| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your private ruling
Authorisation Number: 1012582048999
Ruling
Subject: GST and international recreation packages
Question 1
Are the services supplied by A connected with Australia?
Answer
Yes.
Question 2
Are the services supplied by A GST-free?
Answer
Yes.
Question 3
If yes (in question 2 above), does the addition of flights into the services supplied change the GST-free outcome?
Answer
No.
Relevant facts and circumstances
A supplies recreation travel packages. The packages are currently for international destinations. No services are currently supplied in Australia.
The packages begin upon the participants' arrival at the international destination and include:
· return transfers airport - accommodation
· accommodation
· entry into the recreation event
· some meals
· tuition
· services by a professional
· attire
The package ceases prior to arrival in Australia and no transfers from the Australian airport are provided.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 38-190
A New Tax System (Goods and Services Tax) Act 1999 section 38-355
A New Tax System (Goods and Services Tax) Act 1999 section 11-5
A New Tax System (Goods and Services Tax) Act 1999 section 9-25
Reasons for decision
Question 1
Summary
The services supplied by A are connected with Australia.
Detailed reasoning
For a supply of services such as A's to be connected with Australia, the supply has to meet the requirements of subsection 9-25(5) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act):
(5) 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.
In respect of paragraph (a) above, the 'thing', that is A's supply of services is done in Australia as the supply is made through A's permanent establishment in Australia as required in subsection 9-25(6) of the GST Act:
(6) An *enterprise is carried on in Australia if the enterprise is carried on through:
(a) a permanent establishment (as defined in subsection 6(1) of the Income Tax Assessment Act 1936); or
(b) a place that would be such a permanent establishment if paragraph (e), (f) or (g) of that definition did not apply.
Therefore, A's supply of services is connected with Australia.
Question 2
Summary
The services supplied by A are GST-free as the supplies are used or enjoyed by the recipients outside Australia.
Detailed reasoning
Item 3 in subsection 38-190(1) of the GST Act provides for the GST-free treatment of supplies that are made when the recipient is outside Australia and are effectively used or enjoyed outside Australia:
38-190 Supplies of things, other than goods or real property, for consumption outside Australia
(1) The third column of this table sets out supplies that are GST-free (except to the extent that they are supplies of goods or *real property):
Supplies of things, other than goods or real property, for consumption outside Australia | ||
Item |
Topic |
These supplies are GST-free (except to the extent that they are supplies of goods or *real property)... |
3 |
Supplies used or enjoyed outside Australia |
a supply: (a) that is made to a *recipient who is not in Australia when the thing supplied is done; and (b) the effective use or enjoyment of which takes place outside Australia; other than a supply of work physically performed on goods situated in Australia when the thing supplied is done, or a supply directly connected with *real property situated in Australia. |
A's supply is similar to that of a package holiday retailer that sells overseas holidays, including recreation, accommodation and meals. Whilst the contract for the supplies may be executed in Australia, the relevant supplies are made to the recipient at the precise time the recipient is not in Australia. It follows that the effective use or enjoyment of transient supplies such as accommodation, recreation and meals takes place outside Australia.
Question 3
Summary
The addition of international flights into the services supplied does not change the GST-free outcome. The addition of connecting domestic legs to an existing GST-free international flight will not change the GST-free outcome provided that either the domestic ticket is sold in conjunction with and cross referenced to the international ticket or forms part of the international ticket.
Detailed reasoning
Section 38-355 of the GST Act provides that international air passenger transport is GST-free and that the transport of passengers on domestic legs of international flights can also be GST-free.
38-355 Supplies of transport and related matters
(1) The third column of this table sets out supplies that are GST-free:
Supplies of transport and related matters | ||
Item |
Topic |
These supplies are GST-free ... |
1 |
Transport of passengers to, from or outside Australia |
the transport of a passenger: (a) from the last place of departure in Australia to a destination outside Australia; or (b) from a place outside Australia to the first place of arrival in Australia; or (c) from a place outside Australia to the same or another place outside Australia. |
2 |
Transport of passengers on domestic legs of international flights |
the transport of a passenger within Australia by air, but only if: (a) the transport is part of a wider arrangement, itinerary or contract for transport by air involving international travel; and (b) at the time the arrangement, itinerary or contract was entered into, the transport within Australia formed part of a ticket for international travel, or was cross referenced to such a ticket, issued at that time. |
Therefore the addition of international flights to A's overseas recreation packages will not alter the GST-free status of the package. Further, if an outbound domestic flight to the point of departure is added and/or an inbound domestic flights from the point of arrival is added on the same itinerary at the time the international flights are secured, those domestic flights will be GST-free.
Input tax credits
The making of GST-free supplies does not diminish the supplier's entitlement to claim input tax credits. The entitlement to an input tax credit for a business acquisition arises where:
· you make the acquisition for your business;
· the supply to you is taxable, that is the price you pay includes GST;
· you pay or are liable to pay for the acquisition; and
· you are registered for GST.
An exclusion to this entitlement is where you use the acquisition to make input taxed supplies (such as financial supplies or residential rent). Another exclusion occurs where the acquisition is used privately or domestically.