A draft practical compliance guideline (PCG 2018/D7) deals with the requirement for “inbound tour operators” to collect and remit GST.
An inbound tour operator is an Australian entity that enters into agreements with non-residents to arrange the supply of Australian tour packages (that can include accommodation and non- accommodation components).
Whether GST is required to be remitted on these supplies depends on whether they are acting as an agent or principal. If they act as an agent of the non-resident, any commission charged to the non-resident will be GST-free as it is an export. If they act as principal, the entire supply (which includes mark-up or a profit margin) may be subject to GST as they are providing the service to be used in Australia.
Under this draft PCG, an inbound tour operator can assume they are an agent, if:
- there is a written agreement is in place with the non-resident, which authorises the inbound tour operator to act as agent
- any agreement with an Australian product provider acknowledges that the operator acts as authorised agent for the non-resident and that the contract is between the non-resident and the product provider
- the non-resident is either aware of the commission or fee they pay for the agency services, or expressly allows the inbound tour operator to retain (as commission or fee) the difference between a purchase price and the amount negotiated with the product provider
- any fee charged by the inbound tour operator if the non-resident cancels a booking cannot exceed the sum of the commission or fee
- the inbound tour operator is able to give the non-resident details of transactions entered into on the non-resident’s behalf, including a breakdown of the prices of all transactions, and
- the inbound tour operator does not adopt a different position for income tax purposes.
The ATO understands that an operator, having acted as an agent for a non-resident in arranging an Australian tour package, may also provide other services while the non-resident tourist is in Australia. The ATO considers that in providing these other services and/or products, you may act as a principal.
These other services or products may include but are not limited to:
- meeting and greeting tourists on arrival in Australia
- customer assistance while tourists are in Australia including amending tourist itinerary
- bus / transit services
- guided tours (for example walking or shopping tours)
- provision of gifts.
The provision of these other services or products by you as a principal may be subject to GST.
It is therefore possible for income to not be wholly GST-free if it relates to both supplies of arranging services (GST-free) and supplies of other products or services (subject to GST). In these circumstances an operator may need to apportion a commission to taxable and non-taxable parts in accordance with GSTR 2001/8.