On Thur 23.8.2018, the ATO issued Draft Practical Compliance Guideline PCG 2018/D7, proposing an administrative ‘safe harbour’, for Australian in-bound’ Tour Operators, who must decide whether they operate has an agent or as principal, when self-assessing their GST. The defacto ‘safe harbour’ is created by the Commissioner giving guidance about when he will NOT apply compliance resources (a ‘swim between the flags’ and you’ll be safe enough approach, that allows the Commissioner to give practical compliance guidance on various issues).
Operators GST position can be radically different, depending on whether they are acting as agent or principal. [para 7]
- Where the Operator is acting as principal, then the accommodation and other tour supplies are made to the Operator, who on-supplies them to the foreign tourist, at a price that includes a profit. The way the GST-free ‘export’ provisions are drafted (see s38-190(1) of the GST Act), most in-bound tourist supplies will NOT be GST-free as an export (because, for instance, they are typically not goods (item 1); the tourist is typically in Australia when using in-bound tourist services (item 2); the tourist is in Australia when the supply is made or used or enjoyed (item 3); or any supply of rights is for use inside (not outside) Australia (item 4). [‘para 9]
- When the Operator is acting as agent, however, it does not make the underlying supplies of accommodation etc. and its fee, for acting as agent, is likely to be GST-free, as a supply of rights to a non-resident, whilst they are outside Australia (item 4). [para 8]
The draft Guideline applies where all of the following requirements are met:
PROPOSED DATE OF EFFECT: When finalised, the guideline will apply from its date of issue.
COMMENTS are due by 21 September 2018.
[LTN 162, 23/8/18; Tax Month – August 2018]
Comprehension questions (answers available)
- Does a PCG give a defacto ‘safe harbour’ by signalling when the Commissioner will NOT deploy compliance resources?
- Is the GST position of an ‘Australian Inbound Tour Operator’ different, depending on whether it acts as agent for the non-resident tourist, or as principal, in on-supplying the Australian Tourist products?
- Are On-shore Tourist Services, typically outside the provisions making exports GST-free?
- Would the Tour Operator’s profit, on supplying these Tourist Products (as ‘principal’) typically be taxable?
- If the Tour operator were acting as an agent, would it be the agent or the Australian Product Provider (eg. Hotel operator) who makes the supply to the Tourist?
- If the Tour Operator were acting as agent, does its supply of agency services (and thus its commission for those services) escape GST, as a GST-free export?
- Can the agency agreement be oral (to satisfy the first of the 5 requirements for this defacto ‘safe harbour’ assurance)?
- Does an agent Tour Operator also need an agreement with the Australian Product Provider, that acknowledges the Tour Operator is only acting as agent for the non-resident Tourist?
- Can an agent Tour Operator charge, the non-resident Tourist, an all in price (without having to disclose their profit)?
- Can an agent Tour Operator charge, the non-resident Tourist, a cancellation fee that is greater than their agency fee and the actual costs of cancelling?
- Does an agent Tour Operator have to supply (if asked) the underlying cost and agency fee breakdown, for each of the Australian Products booked?