or ● it is a supply of a right to receive a supply that would be GST-free under paragraph (a). Paragraph 9-30(1)(b) of the GST Act provides that where a right is granted to receive a supply that is GST-free, the supply of that right is also GST-free. Based on the facts provided, under the licence agreement, XXX has granted the Licensee the right to market and sell XXX's training courses which include GST-free education courses. The Licensee markets XXX's courses to various clients and grants the right to attend the GST-free education courses supplied by XXX. As the Licensee supplies the rights to the clients to receive a GST-free supply of education courses from XXX, paragraph 9-30(1)(b) of the GST Act is satisfied. Therefore, the supply of a right by the Licensee to the clients to receive the education course from XXX is GST-free under paragraph 9-30(1)(b) of the GST Act. | Detailed Reasoning - Issue 2: The supply of marketing and teaching services by the Licensee to XXX will be taxable if all the requirements in section 9-5 of the GST Act are satisfied. The facts indicate that the Licensee satisfies the requirements under paragraphs 9-5(b) to 9-5(d) of the GST Act as follows: (b) the supply of marketing and training services by the Licensee to XXX is made in the course of carrying on its enterprise; (c) the supply is connected with Australia and (d) the Licensee is registered for GST. What remains to be determined is whether the Licensee makes the supply of marketing and training services for consideration for the purposes of paragraph 9-5(a) of the GST Act. Based on the facts provided, the Licensee does not receive any separately identifiable consideration for the supply of marketing and teaching services from XXX. As such, the supply does not satisfy the requirement under paragraph 9-5(a) of the GST Act. In summary, the supply of marketing and teaching services by the Licensee to XXX does not satisfy all the requirements of a taxable supply under section 9-5 of the GST Act, and is not taxable.