Edited version of private ruling

Authorisation Number: 1011679291969

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Ruling

Subject: GST and overseas travel package for students

Question 1

Are the payments you receive from members of a student club for the supply of an overseas travel package, subject to goods and services tax (GST)?

Answer

Yes, the payments that you receive from members of a student club for the supply of a travel package are subject to GST to the extent that the payments are consideration for the components of apparel and services provided in relation to that apparel.

However, the payments are not subject to GST to the extent the payments are consideration for the components of the airfares, and rights to overseas land products and overseas accommodation, and services provided in relation to those components.

Question 2

Are you required to issue a tax invoice for the supply of a travel package to the students?

Answer

You do not have to issue a tax invoice where the total of the taxable part of your supply is under the low value threshold (value of $75; price of $82.50).

Relevant facts and circumstances

The entity is registered for GST.

The entity runs a sports centre at an educational institution.

A student club is not registered or required to be registered for GST.

The student club, together with the entity, organise a yearly overseas trip on behalf of its student members.

The entity arranges the airflights and accommodation with a travel agent. The airfares are booked in the individual student's name.

The entity pays the travel agent up front once the number of member students is known.

The entity receives an invoice for the airfares from the travel agent but the tickets are issued directly to the individual students.

The airline would pursue the entity in the first instance for non-payment of the invoice. If there is a cancellation the student has to pay the money involved to the entity for any fees. However the student is legally liable for the airfare.

The student club collects the money from the students and pays the entity for the airfares, accommodation, rights to overseas land products and apparel on the student's behalf.

The entity purchases the apparel from suppliers on behalf of the students for the trip.

The entity does not purchase the apparel items in the individual students' names and the entity is liable for the cost of the acquisition. The tax invoices from the suppliers are made out to the entity.

The entity shows the total transactions in its Revenue and Expenditure accounts.

There is no written agreement between the entity, the student club and the students.

The trip participants are not issued with a tax invoice by the entity.

Reasons for Decision

The GST legislation provides that you must pay GST on taxable supplies that you make.

You make a taxable supply if you are registered or required to be registered for GST and:

· you make the supply for payment (consideration)

· you make the supply in the course or furtherance of an enterprise you carry on, and

· the supply is connected with Australia.

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

You include GST in the price of your taxable supplies and you do not include GST in the price of any input taxed or GST-free supplies you make.

Some supplies may be partly taxable and partly GST-free or input taxed. This will be the case where a taxable supply can be separated into identifiable parts and one or more of those parts is GST-free or input taxed. These supplies are also known as mixed supplies.

In the entity's case, there are a number of separately identifiable parts or components being supplied to the participants in the tour package. The GST implication on each of these components needs to be separately determined.

International airfares

A supply is broadly defined in the GST legislation as any form of supply whatsoever. In order to make a taxable supply, you must make a supply.

Based on the information the entity provided, it is not the supplier of the international transport which is supplied as part of the tour package. The supplier of the international transport is the entity that provides the transport service, that is, the airline company.

In the entity's case, it only organises and pays for the booking for the international transport on behalf of the tour participants by using a local travel agent.

Although the entity is not the supplier of the international air transport, it should be noted that the GST legislation provides that the supply of international air transport is GST-free. Therefore, there will be no GST included in the price of the international airfares.

Supplies of rights to the overseas land content of the tour

Under item 4(a) of the table in subsection 38-190(1) (Item 4(a)) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), a supply that is made in relation to rights is GST-free if the rights are for use outside Australia.

Based on the information provided, the entity supplies rights to overseas land products to the tour participants. These rights to overseas land products are used and enjoyed while the tour participants are overseas, therefore the supply of these rights is GST-free under item 4(a). It should be noted that a supply of a right to overseas accommodation cannot be covered under subsection 38-190(1) as this section does not cover supplies of real property (see below).

As such, the payments that the entity receives from the tour participants which relate to the supplies of rights relating to the overseas land content of the tour is not subject to GST as this payment represents consideration for a GST-free supply.

Supply of overseas accommodation

Irrespective of any other requirements under section 9-5, it is necessary for a supply to be connected with Australia in order for the supply to be taxable. Paragraph 94 in Goods and Services Tax Ruling GSTR 2003/7 states:

94. The essence of a supply of hotel accommodation is the right to occupy a specified room for a particular period.

Furthermore, 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 goods and services tax (GST).

Subsection 9-25(4) of the GST Act 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.

Consequently, where a supplier supplies international accommodation or a right to international accommodation, the supply does not satisfy paragraph 9-5(c) of the GST Act as the supply is not connected with Australia. This is because the real property is not in Australia. Such a supply is therefore not subject to GST as it is outside the scope of the GST system.

Supply of apparel

The entity purchases and supplies apparel to the tour participants while they are in Australia prior to their overseas departure.

In this instance, the entity is making taxable supplies when it supplies the apparel as the supplies satisfy all of the requirements of a taxable supply (the entity supplies it for consideration, the supply is made in the course of the entity's enterprise, the supply is connected with Australia and the entity is registered for GST).

Furthermore, the supply of the apparel in the entity's circumstances is not GST-free or input taxed under the GST legislation.

Therefore, as the supply of the apparel is a taxable supply, the payment that the entity receives from the tour participants which represents consideration for these items is subject to GST.

Tax invoice

An entity must issue a tax invoice if any taxable supplies (or taxable part thereof) it makes are $82.50 or more (including GST) and the purchaser requests a tax invoice. The tax invoice must be issued within 28 days of this request.

Paragraphs 16 and 17 of Goods and Services Tax Ruling GSTR 2000/17 state:

16. A supplier does not have to issue a tax invoice and a recipient can claim an input tax credit without holding one, if the value of the taxable supply is $75 or less However, you should keep records that support all input tax credit claims. For most supplies, a value of $75 corresponds with a price of $82.50.

17. The Commissioner applies this threshold on the basis that a number of things supplied together is one taxable supply, rather than each thing being a separate supply. For example, if the transaction comprises the sale of five items, each with a value of $20, then you need a tax invoice because the total value of the taxable supply exceeds $75.

Therefore the entity does not have to provide a tax invoice to the students where the total of the taxable part of its supply is under the low value threshold (value, excluding GST, of $75.00; price, including GST, of $82.50).