GST and the transport of passengers on the domestic leg of an international flight

Is the entity, an airline operator, making a GST-free supply of transport under item 2 in the table in section 38-355 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies transport on the domestic leg of an international flight for which it separately issues a domestic air travel ticket that is sold in conjunction with and cross referenced to an international air travel ticket?

Yes, the entity is making a GST-free supply under item 2 in the table in section 38-355 of the GST Act when it supplies transport on the domestic leg of an international flight for which it separately issues a domestic air travel ticket that is sold in conjunction with and cross referenced to an international air travel ticket.

The entity is an airline operator. The entity is supplying transport on the domestic leg of an international flight. In relation to the domestic leg, the entity separately issues a domestic air travel ticket. The domestic ticket is sold in conjunction with and cross-referenced to an international air travel ticket.

The entity is registered for goods and services tax (GST).

Item 2 in the table in section 38-355 of the GST Act (Item 2) deals with the transport of passengers on domestic legs of international flights. Item 2 provides that the transport of a passenger within Australia by air is GST-free if: (a) the transport in Australia 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.

The effect of Item 2 is that a supply of domestic transport by air is GST-free if: • the transport is part of an itinerary or arrangement in conjunction with international air transport; and either: • the domestic transport formed part of a ticket for international air transport, or was cross-referenced to it, at the time the arrangement was made; or • the domestic ticket was issued separately and at a different time from the international air ticket but was cross-referenced to it (the domestic ticket can be issued any time before the commencement of the international air transport).

The entity 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 entity'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 of the GST Act.