In the 2018 Federal Budget, the Government announced it will extend the GST, by ensuring that offshore sellers of hotel accommodation, in Australia, calculate their GST turnover, in the same way as local sellers. This will be from 1 July 2019.
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. The exemption was introduced in 2005, when most offshore sales, of Australian hotel rooms, were to foreigners booking through offshore tour operators, and the online booking market was small.
Both Australian and foreign consumers, are increasingly booking Australian hotel rooms, through online services based offshore, which are taking advantage of the exemption, designed for offshore tour operators.
Removing the exemption, will level the playing field, by ensuring the same tax treatment of Australian hotel accommodation, whether booked through a domestic or offshore company.
The measure will apply to sales made on or after 1 July 2019. Sales that occur before 1 July 2019 will not be subject to the measure even if the stay at the hotel occurs after this date.
This change will require the unanimous agreement of the States and Territories prior to the enactment of legislation.
This measure follows the Government’s decision to extend the GST to digital products and other services from 1 July 2017 and to low value imported goods from 1 July 2018.
[Treasury website: Budget Paper, Part 1 – Revenue Measures, p29; Tax Month May 2018]
Study questions (answers available)
- Is the announcement that an exemption, introduced in 2005 going to be withdrawn?
- In 2005, were most Australian Hotel Rooms sold by foreign packagers for foreign tourists?
- And now, is it now common for both Australian, and foreign, tourists, to be booking Australian hotel rooms on the internet on foreign based platforms?
- Has the Australian GST law recently been extended to apply to ‘digital’ products supplied on foreign platforms?
- Is the result of this announcement, that offshore sellers, of Australian hotel room accommodation, will have to include their sales, of that accommodation, in their ‘turnover’, for the purposes of determining whether they have to register for GST and pay GST, on their mark up on that accommodation?
- Will this measure apply to sales of Australian hotel rooms, very soon: 1 July 2018?
