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Edited version of your private ruling

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Ruling

Subject: GST and supply of overseas accommodation

Question 1

Is GST payable on the supply of overseas accommodation to your customers?

Answer

No.

Question 2

Is GST payable on your supply of booking services to the overseas entities?

Answer

No.

Facts

You operate an online booking agency.

You are registered for GST.

You solely offer an online booking service for rental accommodation overseas through your website.

You entered into agency agreements with owners and operators of properties overseas (the overseas entities) to provide online booking services.

You provided us with a copy of an agency agreement (the agreement) between you, as agent, and an owner/operator (the owner) of certain holiday accommodations overseas. The agreement outlines the following:

By booking accommodation, you acknowledge that a rental contract is entered into between the customer and the owner. The rental contract is not effective until the initial deposit has been received by the owner and confirmation in writing for the booking has been sent to you by the owner.

Under the agreement, you must not offer rates lower than the owner's official published rates and must not reduce commissions to create prices lower than the official published rates without prior written approval from the owner.

The owner offers you a commission for providing the service of being responsible for all financial transactions related to the booking.

Commissions are calculated on the gross amount paid by the customer and in cases where you accept the payment from the customer. You may retain your commission and transfer the net amount in settlement to the owner.

When a customer books the accommodation, you send them the invoice and you receive the full payment. You then receive an invoice from the owner for the accommodation booked. You remit to the owner the amounts received from the customers less your commission.

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 9-25.

A New Tax System (Goods and Services Tax) Act 1999 Section 38-360.

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

Reasons for decision

Question 1

Summary

GST is not payable on the supply of rights to overseas accommodation to your customers.

Detailed reasoning

GST is payable on any taxable supply that you make.

Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) sets out the requirements of a taxable supply and it states:

You do not supply the accommodation yourself. You are merely making a supply of rights to overseas accommodation to your customers who book their accommodation via your online booking service.

You satisfy the requirements of paragraphs 9-5(a), 9-5(b) and 9-5(d) of the GST Act as:

The supply of the right to accommodation is not input taxed under the GST Act or under any other Act. Therefore, what is left to determine is whether the supply is connected with Australia and whether it is GST-free.

Section 9-25 of the GST Act outlines when supplies are connected with Australia. In particular, subsection 9-25(4) of the GST Act is relevant which states that a supply of real property is connected with Australia if the real property, or the land to which the real property relates, is in Australia.

The term real property is defined in section 195-1 of the GST Act to include, among other things, a licence to occupy land or any other contractual right over or in relation to land.

Goods and Services Tax Determination GSTD 2004/3 states, at paragraph 1, that a supply of rights to accommodation is a supply of real property for the purpose of GST.

Accordingly, your supply of rights to overseas accommodation is a supply of real property for the purposes of the GST Act.

As the real property is not located in Australia, the supply of rights to accommodation is not connected with Australia. Hence, the supply does not satisfy the requirement of paragraph 9-5(c) of the GST Act.

Therefore, as not all the requirements of section 9-5 of the GST Act are satisfied, your supply of rights to overseas accommodation is not a taxable supply and GST is not payable on the supply.

Question 2

Summary

GST is not payable on your supply of booking services to the overseas entities.

Detailed reasoning

The supply of booking services to the overseas entities satisfies the requirements of paragraphs 9-5(a), 9-5(b), 9-5(c) and 9-5(d). Furthermore, the supply is not input taxed under the GST Act or under any other Act. Therefore, what is left to determine is whether the supply is GST-free.

Section 38-360 of the GST Act deals with travel agents arranging overseas supplies and it states:

All the requirements in that section need to be satisfied for the supply to be GST-free.

The term 'travel agent' is not defined in the GST Act. However, we consider as expressed in the fact sheet GST Travel agents and commissions that a travel agent is not limited to registered travel agents but can cover other tourism enterprises, such as airlines, hotels and professional conference organisers, who arrange domestic and overseas travel on behalf of another person or persons.

As you are carrying on an enterprise of arranging accommodation, you are considered to be a travel agent for GST purposes. Hence, you satisfy the requirement of paragraph 38-360(a) of the GST Act.

You are arranging overseas accommodation for which you are paid a commission by the owner. In this instance, the effective use and enjoyment of the overseas land product takes place outside Australia. Hence, you satisfy the requirement of paragraph 38-360(b) of the GST Act.

Therefore, as all the requirements of section 38-360 of the GST Act are satisfied, the supply of your booking services to the overseas entity is GST-free and GST is not payable.

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 9-25.

A New Tax System (Goods and Services Tax) Act 1999 Section 38-190(1).

A New Tax System (Goods and Services Tax) Act 1999 Section 38-190(4).

A New Tax System (Goods and Services Tax) Act 1999 Section 38-360.

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

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