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Edited version of private ruling
Authorisation Number: 1011728139705
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Ruling
Subject: GST and agency arrangement
Question:
Are the payments that you receive from the participants in relation to the travel and accommodation expenses for the overseas tours subject to goods and services tax (GST)?
Answer
No. The payments that you receive from the participants in relation to the travel and accommodation expenses for the overseas countries are not subject to GST in circumstances outlined in this ruling.
Relevant facts
You are a sport association. You are invited from time to time to enter team(s) in various tournaments in overseas countries. If such invitations are accepted, individual players throughout your region are selected to participate. The selected players are required to make a payment to cover the cost of attendance. You do not make any contribution on behalf of the players and it is purely a 'user pays' arrangement.
The amount of the payment required from each player will vary depending on the length of the tournament and the country visited. You engage an external provider (such as a travel agent) to arrange flights and travel insurance for the players on a group basis. Accommodation is also arranged for the players on a group basis, typically through a local contact in the country in which the tournament is being held. GST is not included in these expenses.
The costs of flights and accommodation would comprise the majority of the total contribution made by each player. There are minor expenses incurred in Australia such as ground hire for training and the supply of clothing on which GST is included in the price.
Your teams have travelled to an overseas country recently to participate in a number of games against local teams in that region. The teams comprised players and officials. Some family members were also attended as spectators and had their flights and accommodation arranged together with the players and officials.
Flights for this tour were arranged through a travel agent while the travel insurance was arranged with an insurer. Accommodation, meals, clothing and travel were arranged through the overseas organisations. All invoices received from these providers were GST-free.
When you calculate the price and invoice the participants of the tour, you are not factoring in any profit margin or commission.
You have been invited to attend further tournaments in future. The structure of those tours will be virtually the same as this tour.
There is no written agency agreement between you and the tour participants in relation to the tour arrangement.
Reasons for decision
Section 9-40 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that you must pay GST on any taxable supply that you make.
Under section 9-5 of the GST Act, you make a taxable supply if:
· you make the supply for consideration
· the supply is made in the course or furtherance of an enterprise that you carry on
· the supply is connected with Australia, and
· you are 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.
To be a taxable supply all of the requirements of section 9-5 of the GST Act must be satisfied.
One of these requirements is that you make a supply for consideration.
Your activities of organising the tours and administrating the funds of each tour would constitute a supply of services to the tour participants. However, you advise that you do not charge a commission to the tour participants for the provision of these services. Rather, all of the money you receive from the tour participants is used to pay for the travel and tour expenses.
Therefore it is necessary to determine whether the payments that you receive from the tour participants are consideration for any other supply that you make to the tour participants, or are merely payments for acquisitions that you make in your capacity as an agent of the tour participants.
Goods and Services Tax Ruling GSTR 2000/37 discusses the general law in relation to agency relationships. In particular, paragraph 10 of GSTR 2000/37 explains that:
An intermediary may be authorised by another party to do something on that party's behalf. Generally, the intermediary is called an agent. The party who authorises the agent to act on their behalf is called the principal.
Further, paragraph 11 of GSTR 2000/37 states:
For commercial law purposes, an agent is a person who is authorised, either expressly or impliedly, by a principal to act for that principal so as to create or affect legal relations between the principal and third parties.
Whether an agency relationship exists is a question of fact determined by, among other things, any relevant documentation about the arrangement, the description used by the parties and the conduct of the parties.
Based on the information provided, we consider that when you organise the tours and administer the funds, you are acting as an agent for the tour participants in making acquisitions from third parties. When you make arrangements for such things as flights, travel insurance, accommodation, you do it on behalf of the tour participants.
According to paragraph 15 of GSTR 2000/37:
When an agent uses his or her authority to act for a principal, then any act done on behalf of that principal is an act of the principal.
Therefore, the acquisitions that you make on behalf of the participants are acquisitions made by the participants. The payments that you receive from them are consideration for supplies made by other entities such as the airline, insurer and accommodation provider. They are not consideration for a taxable supply that you make to the tour participants.
Accordingly, the payment that you receive from the tour participants is not subject to GST.
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