As a general principle, the supply of anything (i.e. including services) other than goods or real property is treated as connected to Australia if the thing is done in Australia or the supplier supplies it through an enterprise it carries on in Australia or it involves a right or option to acquire another thing the supply of which would be connected with Australia.
Specific instances of the application of this test in relation to the supply of services are considered below. It should be noted, however, that for the supply of the service to be taxable, all of the required elements just noted above must be present, including, in particular, supplies made through a permanent establishment where the other tests do not establish a connection with Australia.
The rental or leasing of immovable property is considered to be a supply connected with Australia if it involves the grant, assignment or surrender of an interest in, or right over, land in Australia.
The supply of the use or right to use intangible property will be treated as being connected to Australia if the right is created in Australia. For example, in cases involving the supply of a right to another person through the execution of an agreement to use intellectual property, the grant of the right is considered to be done where the agreement is made and the supply will be considered to be connected with Australia if the agreement is made in Australia. A similar conclusion will result if the agreement is not made in Australia but the supply can be considered to have been made through an enterprise the supplier carries on in Australia.
The ATO has issued a Ruling 2019/1 which provides that the supply of intangibles is considered as connected to Australia and subject to GST, if the supply is made by a supplier situated in Australia. The ruling also provides that supply of intangible is also connected with Australia if the ‘thing’ being supplied is performed in Australia. ‘Thing’ includes but is not limited to a service, advice, information, a right or a digital product.
The provision of advice or information, including the work involved in creating, developing or producing such information or advice for the recipient, is treated as the performance of services. In such cases, the supply thereof will be considered to be connected to Australia if the advice or information is prepared, created or produced in Australia. The same test applies to the provision of accounting and taxation services, legal services, repair services, and maintenance services.
The supply of intermediation (e.g. brokerage) and agency services is normally treated as a taxable transaction and subject to tax under the GST law.
Practical Compliance Guideline (PCG) on GST PCG 2018/6 issued by the ATO effective 10 October 2018 provides that inbound tour operators (ITO), which are Australian entities, enter into agreements with non-residents to arrange for the supply of Australian tour packages and are acting as agents of the non-residents, then any commission charged in respect of such package will be exempt from GST. However, if the ITO is acting as the principal, the entire supply (including mark-up or profit margin) may be subject to GST.
GST will be applicable on international sales of services and digital products provided to Australian consumers, on or after 1 July 2017. In case of sale through an electronic distribution platform (EDP), for example, an app store, the platform operator is responsible for registering, reporting and paying the GST.
A transitional rule applies to periodic or progressive supplies that start before 1 July 2017 and continue after 1 July 2017. Supplies made progressively over a period of time are treated as being supplied continuously over that period. For example, if supply is made before 1 July 2017 and the period of the supply extends beyond this, the portion after 1 July 2017 may be subject to GST.
Examples of digital products include downloaded movies, games and electronic books. Examples of services include architectural, legal or educational services.
The overseas business supplier will be required to register and pay GST if it meets the registration turnover threshold of AUD 75,000.