Private ruling: GST and supplies in relation to an overseas tour/camp
Published: September 2013

Ruling: Q1: Is an Australian entity (you) making a taxable supply to the students and/or family members (participants) in relation to supplies made/arranged for a tour/camp held outside Australia? | A1: No, you are not making a taxable supply to the participants in relation to the supplies made/arranged for the tour/camp held outside Australia.

Relevant facts and circumstances: An Australian entity (you) is registered for goods and services tax (GST). Your business holds training camps/tours overseas in which many students pay a fee to the business, for which the business organises airfares, food and accommodation for each student from Australia to overseas and return. The camps (tours) are held entirely overseas. Almost all your costs in organising the overseas camps/tours (international airfares, overseas accommodation, meals and so on) are not subjected to GST (that is, you have not paid GST on the acquisitions). The fee paid by the students is used to cover these costs for the overseas camps/tours. The following additional information was provided: Your business involves making travel arrangements/bookings of journeys for the students and/or family members (participants). The services that you arrange/provide to the participants include: · Air transportation to and from Australia; · Land transportation overseas; · Food (meals) provided overseas; and · Accommodation located overseas. You do not supply domestic transportation or any other services in Australia. You will arrange for all these services for the participants in return for the set fee. You arrange the services on behalf of the participants. You state that all participants pay the same fee for the set camp/tour. That is, on the tax invoice issued for the fee paid by the participants, you have stated that all members and family members paid the same fee of $XXXX for the tour. You have provided sample copies of the following documents: · Daily tour schedule (the majority of events involves attending overseas tournaments); · A tax invoice for the fee paid by the student and/or family members. · A 'total costs' list outlining your expenses in arranging the tour. · Invoices for booking international travel/transportations (some involving domestic legs to international transport) for the participants. · Invoices for overseas accommodations. · Invoices for tournament fees and other expenses (such as overseas travel insurance). You advise that the alternative is for the business to separately invoice the components used to merely reimbursed costs (such as airfares and overseas accommodation and so on) and the component that contributes towards your profit margin.

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 | 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 38-360

Reasons for decision: Summary: 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) All the requirements of section 9-5 of the GST Act must be satisfied for the supply to be taxable. The facts indicate that you have satisfied paragraphs 9-5(a), 9-5(b) and 9-5(d) of the GST Act. We consider paragraph 9-5(c) of the GST Act and the GST-free provisions in relation to the supplies. | Detailed Reasoning - Supplies of overseas accommodation: The supply of rights to accommodation is a supply of real property. One of the requirements of a taxable supply under section 9-5 of the GST Act is that the supply is connected with Australia. 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. The facts indicate that you provide accommodation located overseas and therefore the supply of the rights to accommodation is not connected with Australia and is not subject to GST. | Detailed Reasoning - Supplies of transport and related matters: A supply is GST-free if it satisfies any of the provisions of Division 38 of the GST Act. Section 38-355 of the GST Act sets out supplies of transport and related matters that are GST-free. Of relevance are items 1, 2 and 7 in the table in section 38-355 of the GST Act (Items 1, 2 and 7), which state: | 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) (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. 7 Arranging transport etc. (a) arranging transport covered by item 1, 2, 3 or 4; or (b) arranging the * international transport of goods covered by item 5; or (c) (c) arranging insurance covered by item 6. 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. The facts provided indicates that you supply or arrange the supply of the international flights (which may include domestic legs of international transport) of passengers (that is, students/family members) to and from an overseas destination(s), and therefore the supply of (or arranging the supply of) the international flights satisfies section 38-355 of the GST Act and is GST-free. | Detailed Reasoning - Supplies of overseas land products: Land product/content includes (but not limited to) accommodation; transport other than air transport (such as train, car or sea); car hire; tickets for entrance to tournaments, exhibitions, and entertainment events; and other similar tourism services other than air transport. The supply of food (meals) wholly outside Australia to the tour participants is not connected with Australia and is not subject to GST. The supplies of services or rights to overseas land products are done in Australia or provided through an enterprise that you carry on in Australia, and therefore are connected with Australia. However, the supplies may be GST-free. For the supply of overseas land products (other than accommodation), items 3 and 4 in the table in subsection 38-190(1) of the GST Act (Items 3 and 4) are of relevance. Under item 3 in the table in subsection 38-190(1) of the GST Act (Item 3), a supply is GST-free where it is: 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. For the purposes of Item 3, a supply is taken to be a supply made to a recipient who is not in Australia if it is a supply under an agreement entered into (directly or indirectly) with an Australia resident and the supply is provided, or the agreement requires it to be provided, to another entity outside Australia. In circumstances where you supply services outside Australia to the tour participants while overseas, the effective use or enjoyment also takes place outside Australia and the supply is GST-free under Item 3. Under Item 4, a supply made in relation to rights is GST-free if: (a) the rights are for use outside Australia; or (b) the supply is to an entity that is not an Australian resident and outside Australia when the thing supplied is done. In circumstances where you make arrangements with various overseas land product providers to supply rights to the overseas land products to the tour participants and you pay the overseas land product providers directly, the rights to the land products are used and enjoyed while the participants are overseas. Therefore, the supply of these rights to various overseas land products to participants is GST-free under Item 4(a). We note that the scope of Item 4 of subsection 38-190(1) of the GST Act is limited by subsection 38-190(2) of the GST Act, which does not apply as the supplies that you make are not in respect of the supply of a right to acquire something that is connected with Australia. | Detailed Reasoning - Travel agents arranging overseas supplies: In addition, the GST-free provision under section 38-360 of the GST Act in relation to travel agents arranging overseas supplies may apply. Section 38-360 of the GST Act states: | Detailed Reasoning - Travel agents arranging overseas supplies: A supply is GST-free if: (a) the supplier makes it in the course of *carrying on an *enterprise as a travel agent; and (b) it consists of arranging for the making of a supply, the effective use or enjoyment of which is to take place outside Australia. In addition, paragraphs 1.11 and 1.12 of the Explanatory Memoranda to the Taxation Laws Amendment Bill (No. 8) 2000 under the heading 'International Travel Provisions - commission' provides: 1.11 The GST Act generally treats commission paid to travel agents for agency services the same way as the GST treatment of the travel... 1.12 Item 4 inserts new section 38-360 into the GST Act. This new section allows for the supply of arranging overseas supplies to be GST-free where the effective use or enjoyment of the supply is to take place outside Australia. New section 38-360 only applies to the arranging overseas supplies made by a supplier in the course of carrying on an enterprise as a travel agent. | Detailed Reasoning - Example 1.2: Dale and her cousin Lauren are planning an overseas trip. They booked a holiday package through their local travel agent. The package includes return air fares (Sydney, London, Sydney), accommodation and car hire in London and a European tour which includes dinner and a show at a night club in Paris. The travel agent fees relating to all the components of the overseas trip are GST-free, that is, the overseas air transport and the other overseas supplies. After arranging their tour package, Dale and Lauren hear that a particular travel agent in Sydney can arrange for them to bungy jump off the le Tour Lansperie while they are in Paris. Dale and Lauren decide to take up this opportunity and make a booking. The travel agent fee charged for booking the bungy jump is also GST-free as the fee relates to a separate supply, the effective use or enjoyment of which takes place outside Australia. The supply of your services must satisfy both paragraphs 38-360(a) and 38-360(b) of the GST Act before it can be GST-free under this provision. Travel agent Paragraph 38-360(a) of the GST Act requires that the supply must be made 'in the course of carrying on an enterprise as a travel agent'. The term 'travel agent' is not a defined term in the GST Act. However, an ATO fact sheet 'GST - travel agents and commissions' (Fact Sheet) provides: | Detailed Reasoning - Who is considered a 'travel agent' for GST purposes?: The term 'travel agent' is not limited to registered travel agents. It can include tourism enterprises, such as airlines, hotels, and professional conference organisers, who arrange domestic and overseas travel on behalf of another person or persons. Furthermore, the common meaning of 'travel agency' is defined in the Macquarie Dictionary as: noun a business that arranges journeys and accommodation for travellers, as by procuring tickets, reservations, etc. Also, travel bureau . - travel agent , noun The Commissioner has clarified in the Fact Sheet that you may be a travel agent for the purpose of section 38-360 of the GST Act, if and only if, you are a 'tourism [enterprise]…who arrange[s] domestic and overseas travel…' Similarly, the common meaning within the Macquarie Dictionary also states that the arrangement of journeys as being a major role of a travel agency. The facts indicate that your business involves organising camps (tours) overseas. This requires you to make travel arrangements/bookings of journeys, accommodation and other overseas land products for the participants of the camps/tours. As travel arrangements/bookings of journeys and land products are services that you provide, we consider that you are carrying on an enterprise as a travel agent within the meaning of paragraph 38-360(a) of the GST Act. GST-free supplies used or enjoyed outside Australia Paragraph 38-360(b) of the GST Act requires that the supply consists of arranging for the making of a supply, the effective use or enjoyment of which is to take place outside Australia. In relation to travel agents' commission, the Fact Sheet states: If you are a travel agent, you may receive fees, such as travel agents' commissions, for arranging transport and land content. A 'travel agents' commission' can be any type of payment for agency services. Where the sale is for GST-free travel, the commission is also GST-free. Sales that are GST-free include: · the transport of passengers to or from Australia or between destinations outside Australia · the domestic transport of a passenger by air where the passenger is a non-resident and the travel was purchased while the passenger was outside Australia · some transport of passengers within Australia connected with international transport · the insurance of transport connected with the international transport of passengers · a sale made in the course of carrying on your enterprise as a travel agent that is used or enjoyed outside of Australia. Further the Fact Sheet states in relation to arranging of land content for international travel: The arranging of the land content for international travel is GST-free if you, in the course of carrying on your enterprise as a travel agent, makes a sale, the will be used or enjoyed outside Australia. Example 1 Dale and her cousin Lauren are planning an overseas trip. They take advantage of a special offer from a local travel agent, and book a return flight from Sydney to London. The travel agent's commission for arranging the overseas air transport is GST-free. Dale and her cousin Lauren return to the travel agent to complete their itinerary. The travel agent arranges accommodation, car hire in London and a European tour that includes dinner and a show at a night-club in Paris. The travel agent's commissions relating to the land content of the overseas trip are GST-free. Example 2 XYZ Co. wishes to arrange an executive retreat for 12 of its managers. XYZ Co. contracts with Conventions Ltd. (a professional conference organiser) to arrange motivational talks, accommodation, meals and sightseeing tours. The commissions received by Conventions Ltd. from the sale of transport and land content are GST-free. The services that you arrange for/provide to the participants include: air (international) transportation to and from Australia; land transportation overseas; food (meals) provided overseas; and accommodation located overseas. The supply of the international travel/transport and overseas land products/content are either GST-free or not subject to GST. The effective use or enjoyment of these supplies takes place while the participants are outside Australia. Accordingly, the commissions received in relation to the supplies of arranging the international travel/transport and overseas land content are also GST-free (or not subject to GST). | Summary: The supplies of international air transport, overseas accommodation, meals, services and rights to overseas land products/content to the participants are not subject to GST (that is, non-taxable or GST-free), and the commissions received in relation to arranging these supplies are also not subjected to GST. | Detailed Reasoning - Additional information: Where you make other supplies of goods in Australia (unless exported), and/or services which are used or enjoyed in Australia by the participants in return for consideration, the supplies may be taxable. In this circumstance, you will provide a combination of taxable and GST-free supplies, and the commissions for arranging those supplies will need to be apportioned. For further information, refer to the GST- travel agents and commissions (fact sheet) - NAT 4518 which has already been provided.