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Ruling

Subject: GST and supply of overseas accommodation

Questions

Is the supply of overseas accommodation to your customers subject to goods and services tax (GST?

Are you liable for the goods and services tax (GST) on your supply of booking services to the overseas entities?

Answers

No. The supply of overseas accommodation to your customers is not subject to GST.

No. You are not liable for GST on your supply of booking services to the overseas entities.

Relevant facts and circumstances

You are registered for GST.

You offer an online service for booking rental accommodation located outside Australia.

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

Customers book the overseas accommodation through your website.

You invoice the customers and receive full payments from them when they book.

You receive an invoice from the overseas entities for the accommodation booked. You remit to the overseas entities the amounts received from the customers less your commission.

You provided us a copy of an agency agreement (the agreement) between you and the owner and operator (the owner) of certain holiday accommodations overseas.

The agreement provides that, by booking an accommodation, you acknowledge that a rental contract is entered into between the customer and the owner of the property.

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

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 and

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

Reasons for decisions

Question 1

GST is payable on a taxable supply.

According to section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), you make a taxable supply if:

· you make the supply for consideration; and

· the supply is made in the course or furtherance of an enterprise that you carry on; and

· the supply is connected with Australia; and

· you are registered, or required to be registered.

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

All the requirements in section 9-5 of the GST Act must be satisfied for the supply to your customers to be a taxable supply.

What is supplied to your customers in this case is a right to accommodation overseas. According to Goods and Services Tax Determination GSTD 2004/3 (available at www.ato.gov.au), a supply of rights to accommodation is a supply of real property for GST purposes.

Subsection 9-25(4) of the GST Act provides 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. Therefore, a supply of rights to accommodation located in Australia is connected with Australia under subsection 9-25(4) of the GST Act.

As the accommodation which you supply to your customers is located outside Australia, subsection 9-25(4) of the GST Act is not satisfied. Therefore, the supply is not connected with Australia.

Your supply to the customers satisfies the requirements in paragraphs 9-5(a), 9-5(b) and

9-5(d) of the GST Act. However, the requirement in paragraph 9-5(c) of the GST Act is not satisfied. As such, the supply is not a taxable supply and is not subject to GST.

Question 2

Section 38-360 of the GST Act provides that a supply is GST-free if:

· the supplier makes it in the course of carrying on an enterprise as a travel agent; and

· it consists of arranging for the making of a supply, the effective use or enjoyment of which is to take place outside Australia.

The term 'travel agent' is not defined in the GST Act. However, our view is 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. Further, the arranging of land content for international travel is GST-free if you, in the course of carrying on your enterprise as a travel agent, make a sale, the land content will be used or enjoyed outside Australia.

In this case, you are carrying on an enterprise of arranging a supply of overseas accommodation for persons travelling overseas and the effective use or enjoyment of the supply takes place outside Australia. As the commission you receive is related to the supply of arranging for the overseas accommodation which is GST-free under section 38-360 of the GST Act, the commission you receive will also be GST-free under section 38-360 of the GST Act. Therefore, you are not liable for GST on your supply of booking services to the overseas entities.

For more information on travel agents and commissions please refer to the fact sheet 'GST-travel agents and commissions' which is available at www.ato.gov.au