Private ruling: GST and domestic leg of an international flight for passengers
Published: July 2013

Ruling: Q1: Is the supply of the domestic leg(s) of an international charter flight by an Australian company (you) GST-free under item 2 in the table in subsection 38-355(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: Yes, your supply of the domestic leg(s) of an international charter flight is GST-free under item 2 in the table in subsection 38-355(1) of the GST Act (Item 2) where the domestic air transport is part of a wider arrangement, itinerary or contract for the international air transport. | Q2: Will the single quotation for the domestic leg(s) of the international charter flight, the subsequent customer's acceptance, and your confirmation as described satisfy the requirement under Item 2 that the transport within Australia forms part of a ticket for international travel? | A2: Yes, the requirement under Item 2 that the transport within Australia formed part of a ticket for international air travel, or was cross-referenced to such a ticket issued at that time, is satisfied where you have issued a documentation (confirmation) which grants a right, entitlement or permission to that customer to be supplied with the transport (and the domestic leg is sold in conjunction with or cross-referenced to the international transport for that customer).

Relevant facts and circumstances: An Australian company (you) is registered for goods and services tax (GST). You will supply charter flight services. You are applying for a certificate to allow you to operate these charter flights. The charter flights will have a large amount of variation in their routing. There will be a significant number of international flights (that is, trips to or from overseas destinations), where there would be a domestic leg(s) with these international flights. For all your charter flight services (work), you will issue a quotation for the services to be provided, which would be followed by an acceptance process by your customer(s). Your understanding is that the quotation and subsequent customer's acceptance would constitute a preliminary recording of transactions. When you enter into an arrangement with a customer to supply the international charter flight which has a domestic leg, you confirm that you will quote the international and domestic legs together within a single quotation. You also confirm that where you supply any domestic legs with the international flights, that the domestic legs will be part of an itinerary or arrangement for the international transport for that customer(s). That is, where there are international and domestic legs of the one charter flight job, there will be only one itinerary or arrangement for the whole of that charter job. At this stage, the actual quotation and terms and conditions are not yet finalised. However, you confirm that after the quotation is accepted by a customer, you will provide a written confirmation document indicating the charter flight services to be provided with that booking for that customer. You confirm that for any quotation and any other documentation issued to a customer, the domestic transport (leg) will be sold in conjunction with or cross-referenced to the international transport for that customer. This ruling only addresses charter flights (transport) which have a combination of international and domestic flights. You do not require a ruling in respect of either purely domestic flights or purely international flights. This ruling relates to the transport of passengers, and not the transport of goods.

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 38-355

Reasons for decision: Detailed Reasoning - Issues 1 and 2: GST is payable on a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), which states: You make a taxable supply if: (a) you make the supply for *consideration; and (b) the supply is made in the course or furtherance of an *enterprise that you *carry on; and (c) the supply is *connected with Australia; and (d) you are *registered, or required to be registered. However, the supply is not a taxable supply to the extent that it is *GST-free or *input taxed. (* denotes a defined term in section 195-1 of the GST Act) The facts indicate that you satisfy the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act as follows: · you will make the supply of the charter flights in return for consideration (such as payments); · the supply will be made in the course of your (charter flights) business; · the supply of the charter flights will be connected with Australia (because the supply is either done in Australia or made through an enterprise (business) that you carry on in Australia); and · you are registered for GST in Australia. However, your supply of the charter flights is not taxable to the extent that it is GST-free or input taxed. Section 38-355 of the GST Act specifies the circumstances where certain supply of transport is GST-free. Of particular relevance to your supply of charter flights for passengers are the following items in the table in subsection 38-355(1) of the GST Act: | Detailed Reasoning - 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. .......... 3 Domestic air travel of non-residents the transport of a passenger within Australia by air, but only if: (a) the passenger is a *non-resident; and (b) the supply was purchased while the passenger was outside Australia. .......... The fact sheet GST and international transport of passengers (NAT 3459) states: | Detailed Reasoning - When can you sell international passenger transport GST-free?: You can sell international transport GST-free if you sell it to passengers travelling to or from Australia (by air or sea) and it is from any of the following: · the last place of departure in Australia to a destination outside Australia · a place outside Australia to the first place of arrival in Australia · a place outside Australia to the same or another place outside Australia. | Detailed Reasoning - When can you sell the domestic legs of international passenger transport GST-free?: Domestic transport by air You can sell domestic air transport GST-free if the following applies: · the domestic transport is part of an itinerary or arrangement leading to international air transport · the domestic transport formed part of a ticket for international air transport when the arrangement was made, or was cross-referenced to it. Further, issue 12 of the Tourism and Hospitality Industry Partnership - Issues Register (Issues Register) considers the meaning of 'transport' which is GST-free, and states: Issue 12 of the Issues Register covers whether the 'transport of a passenger within Australia by air' include: a. charter flights b. scenic flights, hot air ballooning trips, if they are all part of the international holiday package? The term 'transport' is given its ordinary meaning. 'Transport' is defined in the Macquarie Concise dictionary as 'to carry or convey from one place to another'. Travel is similarly defined as 'to go from one place to another'. Therefore a derived definition for domestic air travel is 'to convey the passenger from one place to another (different) place'. The transport of a passenger within Australia by air is GST-free, but only if: · the transport is part of a wider arrangement, itinerary or contract for transport by air involving international travel · 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. Or · the passenger is a non-resident · the transport was purchased while the passenger was outside Australia. Applying this to the examples given: A charter flight that conveys passengers from one place to another place is transport of a person within Australia by air for GST purposes. The charter flight would be GST-free if the conditions above are met. A scenic flight or hot air balloon flight is not the transport of a person within Australia by air for GST purposes because it does not convey passengers from one destination to another, but rather provides a sight-seeing service. Where a flight has no specified destination distinct from the point of departure at which passengers disembark, the flight does not meet the definition of 'transport'. GST is payable on these services, even if purchased by a non-resident outside Australia. Accordingly, we note that charter flights that convey passengers from one destination to another will meet the definition of 'transport', whereas scenic flights are not 'transport' for the purposes of section 38-355 of the GST Act. The facts indicate that you will supply charter flight services (that is, transport). The charter flights will have a large amount of variation in their routing. There will be a number of international flights (that is, trips to or from overseas destinations) where there would be a domestic leg(s) with these international flights. The domestic transport component of the charter flight does not come within the scope of item 1 in the table in subsection 38-355(1) of the GST Act. However, under item 2 in the table in subsection 38-355(1) of the GST Act (Item 2), the transport of passengers on domestic legs of international flights within Australia is GST-free if: (a) the transport is part of a wider arrangement, itinerary or contract for transport by air involving international air travel; and (b) the transport within Australia formed part of a ticket for international air travel, or was cross referenced to such a ticket issued at that time. The facts indicate that you will enter into arrangements/agreements to supply charter flight services (transport) to various companies/organisations (for the transport of individual passengers). The charter flights will have a combination of international and domestic legs. You confirm that where you supply any domestic legs of international flights, that the domestic legs will be part of an itinerary or arrangement for the international transport for that customer(s). That is, where there are international and domestic legs of the one charter flight job, there will be only one itinerary or arrangement for the whole of that charter job. The domestic transport provided by you forms part of the overall charter arrangements for the international transport, and therefore paragraph (a) of Item 2 is satisfied. Paragraph (b) of Item 2 requires that the transport within Australia formed part of a ticket for international air travel, or was cross-referenced to such a ticket issued at that time. The term 'ticket' is given its ordinary meaning. 'Ticket' is defined in the Macquarie dictionary to include: · 'a slip, usually of paper or cardboard, serving as evidence of the holder's title to some service, right, or the like'. · 'a preliminary recording of transactions prior to their entry in more permanent books of account'. Goods and Services Tax Ruling GSTR 2009/3 states: 138. A ticket grants a right, entitlement or permission that the customer has to be supplied with something else. For example, a ticket to attend a theatre to see a play grants to the customer permission to enter upon the land and occupy a particular seat and to receive the supply of the performance (which is the intended supply). Further, issue 13 of the Issues Register states: | Detailed Reasoning - Issue: Where the domestic legs and international legs of international flights are issued on separate tickets, is the domestic flight GST-free? … | Detailed Reasoning - Decision: The airline operator makes a GST-free supply under item 2 in the table in subsection 38-355(1) when it supplies transport on the domestic leg of an international flight provided the separately issued domestic ticket is sold in conjunction with and cross referenced to the international ticket. The operator is supplying air transport within Australia on the domestic leg of an international flight. This transport is part of an itinerary in conjunction with international air transport. Furthermore, although the domestic ticket was issued separately and at a different time from the international air ticket, it was cross-referenced to the international air ticket. Therefore, the operator's supply of domestic air transport satisfies the requirements in paragraphs (a) and (b) of item 2, and is GST-free under section 38-355. For example, an operator of a charter plane business supplies an international charter flight that includes domestic legs of travel. The domestic transport provided forms part of the overall charter arrangement to fly from Australia to the overseas destination and back to Australia and formed part of the charter flight ticket. Therefore, the supply of domestic transport is GST-free under item 2 in the table in subsection 38-355(1). The facts indicate for all your charter flight services, you will issue a quotation which would be followed by an acceptance process by your customer(s). You confirm that when you enter into an arrangement with a customer to supply the international charter flight which has a domestic leg(s), that you will quote the international and domestic legs together within a single quotation. After the quotation is accepted by a customer, you will provide a (written) confirmation document indicating the charter flight services to be provided with the booking for that customer. The quotation, subsequent customer's acceptance, and your written confirmation (document) of the supply (as described) would evidence the customer's title to some service, and would grant a right, entitlement or permission to that customer to be supplied with the transport (unless you have additional/special terms or conditions to state otherwise). Accordingly, when you have issued any documentation (confirmation) to a customer that grants a right, entitlement or permission to that customer to be supplied with the transport, and the domestic transport (leg) is sold in conjunction with or cross-referenced to the international transport for that customer, the requirement under paragraph (b) of Item 2, that the transport within Australia formed part of a ticket for international air travel, or was cross-referenced to such a ticket issued at that time, is satisfied. In summary, the supply of the domestic legs of international flights for passengers is GST-free under Item 2 when you supply the domestic transport (legs) as part of a wider arrangement, itinerary or contract for the international transport; and the transport within Australia formed part of a ticket (documentation) for the international air travel, or was cross-referenced to such a ticket (documentation) issued at that time.