GST and supply of accommodation rights by a non-resident tour operator

Is the entity, a non-resident tour operator, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells rights to accommodation in Australia?

Yes, the entity is making a taxable supply under section 9-5 of the GST Act when it sells accommodation rights in Australia as the entity is supplying 'real property' that is connected with Australia.

The entity is a non-resident tour operator. The entity purchases holiday, tourism or travel packages (travel packages) from resident tour wholesalers or other suppliers and on sells them to non-resident retail or wholesale tour operators or directly to a tourist.

The travel packages can include products such as accommodation, theatre tickets, cruises, transport and theme park tickets. The travel package comprises things on which goods and services tax (GST) is normally payable in Australia (for example, domestic transfers, hotel accommodation in Australia, car hire in Australia and theme park or event entry in Australia etc.).

These things are typically provided by way of the consumer being provided with written reservation details or vouchers for the various components of the travel package. The reservation details or vouchers represent evidence of contractual rights.

The entity sells accommodation rights to a customer. The accommodation rights are for accommodation in Australia. The supply of the accommodation rights is in the course of the entity's enterprise. The entity is registered for GST.

Under section 9-5 of the GST Act, an entity makes a taxable supply when: • the entity makes a supply for consideration • the supply is made in the course or furtherance of an enterprise that the entity carries on • the supply is connected with Australia, and • the entity is registered, or required to be registered for GST.

However, a supply is not taxable to the extent that it is GST-free or input taxed.

The entity sells accommodation rights to a customer. This is a supply for consideration. The sale is made in the course or furtherance of the entity's enterprise as a supplier of travel packages, and the entity is registered for GST in Australia.

Section 9-25 of the GST Act outlines when supplies are connected with Australia. As section 9-25 of the GST Act contains different requirements for the different things that can be supplied, it is necessary to establish what the entity is supplying when they supply the right to accommodation.

'Real property' is defined in section 195-1 of the GST Act to include: • any interest in or right over land • a personal right to call or be granted an interest in or right over land, or • a licence to occupy land or any other contractual right exercisable over or in relation to land.

The meaning of 'real property' for GST purposes is discussed in Goods and Services Tax Ruling GSTR 2003/7 from paragraph 82. Paragraphs 94 and 95 in GSTR 2003/7 provide: 94. The essence of a supply of hotel accommodation is the right to occupy a specified room for a particular period. This is not a tenancy (and the grant of an interest in land) but a personal right given under the arrangements. A person who takes a room at a hotel is conferred with a licence to enter the land of another and occupy it for a particular purpose. 95. A hotel guest may also be entitled to receive other services as part of the supply of the hotel accommodation. These may include access to a gym, pool, lounge areas, business facilities (Internet, facsimile, telephone) and car parking or room services such as cleaning. We consider these services to be only qualitative aspects of the accommodation and ancillary to the dominant part of the supply, a licence to occupy land, which is a supply of real property ...

The entity, when supplying the accommodation rights, supplies a licence to occupy or another contractual right over or in relation to land. The entity's supply of the accommodation rights is a supply of real property for the purposes of the GST Act.

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 accommodation rights are for hotel accommodation in Australia. Therefore, the entity's supply is connected with Australia.

The entity's supply satisfies the positive limbs in section 9-5 of the GST Act. However, the supply is not taxable if it is GST-free or input taxed.

Section 38-190 of the GST Act provides that supplies of things other than goods or real property, for consumption outside Australia are GST-free. In particular, item 4 in the table in subsection 38-190(1) of the GST Act (Item 4) provides that the supply of rights is GST-free in certain circumstances.

However, paragraph 24 of Goods and Services Tax Ruling GSTR 2003/8 provides that a supply of rights which is also a supply of real property as defined in section 195-1 of the GST Act is outside the scope of section 38-190 of the GST Act and therefore cannot be covered by Item 4. The entity is supplying accommodation rights that satisfy the definition of real property for GST purposes, and therefore, the supply is outside the scope of section 38-190 of the GST Act.

There are no provisions in Division 40 of the GST Act in relation to input taxed supplies that would apply to the entity's supply.

Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it sells rights to accommodation in Australia.

Note: As the entity is making a supply of real property, it is not necessary to consider where the supply is 'done'. Where a supply is 'done' only affects the GST status of supplies of things other than goods or real property (subsection 9-25(5) of the GST Act and section 38-190 of the GST Act).