GST Q&A ‘ GST and the recently changed GST-free rules

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We are a training organisation, and have a contract with an overseas business to do some training (in Australia) and research work. However, we are going to invoice the Australian subsidiary of the overseas entity. The agreement with the overseas entity has no GST clause and so the price includes GST.

Under the new rules relating to supplies made to non-residents in s. 38-190 Item (3)(c) of the GST Act, does this mean we can invoice the Australian entity GST-free?

The GST Act seems to indicate that a supply under an agreement entered into, whether directly, or indirectly, with a non-resident and the agreement requires it to be provided to another entity in Australia (e.g. the staff attending the course – some may be from the parent, others from the subsidiary) that it can still be GST-free?


Before getting to s. 38-190(3), the supply first needs to meet the conditions of Item 2 in the table of s. 38-190(1).

One of the conditions to be met in Item 2 is that the supply is made ‘to a non-resident who is not in the indirect tax zone [i.e. Australia] when the thing supplied is done’. You have indicated that the contract is entered into with the non-resident, but the training would be provided to employees of either the non-resident or its Australian subsidiary, and the training would be conducted in Australia.

An employee of a non-resident that attends/receives training in Australia is likely to result in the non-resident being considered to be ‘in Australia’ in relation to the supply. On this basis, the above condition of Item 2 would not apply, and the supply would be subject to GST.

Where the training is provided to an employee of the Australian subsidiary, and assuming the conditions of Item 2 are met (e.g. via the contract with the non-resident), the supply would prima facie be GST-free under Item 2. Also, ss. 38-190(3)(a) and (b) would be met (i.e. contract with non-resident, but supply provided to employees of subsidiary in Australia), but s. 38-190(3)(c) would not be met (as the subsidiary is an Australian-based business recipient). Therefore, it appears that s. 38-190(3) would not apply to cause the supply to stop being GST-free.


Editor’s Note: While the intention behind the recent changes to GST-free exports of services and the definitions of ‘connected with the indirect tax zone’ are intended to alleviate GST applying (essentially on business to business transactions), the new rules are often confusing. If in doubt, we recommend seeking specific advice.

Disclaimer: This article is based upon information available as at the time of publishing and may be subject to change.