Edited version of private advice

Authorisation Number: 1052104349477

Date of advice: 14 December 2023

Ruling

Subject: Monetisation of a social media channel

Question

Is the supply of a right made to a non-resident a GST-free supply under section 38-190 of the A New Tax System (Goods and Services Tax) Act 1999?

Answer

Yes, this is a GST-free supply provided the non-resident recipient is not in Australia in relation to the supply.

Relevant facts and circumstances

•                     You carry on a particular enterprise in Australia.

•                     In the course of carrying on your enterprise you make supplies to two different non-resident recipients under two separate agreements.

•                     You receive consideration for one of your supplies from one recipient. But you do not receive consideration from the other recipient for the supply made to them.

•                     You are registered for GST.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 9-15

A New Tax System (Goods and Services Tax) Act 1999 section 9-10

A New Tax System (Goods and Services Tax) Act 1999 section 38-190

Reasons for decision

GST is payable on a supply if it is a taxable supply as defined in section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

Section 9-5 of the GST Act defines a taxable supply as follows:

You make a taxable supply if:

(a)          you make the supply for consideration

(b)          the supply is made in the course or furtherance of an enterprise that you carry on

(c)          the supply is connected with the indirect tax zone, and

(d)          you are registered, or required to be registered.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

The following is a discussion on each of the requirements of a taxable supply.

Supply for consideration

A supply is defined broadly in subsection 9-10 of the GST Act as 'any form of supply whatsoever' and among other things includes a creation, grant, transfer, assignment or surrender of any right.

Consideration is defined in subsection 9-15 of the GST Act as any payment, or any act or forbearance, in connection with a supply of anything.

Given one of the supplies you make is not for payment that supply does not meet paragraph 9-5 (a) of the GST Act. Therefore, in relation to this supply, further consideration of the rest of requirements of 9-5 is not necessary.

The other supply, which is for consideration meets paragraph 9-5(a) of the GST Act (which is the first requirement of a taxable supply) and therefore it is necessary to consider whether the rest of the requirements of a taxable supply are also satisfied.

Supply is made in the course of an enterprise

You make the supply in the course of your enterprise.

Connected with the indirect tax zone

The supply is connected with the indirect tax zone.

GST registration

You are registered for GST.

Therefore, the supply that you make for consideration meets paragraphs 9-5(a) to 9-5(d) of section 9-5 of the GST Act. This supply is a taxable supply unless it is GST-free or input taxed.

There is no provision in the GST Act under which the supply would be input taxed.

Is the supply of rights GST-free?

Under subsection 38-190(1) of the GST Act certain supplies of things, other than goods or real property, for consumption outside the indirect tax zone are GST-free.

Item 2 in the table in subsection 38-190(1) provides that a supply that is made to a non-resident who is not in the indirect tax zone when the thing supplied is done is GST-free if:

(a)          the supply is neither a supply of work physically performed on goods situated in the indirect tax zone when the work is done nor a supply directly connected with real property situated in the indirect tax zone, or

(b)          the non-resident acquires the thing in carrying on the non-resident's enterprise but is not registered or required to be registered for GST.

Item 4 provides that a supply that is made in relation to rights if:

(a)          the rights are for use outside the indirect tax zone, or

(b)          the supply is to an entity that is not an Australian resident and is outside the indirect tax zone when the thing supplied is done.

For the purpose of items 2 and 4, a non-resident company is in the indirect tax zone if it carries on its enterprise in the indirect tax zone.

The Goods and Services Tax Ruling, Goods and services tax: in the application of items 2 and 3 and paragraph (b) of item 4 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999: when is a 'non-resident' or other 'recipient' of a supply 'not in Australia when the thing supplied is done'? when is 'an entity that is not an Australian resident' 'outside Australia when the thing supplied is done'? explains the Commissioner's view of when a 'non-resident' or other 'recipient' of a supply is 'not in the indirect tax zone when the supply is made and, at paragraph 257 states:

If a non-resident company does not have a fixed and definite place in Australia at, or through which, the business of the non-resident company is carried on in Australia, the company is not in Australia.

The supply you make for consideration meets both item 2 and 4 provided the recipient is not in Australia in relation to this supply and such is a GST-free supply.

Note: the GST-free status of the supply is not negated by any of the subsections of section 38-190 the GST Act (e.g.: 38-190(2), (2A) or (3)).

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