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Edited version of your written advice

Authorisation Number: 1051254787040

Date of advice: 19 July 2017

Ruling

Subject: GST and supply of overseas tours

Note: Where the term 'Australia’ is used in this document, it is referring to the 'indirect tax zone’ as defined in subsection 195-1 of the GST Act.

Question

Is the supply of the international tour made by the Australian entity to Australian individuals subject to the goods and services tax (GST)?

Advice

From the facts given, the international tour is comprised of supplies that will be consumed/enjoyed overseas and in some instance could possibly include some supplies that will be consumed/enjoyed in Australia when the Australian entity supplies the international tour to Australian individuals.

International tour is only for supplies consumed/enjoyed overseas

Where the supply of the international tour consists of arranging//providing international travel (including domestic flights cross-referenced with the international flights), overseas transfers, overseas accommodation, scheduled overseas tours, transport and meals while overseas, the supply of the international tour made by the Australian entity to Australian individuals is GST-free under section 38-360 of the GST Act.

International SCT includes supplies consumed in Australia

Where the supply of the international tour consists of arranging/providing supplies to be consumed/enjoyed overseas and in Australia (hotel, transport and meals), the supply of arranging/providing the hotel, transport and meals in Australia is a taxable supply under section 9-5 of the GST Act.

Further in the event where the domestic flight is not cross-referenced with the international flight, the supply of arranging/providing the domestic flight is a taxable supply under section 9-5 of the GST Act.

In this instance the supply of the international tour is a mix of GST-free and taxable supplies. The Australian entity will need to apportion the consideration received between the GST-free part and the taxable part of the supply on a fair and reasonable basis.

Relevant facts

You are an Australian entity and registered for GST. You organise international tours and promote the tours to Australian individuals.

A fixed rate is charged for the international tour and the fee will cover the cost of flights, transfers, accommodation, scheduled overseas tours, transport and meals.

There may be some domestic travel involved with the international travel from Australia to the overseas country. The domestic flight is connected with the international flight and both flights will be arranged at the same time. However, for whatever reason there is always the exception to the rule where the 2 flights are not connected.

There is a possibility that the individual may have to stay at a hotel while being in transit for the international flight. For example the individual has flown from one state to another state and has to stay overnight in a hotel before catching the international flight. In this instance the hotel accommodation, meals at the hotel and transport from airport to hotel and from hotel to airport will be part of the package offered to the individual in regard to the international tour.

Another possibility is the individuals may be offered meals while being in transit to catch the international flight.

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 38-360

Reasons for decision

Note: Where the term 'Australia’ is used in this document, it is referring to the 'indirect tax zone’ as defined in subsection 195-1 of the GST Act.

GST is payable on a taxable supply. An entity makes a taxable supply under section 9-5 of the GST Act if:

    a) the entity makes the supply for consideration; and

    b) the supply is made in the course or furtherance of an enterprise that the entity carries on; and

    c) the supply is connected with Australia; and

    d) the entity is registered or required to be registered for GST.

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

All of the above requirements must be satisfied for a supply to be a taxable supply under section 9-5 of the GST Act.

You satisfy paragraphs 9-5(a) to 9-5(d) of the GST Act when you supply your international tour as:

    a) you make the supply of tour for consideration; and

    b) the supply is make in the course of an enterprise that you carry on; and

    c) the supply is connected with Australia as the supply is made through an enterprise that you carry on in Australia; and

    d) you are registered for GST.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. There is no provision under the GST Act that makes your supply of international tour input taxed.

We will now consider whether your supply of international tour is GST-free.

GST-free

Of particular relevance to your supply of the international tour is section 38-360 of the GST Act which provides that a supply is GST-free if:

      (a) the supplier makes it in the course of carrying on an enterprise as a travel agent; and

      (b) it consists of arranging for the making of a supply, the effective use or enjoyment of which is to take place outside Australia.

Goods and services Tax Ruling GSTR 2009/3 (available from the legal database of our website at www.ato.gov.au) briefly discusses section 38-360 of the GST Act.

Paragraphs 162 to 165 and 170 to 171 of GSTR 2009/3 provide as follows:

    162. Package tour operators (which include package tour wholesalers) arrange and/or sell domestic or overseas tour packages, typically comprising travel, transport, accommodation and events. They make the necessary arrangements for customers, either directly or indirectly, for example, through the making of bookings for airlines, accommodation and other ground arrangements. They may also enter into arrangements with other travel agents or wholesalers to sell the tour packages.

    163. The Commissioner takes the view that 'travel agents', as the term is used in section 38-360, includes package tour operators that act as agents or as principals or both. The Commissioner considers that package tour operators carry on an enterprise as travel agents for the purposes of section 38-360.

    164. Package tours involve a number of supplies. These supplies may include:

      ● travel (airline, cruise ship or train) tickets;

      ● accommodation bookings;

      ● car hire;

      ● reservations for special events; and

      ● reservations to undertake recreational and leisure activities.

    165. When a package tour operator arranges travel, books accommodation, guided tours and ground transportation, and makes reservations for special events, recreation and leisure activities as part of a package tour, the package tour operator makes a facilitation supply. This supply is arranging for other supplies to be made to the customer.

    170. If the facilitation supply made by a package tour operator is a supply consisting of arranging for the making of a supply, the effective use or enjoyment of which is to take place outside Australia, the facilitation supply is GST-free under section 38-360.

    171. If the facilitation supply is of arranging transport of the kind covered by items 1 to 4 of the table in subsection 38-355 (1), that facilitation supply is GST-free under item 7 of the table in subsection 38-355(1).

Further, paragraph 28 of GSTR 2009/3 provides as follows:

    28. For example, if a facilitation supply is within one of the following provisions of the GST Act, that supply would be GST-free:

      ● …

      ● …

      ● …

      ● item 7 of the table in subsection 38-355(1), which provides that the supply of arranging certain kinds of international transport of passengers, goods or insurance is GST-free; and

      ● section 38-360, which provides that a supply is GST-free if the supplier makes the supply in the course of carrying on an enterprise as a travel agent and the supply consists of arranging for the making of a supply, the effective use or enjoyment of which is to take place outside Australia.

Your supply of international tour is mainly an overseas tour comprising of combined domestic and international airfare, overseas accommodation and transfers, scheduled overseas tours, transport and meals for which you will make the necessary arrangements for the Australian tour participants. Referring to paragraph 163 in GSTR 2009/3, you are therefore considered to be carrying on an enterprise as a travel agent for the purposes of paragraph 38-360(a) of the GST Act when supplying the international tour.

Further as the effective use or enjoyment of the arranged supplies relating to the international tour takes place outside Australia, paragraph 38-360(b) of the GST Act is also satisfied.

In this case your supply of the international tour to Australian tour participants is GST-free under section 38-360 of the GST Act to the extent that the exceptions below do not apply.

Exceptions to your supply

Accommodation, transport and meals in Australia

You advised that there may be occasions that you may have to arrange/provide for hotel, transport and meals in Australia for the tour participants while waiting to board the international flight when supplying the international tour.

In this instance the use and enjoyment of the hotel, transport and meals is in Australia. The supply of the hotel, transport and meals in Australia as part of your supply of the international tour is not GST-free under section 38-360 of the GST Act. Your supply of the hotel, transport and meals in Australia to the tour participants who are in transit is a taxable supply under section 9-5 of the GST Act.

Domestic flights

You advised that for whatever reason the domestic and international flights may not be connected.

The fact sheet 'GST and international travel’ states:

    International travel

    To and from Australia

    International transport is GST-free if you sell it to passengers travelling to or from Australia (by air or sea) and:

      ● their last place of departure in Australia is to a destination outside Australia

      ● it is from a place outside Australia to the first place of arrival in Australia

      ● it is from a place outside Australia to the same or another place outside Australia.

    Outside Australia

    Transport booked within Australia for travel outside Australia is GST-free. This covers activities such as coach tours, train transport, hire-cars and ferry passages

    Services booked within Australia for use overseas are also GST-free

    Domestic travel - Australian residents

    Air travel

    You can sell domestic air transport GST-free to Australian residents if it:

      ● is part of an itinerary or arrangement leading to international air transport

      ● formed part of, or was cross-referenced to, a ticket for international air transport when the arrangement was made.

    Example: GST-free air travel

    Tanya lives in Brisbane and has booked an overseas trip. She will fly from Brisbane to Sydney to connect with a flight to New York. From New York she will fly to London and then back to Australia, landing in Sydney before flying home to Brisbane. All of Tanya's air travel supplied is GST-free if the Brisbane to Sydney and Sydney to Brisbane flights were booked or committed to at the same time as the international flights.

    If the Brisbane to Sydney return flights were booked separately but cross-referenced to the international flights, they are still GST-free.

Where the domestic flight is booked separately and not cross referenced with the international flight, the supply of the domestic flight is a taxable supply under section 9-5 of the GST Act.

Where the domestic flight is booked separately and is cross referenced to the international flight, the supply of the domestic flight is GST-free.

Summary

Where your supply of the international tour includes the above exceptions, your supply of international tour is a mixed of GST-free and taxable supplies. You will have to apportion the consideration received between the GST-free part and the taxable part of the supply on a fair and reasonable basis.