Goods and Services Tax (GST) is a big part of the Australian tax system, affecting both domestic and international transactions.
If you run an Australian business that provides services to overseas clients, getting GST (goods and services tax) right can be confusing. Many cross-border services are GST-free.
Carve-outs can turn an export into a taxable supply, especially where the services are provided to people and businesses in Australia.
Understanding these rules is key to compliance and avoiding costly mistakes and scrutiny from the ATO.
In this article
What changed, tax implications and why it matters
In July 2025, the ATO replaced its long-standing ruling on services to non-residents with two new public rulings and revised regulations that affect how to apply section 38-190 of the GST Act.
GSTR 2025/1 deals with when a supply to a non-resident is actually provided to another entity in Australia and therefore loses GST-free status under subsection 38-190(3).
GSTR 2025/2 explains Item 3 (effective use or enjoyment outside Australia), including how to apportion mixed supplies. Together these rulings clarify the key tests and provide new examples and decision steps that businesses can follow, illustrating the practical application of the new rules.
The three pathways most businesses use
Services to overseas clients (non-residents)
Many professional and consulting services rely on Item 2 of section 38-190.
The supply of a services other than goods or real property is GST-free if it’s made to a non-resident who is not in Australia when the supply is done, and the supply is not work physically performed on goods in Australia and not directly connected with Australian real property.
These rules apply to an enterprise carrying on business, and whether the non-resident is carrying on an enterprise in Australia is important for determining GST obligations.
The “provided to another entity in Australia” limited
Even if you satisfy Item 2, GST-free status can be turned off where your supply is made to the non-resident but provided to another entity in Australia.
For example, you invoice the UK parent but you present workshops to its Australian staff or tailor deliverables for its Australian subsidiary. GSTR 2025/1 sets out the framework for working out who actually received and used the service, the importance of identifying the customer for GST purposes, how to recognise multiple recipients and what to do when only part of your service is provided in Australia, including when you may be liable for GST on the Australian portion.
Effective use or enjoyment outside Australia
Where a supply is GST-free if the recipient is not in Australia and the effective use or enjoyment takes place outside Australia, subject to similar carve-outs for goods in Australia and Australian real property the new rulings explain how to decide where use or enjoyment happens and how to apportion if it is split between Australia and overseas.
Business scenarios
GST rules can affect whether your services are GST-free or taxable depending on where and how they are provided.
A. Board-level strategy for a UK parent, delivered to Australian executives
- You contract with the UK parent and invoice them. If workshops, training or key deliverables are provided to staff in Australia, subsection 38-190(3) can deny GST-free treatment in full or in part. The ATO expects apportionment between the part provided in Australia and the part provided offshore, with a reasonable documented method.
B. Tax or audit advisory for a non-resident, used only offshore
- If the non-resident recipient is not in Australia when the work is done and no part is provided to people in Australia, the supply generally qualifies as GST-free under Item 2. Keep clear evidence of recipient residency and where the service was received and used.
- If you incur GST on business related purchases for this work you may be able to claim input tax credits. GST credits can be claimed on eligible purchases related to providing these services.
C. Remote training paid by an overseas head office but attended in Australia
- As the training is provided to people in Australia, GST-free treatment is usually denied for that portion. Charge GST on the Australian part.
D. Work on goods in Australia
- Repairs, modifications or similar services done on goods in Australia are not GST-free under Items 2 or 3. GST applies to these items sold or serviced in Australia.
E. Services connected with Australian real property
- Valuations, architecture, project management or property advisory connected with land in Australia are not GST-free under Item 2 or Item 3. Treat as taxable. GST applies to items sold or supplied in connection with Australian real property.
F. Multi-country rollouts with Australian and overseas end-users
- Where your supply to a non-resident is provided to both Australian and overseas customers or staff, apportionment is expected. Keep attendance lists, usage logs and workpapers to support your basis.
Documentation
In practice the ATO relies on evidence so proper documentation is key. Build these into your engagement and delivery process. Failure to keep proper documentation can lead to disputes with the ATO and potential liabilities for underpaid GST.
- Contracting entity and residency: Engagement letter shows the non-resident counterparty and they were not in Australia when the thing supplied was done.
- Where the service is provided: Agendas, invite lists, attendance records and recordings show whether presentations, workshops or Q&A were delivered to people in Australia.
- Where the outputs are used: Email headers, distribution lists or project tools show offshore audiences.
- Why carve-outs don’t apply: Brief notes confirming the work was not done on goods in Australia and was not connected with Australian real property.
Apportionment: If part of the service is provided in Australia, keep the calculation and rationale. This is in line with the ATO’s approach in GSTR 2025/1 and GSTR 2025/2.
Invoicing — wording and logic
Use the same wording on your invoices and keep it in your files. For taxable supplies you must issue a tax invoice to your customers. A tax invoice is required for GST compliance and allows customers to claim GST credits.
GST-free under Item 2
Show no GST and include a note such as: “GST-free export of services.
Keep your residency and location evidence on file. Tax invoices are different from regular invoices as they must include specific details for GST purposes.
Item 3 with offshore effective use or enjoyment
If effective use or enjoyment is wholly outside Australia, you can treat as GST-free under Item 3. If it’s split, apply fair apportionment and charge GST on the Australian part.
Subsection 38-190(3) applies
If a non-resident engages you but the service is provided to people in Australia, charge GST in full or on the Australian part per your apportionment. Reference your workpapers if queried.
Connected with Australian goods or real property
Treat as taxable and charge GST. On a tax invoice you must include: the amount of GST, the GST rate, and a clear statement that the total includes GST where applicable. This is to meet ATO requirements and for your customers to claim GST credits.
GST registration still applies even for GST-free exports
Even if most of your sales are GST-free exports you may still need to register for GST once your GST turnover that is connected with Australia reaches $75,000. Businesses must register for GST when they meet this threshold which is calculated on your annual turnover over a year.
For most businesses registration is mandatory at that point; not-for-profits have a higher threshold. The ATO’s current guidance sets out the threshold, how to calculate turnover and the special cases. You can register for GST using GST online services provided by the Australian Taxation Office, making it easy for any business in Australia.
Once registered for GST you have the responsibility to properly account for GST in your business records and report the amount of GST collected and paid.
These rules apply to all businesses operating under the Australian GST system and you must meet all compliance obligations. GST-free supplies must still be reported in the Business Activity Statement (BAS) by registered businesses.
Quick decision checklist
Use this five-step triage before you issue an invoice.
- Who is the contracting recipient? Non-resident or Australian?
- Where was the recipient when the supply was done? If not in Australia, tick one box for Item 2 or Item 3 analysis.
- Who actually received the service and where are they located? Watch for “provided to another entity in Australia” limiter.
- Any carve-outs? Work on goods in Australia or directly connected with Australian real property means GST applies. Have you met all the requirements for GST exemption or obligation?
- Apportion if mixed and record your basis, so you apply the GST rules correctly to each part.
FAQs
Is every invoice to a non-resident GST-free?
No. If your service is provided to a non-resident but to another entity in Australia, subsection 38-190(3) can deny GST-free status in full or part.
What does “effective use or enjoyment outside Australia” mean in practice?
Look to where the recipient actually uses or enjoys the supply If it’s partly in Australia, you apportion.
If a UK parent pays but Australian staff attend
As the training is provided to people in Australia, charge GST on that part and keep attendance evidence.
Do GST-free exports count towards the $75,000 GST registration threshold?
Yes, if the supplies are connected with Australia. Check the ATO’s registration page for how GST turnover is calculated.
Do we need to change our contracts?
You don’t need legalese for its own sake, but you should clarify scoping and evidence: name the contracting entity, describe the expected audience and whether delivery is to any Australian recipients. This mirrors how the ATO looks at “provided to” vs “made to”.
