On Friday 20 July 2018, Treasury released draft legislation to ensure offshore sellers of hotel accommodation in Australia calculate their GST turnover in the same way as local sellers from 1 July 2019.
By doing so, the Government proposes to amend the GST Act by requiring offshore suppliers of rights or options to use commercial accommodation in the indirect tax zone (broadly Australia) to include these supplies in working out their GST turnover. If the supplier’s GST turnover equals or exceeds the registration turnover threshold, then GST must be remitted for supplies that are taxable supplies.
Currently, unlike GST-registered businesses in Australia, offshore sellers of Australian hotel accommodation are exempt from including sales of hotel accommodation in their GST turnover. This means they are often not required to register for, and charge, GST, on their mark-up over the wholesale price of the accommodation.
Surprisingly (to me) this type of supply can be disregarded when calculating an entity’s ‘current GST turnover’ and ‘projected GST turnover’. Therefore, the draft Bill would remove those exemptions (by repealing s188-15(3)(c) and s188-20(3)(c) respectively).
The measure would apply to sales that are, essentially ‘attributable’ on or after 1 July 2019 (that is, ‘consideration’ first received, or ‘invoice’ first given on or after that date – even for ‘cash’ based suppliers). Sales that occur before that date will not be subject to the measure even if the stay at the hotel occurs after 1 July 2019.
[Treasury website: Consultation Page, Draft Bill, EM; LTN 138, 20/7/18; Tax Month – July 2018]
Comprehension questions (answers available)
- Do Australian travel agents, supplying rights to use Australian tourist accomodation, have to include the ‘value’ of those supplies in their GST turnover, for the purpose of being required to register for GST?
- Are foreign travel agents in the same position?
- Would the Bill remove s188-15(3)(c) & s188-20(3)(c) from the GST Act?
- Would the changes, to be effected by the draft law, apply to supplies of rights to use accommodation after 1 July 2019, even if the supply of the rights was made before then?
