GST on consulting work performed overseas

Question

My client operates as an Australian based company, who travels overseas to inspect airline facilities and report on their conditions.

He invoices another Australian based company for the work he’s done.

I think my client should add GST to his invoices as his supplier is Australian based.

However, the supplier then invoices a German based company for the work done by my client, and argues that because the end user is overseas based, my client should not add GST to his invoices.

Can you please clarify this for me? Thank you.

Answer

You are right, your client needs to include GST in his invoice because he, as an Australian based business is making supplies to an Australian based business. This should not be a problem to the company he is invoicing as they will be entitled to the input credit even though the supply they are making to the German company may well be GST free.
So now to give you the ammunition for the argument:
Section 38-190 of the 1999 GST Act explains when a supply made outside Australia can be GST free. The very first requirement is that the supply be made under an agreement with a non resident.. Your client’s agreement is with the Australian company not the German company. As the agreement is between two Australian companies GST applies regardless of where the supply is made.
Here is a link to section 38-190 https://www.ato.gov.au/law/view/document?Docid=PAC/19990055/38-190&PiT=99991231235958

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