Edited version of private advice

Authorisation Number: 1052152581643

Date of advice: 7 August 2023

Ruling

Subject: GST - professional or trade course

Question 1

Is your supply of Commercial Pilot Licence training course a GST-free professional or trade course under section 38-85 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes, the supply of the Commercial Pilot Licence training course by you is GST-free education course under section 38-85 of the GST Act.

Question 2

Is your supply of Command Instrument Rating training course a GST-free professional or trade course under section 38-85 of the GST Act?

Answer

Yes, the supply of Command Instrument Rating training course by you is a GST-free education course under section 38-85 of the GST Act.

Question 3

Is your supply of ground theory course for Commercial Pilot Licence or Command Instrument Rating a GST-free professional or trade course under section 38-85 of the GST Act?

Answer

Yes, the supply of ground theory course for either Commercial Pilot Licence or Command Instrument Rating training course by you is a GST-free education course under the GST Act.

Question 4

Is the examination fee charged by you for the Commercial Pilot Licence flight test GST-free under section 38-85 of the GST Act?

Answer

Yes, the examination fee charged by you for the Commercial Pilot Licence flight test is GST-free under paragraph 38-85(b) of the GST Act.

Question 5

Is your supply of ground theory course for Recreational Pilot Licence and Private Pilot Licence GST-free under Division 38 of the GST Act for students who are enrolled and intend to proceed to obtain a Commercial Pilot Licence?

Answer

No, your supply of ground theory course for Recreational Pilot Licence and Private Pilot Licence is not a GST-free education under the GST Act. Your supply of ground theory course for Recreational Pilot Licence and Private Pilot Licence will be a taxable supply under section 9-5 of the GST Act and therefore subject to GST.

Question 6

Is the examination fee charged by you for the flight test for Recreational Pilot Licence and Private Pilot Licence for students who are enrolled and intend to proceed to obtain a Commercial Pilot Licence GST-free under Division 38 of the GST Act?

Answer

No. The examination fee charged by you for the flight test for Recreational Pilot Licence and Private Pilot Licence will be subject to GST.

This ruling applies for the following period:

Year ending 30 June 2024

The scheme commenced on:

1 July 2023

Relevant facts and circumstances

You have an active Australian Business Number.

You have been registered for Goods and Services Tax since XXX.

You are not a higher education institute or a registered training organisation (RTO).

You are a flight training organisation permitted under the Civil Aviation Safety Regulations (CASR) that is approved by the Civil Aviation Safety Authority (CASA).

You conduct the following courses to students in Australia:

•                     Commercial Pilot Licence (CPL) training course

•                     Command Instrument Rating training course

•                     Recreational Pilot Licence (RPL) course

•                     Private Pilot Licence (PPL) course

•                     Ground theory courses (The industry terminology for a course which teaches theoretical aeronautical knowledge.)

Commercial Pilot Licence training course (CPL)

You provide CPL training courses under CASA certification. You conduct the CPL course according to syllabus approved by CASA.

A CPL is an essential requirement prior to being engaged as a commercial pilot of an aircraft. The pilot cannot be employed as a commercial pilot such as in charter operations or in an airline environment without a CPL. The CPL enables an individual to be employed and receive an income for providing services as a commercial pilot.

A CPL is a legal requirement if a person wishes to work as a pilot as per the privileges specified in the Civil Aviation Safety Regulations 61.510.

Before recommending a student for a flight test conducted by CASA, the student is required to pass the CASA examinations of the seven subjects and achieve a full CPL theory credit. For each examination, CASA assesses the student against defined competency standards.

All the students are required to pass seven theory examinations whether the CPL course is integrated or non-integrated.

According to the CASA website, an integrated training course is a structured course where the students do the ground theory with practical flight training at the same time provided through Part 142 flight training operators, whereas in a non-integrated training the students do more practical flight training through Part 141 flight training operators.

You provide non-integrated CPL training course only.

CASA will issue a CASA Part 61 CPL to the student upon passing the flight test.

Command Instrument Rating training courses

The Instrument Flight Rules (IFR) rating is required for flight in non-visual meteorological conditions. Rough translation: it is a flight crew rating that indicates that a pilot is qualified to fly an aircraft by sole reference to the aircraft's instruments.

The Command Instrument Rating training courses provided by you allows a pilot of an aeroplane to fly in all weather conditions. A pilot employed in airline operations would require a Command Instrument Rating. Furthermore, the charter operators provide all weather services, for example flying in cloud or low visibility would require a pilot to have a Command Instrument Rating.

The Command Instrument Rating training course leads to professional opportunities, for a CPL holder, that would not otherwise be possible due to the imposed limitation of flight in fair weather conditions by day. A charter operator who provides all weather flight services such as flight through cloud or low visibility requires the pilot to have a Command Instrument Rating.

The Command Instructor Rating course is a structured course. The students cannot fly command (solo) under IFR until they have passed the Command Instrument Rating test. All the training must be dual with an instructor and the course is approved by CASA.

Recreational Pilot Licence (RPL)

The RPL is intended for those who want to fly purely for recreational purposes. It allows pilots to fly light (under 1500kg maximum take-off weight), single-engine aircraft as pilot in command and can be achieved in as little as 30 hours. The RPL also allows pilots to fly without supervision from a flight instruction or flying school once they have earned the licence. The RPL is the first step towards a CPL, where a student learns to fly the aeroplane under normal and emergency situations. The RPL does not enable a pilot to be paid as a pilot. The hours, completed in order to gain an RPL, count towards the total hours required for a CPL, if the students intend to obtain a CPL.

Private Pilot Licence (PPL)

The PPL will allow the pilot to fly friends and family anywhere in Australia during the day in visual meteorological conditions. In this course the students will build on the basics they have already mastered and be taught how to navigate. The theory component culminates with a CASA cyber exam which we can help them prepare for. Once the students have passed the flight test, they will be 'free' to fly wherever they choose.

The following are the requirements for PPL:

•                     Complete flight training at a CASR organisation.

•                     Pass a PPL theory exam.

•                     Pass a PPL flight test for the licence and category rating.

•                     If over 18, hold a current aviation security status check.

Training for a PPL required at least 40 hours of flying time, including 5 hours of general flight time as pilot in command, 5 hours of cross-country flight time as pilot in command and 2 hours of instrument flight time and a security status check.

Ground Theory Courses

The ground theory courses provide education opportunities for students to learn and practice mandatory CASA licence theory examinations. It is essential that a student pass seven theory exams prior to being able to sit for the practical commercial pilot licence exam. It is also essential that a student pass one theory exam for the Command Instrument Rating test.

All the ground theory courses provided by you are structured and designed to cover all applicable Manual of Standards (MOS) competencies under CASR Part 61.

Flight test fee for CPL, RPL and PPL

Flight Examiners (CASA delegates) conduct the flight tests for CPL, RPL and PP.

You have contract staff who are authorised by CASA to conduct flight tests. You charge an examination fee per flight test.

CASA charges a licence processing fee, and you charge the applicant for hire of the aircraft in which the flight test is conducted.

Each of the courses that you supply have its own syllabus of knowledge and is assessed via different examinations. The examination contents are determined by CASA.

You provided that although there are common contents between the PRL, PPL and CPL (the basics of flying an aircraft does not change) some elements of the practical lesson for RPL and PPL are not required when progressing direct to the CPL nor are the RPL and PPL flight tests.

Theoretical knowledge is studied at a higher level for those undertaking the CPL and it is not essential to complete the RPL or PPL knowledge examinations when progressing towards the CPL.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 9-5

A New Tax System (Goods and Services Tax) Act 1999 section 38-85

A New Tax System (Goods and Services Tax) Act 1999 section 195-1

Reasons for decision

Question 1

Under section 9-5 of the GST Act, you make a taxable supply if:

(a)          You make a supply for consideration; and

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

(c)           The supply is connected with the indirect tax zone (Australia); and

(d)          You are registered or required to be registered.

Section 9-40 of the GST Act states that 'you must pay the GST payable on any taxable supply that you make'.

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

(Note: defined terms within the GST Act.)

There are no provisions in the GST Act under which your supply of course is input taxed.

Section 38-85 of the GST Act provided that:

A supply is GST-free if it is a supply of:

(a)          An education course; or

(b)          Administrative services directly related to the supply of such a course, but only if they are supplied by the supplier of the course.

An education course is defined in section 195-1 of the GST Act to include among other things;

•                     a tertiary course;

•                     an adult and community education (ACE) course; and

•                     a professional or trade course.

Each of the above courses is further defined under section 195-1 of the GST Act.

Section 195-1 of the GST Act defines:

education course means ... (j) a professional or trade course

professional or trade course means a course leading to a qualification that is an essential prerequisite

(a)          for entry to a particular profession or trade in Australia; or

(b)          to commence the practice of (but not to maintain the practice of) a profession or trade in Australia.

essential prerequisite: a qualification is an essential prerequisite in relation to the entry to, or the commencement of the practice of, a particular profession or trade if the qualification is imposed;

(a)          by or under an industrial instrument

industrial instrument has the meaning given by section 995-1 of the ITAA 1997

ITAA 1997 means the Income Tax Assessment Act 1997

Section 995-1 of the ITAA 1997 defines:

industrial instrument means:

(a)          an Australian law

Australian law means a Commonwealth law, a State law or a Territory law.

Commercial Pilot Licence

A person not holding a CASR Part 61 CPL for aeroplane (a commercial pilot licence) is not authorised to pilot or co-pilot any aircraft.

A CASR Part 61 CPL is issued by CASA under Part 61 of the Civil Aviation Safety Regulation 1998 which is an Australian law dealing with licensing of pilots of aircraft.

Qualification - an essential prerequisite

GSTR 2003/1 Goods and services tax: supplies that are GST-free as professional or trade courses states:

45.  Documents that are qualifications or that provide evidence of a qualification include ... a licence

It is mandatory for a person to hold a CASR Part 61 CPL for aeroplane before they can enter into, or commence the practice of, the profession or trade of a commercial pilot of aircraft.

Therefore, for GST purposes, a CASR Part 61 CPL for aeroplane is a qualification which is an essential prerequisite in relation to the entry to, or the commencement of the practice of, the profession or trade of a commercial pilot of aircraft.

CPL course conducted by you

You conduct a CPL course to train a student to obtain a CASR Part 61 CPL for aircraft.

Your CPL course syllabus contains all the flying sequences required by CASA for the completion of a CPL training course.

Your CPL courses do not include ground theory. The students have option to achieve the ground theory by self-study or attending separate course run by a third-party provider or available to individual students in classes conducted by you.

Before you would recommend a student for a flight test conducted by CASA, the student is required to pass the CASA examinations of the seven subjects and achieve a full CPL theory credit. For each examination, CASA assesses the student against defined competency standards.

CASA will issue a CASR Part 61 CPL to the student upon passing the flight test.

The CASR Part 61 CPL is the qualification showing the student has successfully completed the CPL course.

Professional or trade course

Based on the facts provided, you supply the CPL course to a student. Upon the student successfully completing the course and passing the flight test, CASA issues to the student a CASR Part 61 CPL.

The CASR Part 61 CPL is a qualification that is an essential prerequisite for the student to enter to, or commence the practice of, the profession or trade of a commercial pilot of aircraft.

Accordingly, the CPL course delivered by you will be the supply of a professional or trade course under the GST Act. The supply of CPL training course by you will therefore be a GST-free supply of an education course under section 38-85 of the GST Act.

Question 2

Based on the information provided, the pilots cannot fly command (solo) aircraft under the Instrument Flight rules until they have passed the Command Instrument Rating test. The Command Instrument Rating is essential pre- requisite to fly in all weather conditions. A pilot of commercial aircraft cannot legally fly in cloud or in certain reduced visibility conditions without a Commend Instrument Rating.

Accordingly, the Command Instrument Rating course delivered by you will be the supply of a professional or trade course under the GST Act. The supply of Command Instrument Rating course by you will therefore be a GST-free supply of an education course under section 38-85 of the GST Act.

Question 3

The Civil Aviation Regulations 1988 regulation 5.104(1)(c) requires a pass in a commercial pilot licence (aeroplane) theory examination. In the integrated course the theoretical aeronautical knowledge required to pass this examination is provided. For the non-integrated program CASA recommends the completion of a theoretical aeronautical knowledge course. If the course is completed as a structured course of study it will be GST-free as a professional and trade course.

You advised us that your ground theory courses are structured and designed to cover all applicable Manual of Standards (MOS) competencies under CASR Part 61. Therefore, your supply of ground theory course for either Commercial Pilot Licence or Command Instrument Rating training course by you is a GST-free education course under the GST Act.

Question 4

The supply of an education course is GST-free. In certain circumstances, the following associated supplies are also GST-free:

•                     administrative services;

•                     course materials;

•                     right to receive GST-free education;

•                     excursion or field trip.

The Australian Taxation Office view for education courses is provided in the Goods and Services Tax Ruling GSTR 2000/30. GSTR 2000/30 discusses the GST-free supply of administrative services, field trips and excursions, course materials, the lease or hire of curriculum related goods and student accommodation. This Ruling also deals with education related supplies that are not GST-free.

Supply of administrative services

A supply of administrative services made by you that is directly related to the supply of an education course is GST-free under paragraph 38-85(b) of the GST Act.

What is the meaning of 'directly related' to the supply of an education course?

'Directly related' is not defined in the Act and therefore, takes on its ordinary meaning. The Macquarie Dictionary defines 'directly' to mean 'in a direct line, way or manner; immediately; absolutely'. The term 'related' means 'associated; connected or allied by nature'.

The phrase 'directly related' was considered in the context of being 'directly related to employment' for income tax purposes in FC of T v. Dixon (1952) 86 CLR 540, at 553-554: 'A direct relation may be regarded as one where the employment is the proximate cause of the payment, an indirect relation as one where the employment is a cause less proximate, or, indeed, only one contributory cause'. Therefore, administrative services must be in a direct line or immediately associated or connected with the supply of the education course.

Administrative services provided by an entity other than the supplier of the course will be subject to GST.

Paragraph 75 of GSTR 2000/30 provides guidance on the administrative services that are directly related to the supply of an education course which states:

75. The Act does not outline the administrative services that are directly related to the supply of an education course. However, the ATO considers that the supply of administrative services includes:

(a)          program changes;

(b)          enrolment services, including the processing of late enrolments;

(c)          late issue or replacements of student cards;

(d)          examination arrangements and assessments of students including re-assessment of results where a student has failed;

(e)          processing academic results including duplicate degree copies;

(f)           overdue charges or late payment charges;

(g)          record-keeping;

(h)          administration of the library;

(i)            administration of a textbook scheme;

(j)            administration of the supply of course materials;

(k)          graduation certificates;

(l)            course reinstatement;

(m)         charges for HECS statements.

Based on the information provided, the examination fee for the CPL flight test is related directly to the administration of your CPL course. Therefore, the examination fee charged by you for the CPL flight will be GST-free under paragraph 38-85(b) of the GST Act.

Question 5

The RPL and PPL are not essential pre-requisite for obtaining CPL and therefore are not GST-free under section 38-85 of the GST Act

As these courses are not GST-free education courses, your supply of ground theory course for RPL and PPL is also not GST-free under section 38-85 of the GST Act or/and GST-free under any provisions of the GST Act or any other legislation.

The entire education course has to meet the requirements of a professional or trade course and not the individual subjects within the course. Therefore, even if an individual who has completed a RPL or PPL course may assist them in obtaining CPL, it is not sufficient for the RPL and PPL course to be a GST-free course under section 38-85 of the GST Act.

Even if the student who is enrolled in a RPL or PPL course has the intention or is enrolled in a CPL training course, it does not change the fact that RPL and PPL course do not meet the requirements to be a GST-free education course under section 38-85 of the GST Act.

Accordingly, your supply of ground theory course for RPL and PPL is a taxable supply under section 9-5 of the GST Act and therefore subject to GST.

Question 6

Based on the information provided RPL and PPL courses are not GST-free under section 38-85 of the GST Act and therefore examination fee charged for this course will not be GST-free under paragraph 38-85(b) of the GST Act or/and GST-free under any provisions of the GST Act or any other legislation.

Accordingly, the examination fee charged by you for the RPL and PPL flight tests will be a taxable supply under section 9-5 of the GST Act and therefore subject to GST.

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