Edited version of your written advice

Authorisation Number: 1013105953136

Date of advice: 11 October 2016

Ruling

Subject: GST and supply of specific tours

Question

Is your supply of specific overseas tours to the tour participants a taxable supply under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Advice

Based on the facts given we consider the following distinct supplies are made when you supply the specific overseas tours to the tour participants:

• supply of a right to overseas accommodation - the supply is not connected with Australia and therefore outside the scope of the goods and services tax (GST);

• supply of goods (breakfast, dinner) outside Australia - the supply is not connected with Australia and therefore outside the scope of GST;

• supply of rights to overseas land products (airport transfers, entry for visiting the sites, transport other than air transport, porterage and guide services. The tips are incidental to the supply of rights to overseas land products).

Your supply of right to overseas land products is connected with Australia, and is not a taxable supply under section 9-5 of the GST Act where your GST annual turnover in regard to supplies that are connected with Australia is under $75,000 and you choose not to register for GST.

Where you are registered or required to be registered for GST (because the GST turnover for supplies that are connected with Australia is $75,000 or above), your supply of right to overseas land products is GST-free under paragraph (a) of item 4 in the table in subsection 38-190(1) of the GST Act.

Relevant facts

You run a business in Australia and your business activity is to promote and supply overseas tours. This is the only business activity that you carry on in Australia.

Currently you are not registered for GST because your GST annual turnover is under the GST registration threshold of $75,000. However you estimate that your projected GST annual will be above $75,000.

You organise the specific overseas tours with an overseas tour company. The tour company runs the overseas tours and provides all the hotel accommodation, bus, bus driver and tour guide for the tours.

You promote the overseas tours in Australia to anyone wanting to go on an overseas tour. You calculate the cost of the tours in Australian dollars and determine what price you are going to charge for the tours and receive payments from the tour participants. You then make payment of the specific tour costs to the tour company before the tour participants leave Australia.

In general most of the tour participants are located in Australia and are residents of Australia. You do not organise the flights of the tour participants. The flights are organised by the tour participants themselves or can be organised by a travel agent.

Each tour price includes group airport transfers on arrival and departure, accommodation as listed on each tour page, including breakfast and dinner daily, hotel porterage fees, licensed tour guides, entrance/site admission fees included in program and customary tips.

Each tour does not include flights, travel and medical insurance (which is required), visa documents (if required), individual airport transfers to hotel destinations for earlier or later arrival/departures, lunches daily and personal expenses.

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 23-5

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

Reasons for decision

Detailed reasoning

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. Under section 9-5 of the GST Act, an entity makes a taxable supply if:

a) the supply is made 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 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 must be satisfied for your supplies to be taxable supplies.

The facts indicate that you satisfy paragraphs 9-5(a) and 9-5(b) of the GST Act since you make your supply of specific overseas tours for consideration and the supply is made in the course of a business that you carry on in Australia.

We will now consider the remaining criteria for a taxable supply.

Paragraph 9-5(c) of the GST Act - connected with Australia

The connection with Australia is one of the elements required to be satisfied before a supply is a taxable supply.

For the purposes of determining whether a supply is connected with Australia, section 9-25 of the GST Act makes a distinction between a supply of goods, a supply of real property and a supply of anything other than goods or real property.

From the information received, each tour price includes group airport transfers on arrival and departure, accommodation as listed on each tour page, including breakfast and dinner daily, hotel porterage fees, licensed tour guides, entrance/site admission fees included in program and customary tips.

Accordingly, we need to determine the character of your supply of specific overseas tours to the tour participants before determining the GST status of the supply.

Based on the facts given we consider the following distinct supplies are made to the tour participants when you supply the specific tours:

• supply of a right to overseas accommodation;

• supply of goods (breakfast, dinner) outside Australia; and

• supply of rights to overseas land products (airport transfers, entry for visiting the sites, transport other than air transport, porterage and guide services. We consider the tips are incidental to the supply of rights to overseas land products as the tips are a means of better enjoying the supply of rights to overseas land products rather than constituting an aim in itself).

Supply of a right to overseas accommodation

A supply of rights to overseas accommodation is a supply of real property.

Under subsection 9-25(4) of the GST Act 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.

You provide the tour participants with accommodation located overseas. Your supply of the right to overseas accommodation is not connected with Australia and is therefore outside the scope of GST.

Supply of goods

A supply of goods is connected with Australia if:

• the goods are delivered or made available in Australia to the recipient of the supply (subsection 9-25(1) of the GST Act); or

• the supply of the goods involves the goods being removed from Australia (subsection 9-25(2) of the GST Act); or

• the supply of the goods involves the goods being brought to Australia and the supplier imports the goods into Australia (subsection 9-25(3) of the GST Act).

A supply of food (breakfast, dinner) is a supply of goods for GST purposes. Since the goods are provided wholly outside Australia to the tour participants, the supply of the goods is not connected with Australia and is outside the scope of GST.

Supply of rights to overseas land products

Under subsection 9-25(5) of the GST Act, a supply of anything other than goods or real property is connected with Australia if:

a) The thing is done in Australia; or

b) The supplier makes the supply through an enterprise that the supplier carries on in Australia; or

c) All of the following apply:

i. Neither paragraph (a) nor (b) applies in respect of the thing;

ii. The thing is a right or option to acquire another thing;

iii. The supply of the other thing would be connected with Australia.

Your supply of rights to overseas land products (airport transfers, entry for visiting the sites, transport other than air transport, porterage and guide services) is connected with Australia as they are provided through an enterprise that you carry on in Australia.

However, your supply of rights to overseas land products may be not a taxable supply to the extent that you are either not registered for GST or the supply is GST-free where you are required to be registered or are registered for GST.

There is no provision under the GST Act that makes your supply of rights to overseas land products input taxed.

Paragraph 9-5(d) of the GST Act - GST registration

Under section 23-5 of the GST Act, an entity is required to be registered for GST if:

a) the entity carries on an enterprise; and

b) the entity's GST turnover (current and/or projected) meets the GST registration turnover threshold (currently $A75,000 and $A150,000 for non-profit organisation).

The entity can choose to register for GST if its GST turnover is less than $A75,000.

Goods and Services Tax Ruling GSTR 2001/7 (available at www.ato.gov.au) provides guidance on the meaning of GST turnover.

The current annual turnover is the sum of the values of all supplies made in a particular month plus the previous 11 months. The projected annual turnover is the sum of the value of all supplies made in a particular month plus the next 11 months.

The GST turnover is the gross business income (not the profit), excluding any:

• supplies that are input taxed;

• supplies that are not for consideration (and are not taxable supplies under section 72-5);

• supplies not made in connection with an enterprise that you carry on;

• supplies that are not connected with Australia;

• supplies that are connected with Australia because of paragraph 9-25(5)(c) of the GST Act;

• supplies (other than supplies that are not connected with Australia and supplies that are connected with Australia because of paragraph 9-25(5)(c) of the GST Act) of a right or option to use commercial accommodation in Australia where the supplies are not made in Australia and are made through an enterprise that the supplier does not carry on in Australia; and

• supplies made from one member of a GST group to another member of that GST group.

In your case you will only consider supplies that are connected with Australia when calculating your current and projected GST annual turnover. You will therefore only include the turnover for the supply of your rights to overseas land products when calculating your current and projected GST annual turnover.

Where your current or projected GST annual turnover of supplies connected with Australia is below the GST registration threshold of $75,000, you are not required to be registered for GST. In this instance your supply of rights to overseas land products will be outside the scope of GST as currently you are not registered for GST. However you can choose to register for GST.

Where your current or projected GST annual turnover for supplies connected with Australia meets or exceeds the GST registration threshold of $75,000 you will be required to be registered for GST. In this instance your supply of rights to overseas land products will be subject to GST to the extent that it is not GST-free.

GST-free supply

Under item 4 in the table in subsection 38-190(1) of the GST Act (item 4), a supply made in relation to rights is GST-free if:

(a) the rights are for use outside Australia; or

(b) the supply is to an entity that is not an Australian resident and outside Australia when the thing supplied is done.

Based on the information received the rights to the land products are used and enjoyed while the participants are overseas. Therefore, your supply of rights to various overseas land products to the tour participants is GST-free under paragraph (a) in item 4 to the extent that it is not limited by subsection 38-190(2) or 38-190(2A) of the GST Act.

Subsection 38-190(2) and 38-190(2A) of the GST Act do not apply as the supplies that you make are not in respect of the supply of a right to acquire something that is connected with Australia.

Summary

Based on the facts given we consider the following distinct supplies are made when you supply the specific overseas tours to the tour participants:

• supply of a right to overseas accommodation - the supply is not connected with Australia and therefore outside the scope of the goods and services tax (GST);

• supply of goods (breakfast, dinner) outside Australia - the supply is not connected with Australia and therefore outside the scope of GST;

• supply of rights to overseas land products (airport transfers, entry for visiting the sites, transport other than air transport, porterage and guide services. The tips are incidental to the supply of rights to overseas land products).

Your supply of right to overseas land products is connected with Australia and is not a taxable supply under section 9-5 of the GST Act where your GST annual turnover in regard to supplies that are connected with Australia is under $75,000 and you choose not to register for GST.

Where you are registered or required to be registered for GST (because the GST turnover for supplies that are connected with Australia is $75,000 or above), your supply of right to overseas land products is GST-free under paragraph (a) of item 4 in the table in subsection 38-190(1) of the GST Act.

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