The ATO has issued a new GST Ruling GSTR 2018/2 which sets out the Commissioner’s views on when supplies of goods are connected with Australia under key provisions in the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). The concept discussed in the ruling is important because one of the preconditions for liability for GST is that a supply must be connected with the “indirect tax zone”, or with Australia.
GSTR 2018/2 updates and replaces GSTR 2000/31 (Goods and services tax: supplies connected with Australia). The ruling applies from the date of issue, 19 September 2018. However, para 42 to 57 of the ruling apply in working out net amounts for tax periods starting on or after 1 October 2016.
The ruling explains the Commissioner’s view on the meaning, in s 9-25 of the GST Act, of a supply of goods:
- wholly within Australia (s 9-25(1))
- from Australia (s 9-25(2)), and
- to Australia (s 9-25(3)).
The ruling concerns only the supply of goods for GST purposes. It defines a supply of goods as a supply of any form of tangible personal property. Therefore, it does not include intangible personal property such as intellectual property like a copyright, or land or an interest in land. A supply of goods is not limited to a sale of goods. It can include other means of supply such as a lease or hire of goods.
Supplies wholly within Australia
Goods are delivered in Australia if they are physically delivered in Australia. Goods are also supplied in Australia if they are physically made available in Australia. The terms “delivered” and “made available” look at the place where the goods are at the relevant time.
Goods are delivered or made available by a supplier in Australia to the recipient:
- where the supplier physically delivers the goods from a place in Australia to the recipient’s nominated place in Australia, and
- where the supplier has the goods imported into Australia and shipped to themselves before delivering or making the goods available to the recipient in Australia.
The term “made available” refers to the situation where goods are not actually delivered to the recipient but rather the supplier makes them physically available to the recipient in Australia. For example, where a supplier sells a load of sand to a customer, and the customer takes the sand away, the supplier has made the sand available.
Supplies of goods from Australia
A supply of goods is connected with Australia if the supply involves the goods being removed from Australia (s 9-25(2)). “Remove” means to move from a place, to move or shift to another place, or to displace from a position. The subsection does not apply where removal is not part of the supply.
Supplies of goods to Australia
A supply of goods is connected with Australia if the supply involves those goods being brought to Australia and the supplier imports the goods into Australia (s 9-25(3)). Section 9-25(3) does not apply to a supply of goods that involves them being brought to Australia where the recipient imports the goods into Australia.
Supplier as importer
A supplier imports the goods into Australia where it is the importer for the purposes of determining who (if any entity) makes a creditable importation under s 15-5.
If a supply of goods involves the goods being delivered or made available to the recipient outside of Australia and the recipient subsequently imports the goods into Australia, the supply is not connected with Australia under s 9-25(1), (2) or (3). However, the importation can be a taxable importation and the recipient (importer) would be liable to pay GST on the taxable importation.
Exceptions to the connected with Australia rule
Ordinarily, a supply of goods that is delivered or made available in Australia is connected with Australia. This is the case even where the supply is made between two non-residents, neither of which makes the supply or acquisition in the course of an enterprise they carry on in Australia.
However, s 9-26 provides two exceptions to the connected with Australia rules in s 9-25 for supplies that involve a transfer of ownership of goods that are subject to a lease. If the exceptions apply, the supply is not connected with Australia.
The first exception is for a supply of goods subject to a lease involving a transfer of ownership from one non-resident lessor to a new non-resident lessor. The second exception is for new lease arrangements that are entered into between the non-resident that acquired the goods and the entity that continues to lease the goods. Details of these exceptions are set out in items 3 and 4 in the table in s 9-26(1)(c).