Edited version of your private ruling

Authorisation Number: 1012599648274

Ruling

Subject: Goods and services tax (GST) and bus tours

Question 1

Is GST payable on your supplies of buses to the non-resident company?

Answer

Yes.

Question 2

Is GST payable on your supplies of bus drivers to the non-resident company?

Answer

Yes.

Relevant facts and circumstances

You are registered for GST

You carry on a business of supplying buses and bus drivers to tour operators.

You are based in Australia.

You sub-lease buses and supply bus drivers to a non-resident company, which uses them to conduct tours around Australia. You charge for these supplies.

You payroll the drivers and pay all PAYG and superannuation. You bill the non-resident company for your total cost of labour and charge a service fee for doing this.

The non-resident company has offices in an overseas country. Ticket sales for the Australian tours are made through the non-resident company's overseas offices.

The non-resident company also has a branch in Australia, but this branch carries on a different business to the business carried on by the overseas offices. The Australian branch supplies tours around overseas countries.

The Australian branch of the non-resident company has a certain percentage management involvement with the bus drivers when they are being used by the non-resident company. The Australian branch of the non-resident company arranges accommodation and meals etc for the bus drivers.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 subsection 7-1(1)

A New Tax System (Goods and Services Tax) Act 1999 section 9-5

A New Tax System (Goods and Services Tax) Act 1999 section 38-190

Reasons for decisions

Summary

We consider that you are supplying tours to the non-resident company, and your supplies of buses and bus drivers are components of these supplies.

GST is payable on your supplies of tours to the non-resident company because:

• you supply the tours for consideration;

• you supply the tours in the course or furtherance of an enterprise that you carry on;

• these supplies are connected with Australia;

• you are registered for GST; and

• these supplies are not GST-free or input taxed.

Your supplies of the tours are not GST-free under item 2 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) because they are supplies to an entity that is in Australia in relation to your supplies and you are providing the supplies to third parties in Australia.

Detailed reasoning

GST is payable by you on your taxable supplies.

You make a taxable supply where you satisfy the requirements of section 9-5 of the GST Act, which states:

You make a taxable supply if:

(a) you make the supply for *consideration; and

(b) the supply is made in the course or furtherance of an *enterprise that

you *carry on; and

(c) the supply is *connected with Australia; and

(d) you are *registered, or *required to be registered.

However, the supply is not a *taxable supply to the extent that it is *GST-free

or *input taxed.

(*Denotes a term defined in section 195-1 of the GST Act)

We consider that you are supplying tours to the non-resident company, and your supplies of buses and bus drivers are components of these supplies of tours.

You meet the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act because:

• you supply the tours for consideration;

• you supply the tours in the course or furtherance of an enterprise that you carry on;

• these supplies are connected with Australia; and

• you are registered for GST.

There are no provisions in the GST Act under which your supplies of the tours are input taxed.

Therefore what remains to be determined is whether your supplies of the tours are GST-free.

GST-free supplies to non-residents

In accordance with subsection 38-190(1) of the GST Act, supplies of things other than goods or real property to entities which are outside Australia may be GST-free.

Item 2 in the table in subsection 38-190(1) of the GST Act provides that a supply of something other than goods or real property to a non-resident who is not in Australia when the thing supplied is done is GST-free if:

(a) the supply is neither a supply of work physically performed on goods situated in Australia when the work is done nor a supply directly connected with real property situated in Australia; or

(b) the non-resident acquires the thing in carrying on the non-resident's enterprise, but is not registered or required to be registered for GST.

However, subsection 38-190(3) of the GST Act provides that a supply covered by item 2 in the table in subsection 38-190(1) of the GST Act is not GST-free if it is a supply under an agreement entered into with a non-resident and the supply is provided to another entity in Australia.

Paragraph 31 of Goods and Services Tax Ruling GSTR 2004/7 states:

31. The requirement that the non-resident in item 2, or the recipient in item 3, is not in Australia when the thing supplied is done is a requirement, in our view, that the non-resident or recipient is not in Australia in relation to the supply when the thing supplied is done.

Paragraph 37 of GSTR 2004/7 explains when a non-resident company is in Australia. It states:

37. A non-resident company is in Australia if that company carries on business (or in the case of a company that does not carry on business, carries on its activities) in Australia:

(a) at or through a fixed and definite place of its own for a sufficiently substantial period of time; or

(b) through an agent at a fixed and definite place for a sufficiently substantial period of time.

Paragraph 41 of GSTR 2004/7 explains when a non-resident company is in Australia in relation to a supply. It states:

41. A non-resident company is in Australia in relation to the supply if the supply is solely or partly for the purposes of the Australian presence, for example, its Australian branch. If the supply is not for the purposes of the Australian presence but that Australian presence is involved in the supply, the company is in Australia in relation to the supply, except where the only involvement is minor.

Paragraphs 362 and 363 of GSTR 2004/7 give an example where the Australian branch of a non-resident company is involved with a supply made by an Australian company and this involvement is of more than a minor nature. They state:

362. A United Kingdom company ('UK Co') has a representative office in Australia at which it carries on business. UK Co engages Aus Finance, an Australian company, to give advice on the possible acquisition of shares in an Australian company. UK Co instructs its representative office in Australia to give responses to the questions posed by Aus Finance and any other information that may be of assistance to Aus Finance. Some information is supplied in writing, and at other times the information is supplied at meetings held between Aus Finance and the Australian representative office of UK Co .

363. The role of the representative office in Australia is not limited to administrative tasks of a minor nature. UK Co is in Australia in relation to the supply. Therefore, the supply is not GST-free under item 2 or item 3 .

Paragraphs 222 and 223 of Goods and Services Tax Ruling GSTR 2005/6 discuss the concept of providing a supply to an entity. They state:

222. We consider, therefore, that 'provided' in the context of subsection 38-190(3) is used, in relation to a supply covered by item 2, to distinguish between the contractual flow of the supply to the non-resident recipient and the actual flow of the service or other thing supplied to another entity in Australia.

223. This view is supported by the construction of subsection 38-190(3). Paragraph 38-190(3)(a) requires that the supply covered by item 2 is under an agreement entered into with a non-resident. That paragraph establishes the contractual arrangements for the supply - an agreement with a non-resident. Paragraph 38-190(3)(b) looks to the provision of the supply and whether it is provided to another entity in Australia - that is, the actual flow of that supply. These paragraphs contrast the recipient of the supply under the agreement - a non-resident, and the entity that is provided with the supply - another entity.

Paragraph 96 of GSTR 2005/6 discusses the situation where the providee is a non-resident individual. It states:

96. If a supply is provided (or is required to be provided) to a non-resident individual who is physically in Australia when the thing supplied is done and that individual's presence in Australia is integral to, as distinct from being merely coincidental with, the provision of the supply, we consider that the supply is provided to that individual in Australia. The requirement in paragraph 38-190(3)(b) is satisfied and subsection 38-190(3) (assuming the other requirements of the provision are satisfied) negates the GST-free status of the supply.

Paragraph 100 of GSTR 2005/6 discusses the situation where the providee is a residential individual. It states:

100. If a supply is provided (or is required to be provided) to a resident individual who is physically in Australia when the thing supplied is done, the supply is provided to that individual in Australia. The requirement in paragraph 38-190(3)(b) is satisfied and subsection 38-190(3) negates the GST-free status of the supply (assuming the other requirements of that provision are satisfied).

You are supplying tours to the non-resident company. Therefore, you are supplying something other than goods or real property. Hence, it is appropriate to consider item 2 in the table in subsection 38-190(1) of the GST Act.

You are supplying the tours to a non-resident.

The non-resident company is based overseas, but also has a branch in Australia that conducts outbound tours.

We consider that you supply the tours for the purposes of the non-resident company's overseas presence because ticket sales are made through the overseas offices and their Australian branch's involvement in the Australian tours business is to assist the business operated by the non-resident company from its overseas offices. The Australian branch of the non-resident company carries on a business of supplying tours around overseas countries whereas the overseas offices are carrying on the business of supplying tours around Australia.

However, the Australian branch of the non-resident company is involved with the supply of the tours and this involvement is not of a minor nature, as the Australian branch of the non-resident company has a certain percentage management involvement in relation to the bus drivers when they are being used by the non-resident company and the Australian branch assists with arranging accommodation and meals for the bus drivers.

Therefore, the non-resident company is in Australia in relation to your supplies of the tours.

You are supplying the tours under an agreement you have with a non-resident.

You are providing the tours to third parties - the travellers.

Where the travellers are non-residents, you would be providing the tours to these non-residents in Australia because their presence in Australia is integral to receiving the supplies.

Where the travellers are residents, you would be providing the tours to these residents in Australia because they are physically in Australia when the tours are performed and they are residents.

Therefore, the exclusion in subsection 38-190(3) of the GST Act applies.

As the non-resident company is in Australia in relation to your supplies of the tours and the exclusion in subsection 38-190(3) of the GST Act applies, your supplies of the tours are not GST-free supplies under item 2 in the table in subsection 38-190(1) of the GST Act.

There are no other provisions of the GST Act under which your supplies of the tours are GST-free.

Therefore, as all of the requirements of section 9-5 of the GST Act are met, you make taxable supplies of the tours. Hence, GST is payable on your supplies of the tours.

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