Grant received from a foreign entity which has an office in Australia
13 December 2009
The supply will be GST-free if the supply is made to the overseas entity. This will be the case even where there is a permanent establishment in Australia as long as the permanent establishment is not representing the US company in Australia in relation to that supply.
The provision of a report to an overseas organisation is regarded as a supply, being the supply of services. This point is outlined in paragraph 69 of Goods and Services Tax Ruling GSTR 2000/31 which states:
Sometimes a service may involve both work being done and the creation of a product. However, this does not alter the supply as one for the performance of a service.
Where you provide a report for payment, this would generally give rise to a GST liability as all of the conditions of a taxable supply exist, that is:
● There is a supply (of services) for consideration (the payment).
● The supply is made in the course or furtherance of your enterprise.
● The supply is connected with Australia. For a supply of services, a supply will be connected with Australia if it is done in Australia or the supply is through an enterprise that the supplier carries on in Australia. The supply of services by you in this instance is connected with Australia.
● You are registered, or required to be registered, for GST.
However, the supply of a report by you to the overseas organisation is GST-free. Therefore, you will not be required to remit GST on the funds received from the overseas organisation for the provision of the report.
Under section 38-190 of the GST Act, certain supplies of things other than goods or real property, for consumption outside Australia, are GST-free. As a supply of services is not a supply of goods or real property, its GST status is appropriately considered under section 38-190 of the GST Act.
Item 3 in the table in subsection 38-190(1) of the GST Act provides that a supply is GST-free where:
● it is made to a recipient who is not in Australia when the thing supplied is done
● it is effectively used or enjoyed outside of Australia, and
● it is not a supply of work physically performed on goods situated in Australia or a supply directly connected with real property situated in Australia.
The supply of the report by you will be GST-free if:
● It is made to a recipient who is not in Australia when the thing supplied is done.
● It is effectively used or enjoyed outside of Australia. We note that as the objective of the overseas organisation is to make information freely and openly available, it is possible that another entity in Australia may benefit from the information contained in the report prepared for the overseas organisation. This, however, does not alter the outcome that effective use or enjoyment takes place outside of Australia.
● It is not a supply of work physically performed on goods situated in Australia or a supply directly connected with real property situated in Australia.'