In brief - Confirmation of GST obligations for hotel industry and tour operators

The ATO has recently issued GST Ruling GSTR 2018/1, which reconfirms the position in respect of when supplies of real property, and in particular hotel accommodation, are connected with Australia for GST purposes. 
This ruling replaces part of one of the fundamental GST rulings that deals with supplies of real property (GSTR 2000/31) and replaces GSTD 2004/3 dealing with the supply of rights to accommodation.
Under section 9-5 of the GST Act (A New Tax System (Goods and Services Tax) Act 1999), a taxable supply is made if:
  • the supply is for consideration, and
  • the supply is made in the course or furtherance of an enterprise that the supplier carries on, and 
  • the supply is connected with the indirect tax zone (ie, Australia), and
  • the supplier is registered, or required to be registered, for GST purposes
The GST Act specifically provides that the supply of real property is connected with Australia where the real property, or the land to which the real property relates, is in Australia.
For GST purposes, the meaning of "real property" is expanded to include a licence to occupy land or any other contractual right(s) exercisable over or in relation to land. This will include the right to stay in a hotel. 

New GSTR 2018/1 confirms previous views

In GST Ruling GSTR 2018/1 (effective 22 August 2018), the Commissioner has reconfirmed his views set out in GSTD 2004/3 (now withdrawn by the Ruling), that a grant of contractual rights to occupy or stay at accommodation in Australia is "connected with" Australia.
The Ruling makes clear that supplies of hotel accommodation by hotels located in Australia will be "connected with" Australia, and subject to Australian GST (assuming all of the other requirements of a taxable supply in section 9-5 of the GST Act are satisfied).

Application of GST Ruling to tour operators

The ATO has also confirmed its position in respect of the business of tour operators.
  • a tour operator grants a traveller the right to stay at a hotel in Australia,
  • even if the hotel is operated by a different entity, then
  • the tour operator is making a supply of rights to accommodation,
  • which is a supply of real property connected with Australia.
The tour operator is therefore liable for GST on that supply if the other requirements of a taxable supply under section 9-5 of the GST Act are met. 
The tour operator could be a non-resident of Australia and still be liable for Australian GST.
The "connection with Australia" test for GST purposes extends to on-supply, for example where a New Zealand tour operator on-sells (as principal) accommodation in Australia to New Zealand resident tourists as part of a package tour.
In that case, the Commissioner considers that the New Zealand tour operator is also supplying real property connected with Australia and, therefore, is liable for GST if it otherwise falls within the scope of Australian GST.

Offshore sellers of hotel accommodation in Australia

The ATO is currently consulting on draft legislation to extend GST by ensuring that offshore sellers of hotel accommodation in Australia calculate their GST turnover in the same way as local sellers from 1 July 2019. 

Importance of ATO's Ruling for the hotel industry

The Ruling is a helpful indicator to the hotel and accommodation industry of its GST obligations, and is consistent with the Commissioner's approach in respect of other supplies connected with Australia.
Disclaimer: The content of this article does not constitute legal or financial advice to be relied upon.

This is commentary published by Colin Biggers & Paisley for general information purposes only. This should not be relied on as specific advice. You should seek your own legal and other advice for any question, or for any specific situation or proposal, before making any final decision. The content also is subject to change. A person listed may not be admitted as a lawyer in all States and Territories. © Colin Biggers & Paisley, Australia 2024.

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