The Australian Federal Parliament recently passed amendments to the Goods and Services Tax (GST) Act 1999 that are intended to “…ensure that there is neutrality in the GST treatment of Australian hotel and similar accommodation regardless of whether the right to use the accommodation is purchased directly through an Australian supplier or from an offshore supplier”.
As a result of the amendments, since 1 July 2019 offshore sellers of Australian commercial accommodation have been required to include sales of Australian accommodation in their GST turnover to determine if they are required to register for, charge, and pay GST in Australia.
The amendments achieve GST 'neutrality' by repealing prior amendments to the GST Act that had been made because of a 2005 adverse decision of the Full Federal Court of Australia. The issue in Saga Holidays Limited v Commissioner of Taxation [2006] FCAFC 191 (Saga Holidays) was whether the portion of the accommodation component that related to accommodation provided in Australia and sold as part of a tour package by a non-resident travel company was 'real property' for Australian GST purposes. The Court found that as the accommodation was supplied in hotels, and so on, that were physically located within Australia, GST must apply despite being provided to a non-resident individual and the booking of the accommodation being made when the non-resident individual was outside of Australia.
Interestingly, the most recent amendments specifically do not apply where the supply of rights to the accommodation are “merely facilitated by an offshore entity acting as an agent on behalf of a hotel”. Therefore, these amendments do not capture an offshore entity that has been appointed as the agent of an Australian hotel. In such circumstances, the Australian hotel is the supplier to the customer and the hotel is obligated to account for the GST on the total amount paid by the customer.
Because these amendments came into effect from 1 July 2019, the Australian Taxation Office has indicated it will apply a ‘concessional’ approach where an offshore entity contacts them within the first 12 months of the measures’ operation. The offshore entity will still need to pay any GST on its supply of accommodation in Australia, but any penalties that would otherwise be applicable in the first twelve months will not be applied where the offshore entity is found to be a principal or ‘re-seller’ of the accommodation and not a hotel’s appointed agent.
It should also be noted that offshore entities that previously registered for Australian GST between 1 July 2000 and 1 July 2007 (the date when the Saga Holidays amendments took effect that resulted in the offshore entity not having to be registered for GST in Australia) are currently receiving correspondence from the Australian Taxation Office alerting them to the legislative changes that may result in the offshore entity having to re-register for Australian GST.
Fady Abi Abdallah
fady.abdallah@bdo.com.au
Steve Visser
steve.visser@bdo.com.au