Our university often charges for lab space, use of equipment and consumables in one form or another for various lengths of time. Historically, we have always treated this supply as taxable in terms of GST because it is consumed in Australia.
With the introduction of changes to GST-free supplies to non-residents in October 2016, is this something we could be treating as GST-free to overseas entities if they are using the space or equipment or consumables for less than 183 days?
Or is rental of this type of space (which may just be a desk in a lab) considered ‘related to real property’ and therefore not GST-free in the same way that hotel accommodation is not be GST free when sold to overseas entities?
Does it make a difference if it is equipment rented versus an entire lab versus a desk in a lab? Is it the same as renting property in general?
This is an interesting question, and one which raises a number of different interconnecting concepts in terms of the GST application.
On the basis that the University is GST-registered and would otherwise meet the conditions to be a taxable supply, the default position would be that the supplies are taxable. The only way such supplies would not be subject to GST is if they meet the specific conditions of one of the GST-free provisions.
There are different GST-free rules regarding exports, with the main ones being:
- goods (s. 38-185);
- lease or hire of goods (s. 38-187); or
- things other than goods or real property (s. 38-190).
The situation regarding a lease or hire of goods appears reasonably straightforward. Section 38-187 provides that a supply of goods is GST-free if (a) the supply is by way of lease or hire; and (b) the goods are used outside the indirect tax zone (i.e. Australia). On the basis the goods would be used in Australia, a supply of goods by way of lease or hire would not be GST-free.
The situation regarding a right to use lab space is a little more complex. However, if we look at the items in s.38-190(1) then:
- Item 1 would not apply, as this requires ‘a supply that is directly connected with goods or real property situated outside the indirect tax zone’ and the space would be in Australia;
- Item 2 requires the supply to be ‘made to a non-resident who is not in the indirect tax zone when the thing supplied is done …’. Assuming a non-resident individual will be in Australia occupying the space, this opening condition of Item 2 would not appear to be met. In this regard, we refer to GSTR 2004/7 which contains various examples and conditions including where supplies are made to individuals, companies, partnerships, etc. A review of this Ruling should assist when applying the rules to specific transactions which the University is entering into.
- Similarly, Item 3 requires a supply to be made ‘to a recipient who is not in the indirect tax zone when the thing supplied is done…’; and
- Item 4 provides ‘a supply that is made in relation to rights if: (a) the rights are for use outside the indirect tax zone …’.
Depending on the specific facts and circumstances, the GST treatment will depend on whether the conditions of one of the GST-free items are met.