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:

Category Requirement
1 You have authority to act as agent You must have a written agreement with any non-residents which authorises you to book products on their behalf (as their agent).
2 Dealings with third parties / Exercise of agency authority Any agreement that you have with an Australian Product Provider (APP), such as a hotel, must acknowledge that:

(a)    you have, or will have, the authority to act as an agent for non-residents
(b)    on confirming a booking, the APP enters into a contractual agreement with the non-residents, and
(c)    rights under the agreement (such as a right to be provided with an alternative product of the same or higher value if the requested product cannot be provided) are enforceable by the non-residents.

The APP must also be made aware of the identity of the non-residents through the booking process (or at another time during the booking process).

Example: The following is an example of wording that the Commissioner considers would meet points (a)-(c) above. You are not required to adopt this wording and may adopt any alternative that meets (a)-(c):

We will be acting as authorised agent for non-residents on all products sourced from you. This means that, upon confirming a booking, your contract will be with a non-resident and any rights you supply under that contract will be enforceable by that non-resident. However, under our agreement with the non-resident, we will be liable to pay you (on their behalf) for all products we source from you.
3 Your commission Any non-resident who appoints you as their agent must either:

(a)    know any amount of the commission or fee it pays you for your services (eg. the percentage amount of your commission), or
(b)    expressly allow you to retain, as your commission or fee, the difference between a purchase price and the amount you can negotiate with the relevant APP.
4 Cancellation policy Any fees that you charge non-residents, when they cancel their booking, must not exceed the sum of your commission or fee (being the amount you would have received if the booking was not cancelled) and the costs you incur in processing the cancellation.
5 Accounting / invoicing You must maintain capacity to provide to the non-residents, details of transactions entered into on their behalf (if you do not routinely advise them of these amounts).If the non-residents call for an account, you must provide a breakdown of the prices of all transactions, and cannot report the ‘composite price’ of two or more transactions (unless the non-resident permits you to do so).

Example: If the cost of a product is $500 and the cost of your services is $40, you must (if the non-resident calls for an account) advise the non-resident of the separate prices for each transaction, and not just the composite price of $540.


13. This draft Guideline will not apply if you adopt a position (that is, whether you are an agent) for GST purposes that is inconsistent with a position you adopt for income tax purposes.

PROPOSED DATE OF EFFECT: When finalised, the guideline will apply from its date of issue.

COMMENTS are due by 21 September 2018.

FJM 9.9.18

[LTN 162, 23/8/18; Tax Month – August 2018]


Comprehension questions (answers available)

  1. Does a PCG give a defacto ‘safe harbour’ by signalling when the Commissioner will NOT deploy compliance resources?
  2. 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?
  3. Are On-shore Tourist Services, typically outside the provisions making exports GST-free?
  4. Would the Tour Operator’s profit, on supplying these Tourist Products (as ‘principal’) typically be taxable?
  5. 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?
  6. 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?
  7. Can the agency agreement be oral (to satisfy the first of the 5 requirements for this defacto ‘safe harbour’ assurance)?
  8. 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?
  9. Can an agent Tour Operator charge, the non-resident Tourist, an all in price (without having to disclose their profit)?
  10. 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?
  11. Does an agent Tour Operator have to supply (if asked) the underlying cost and agency fee breakdown, for each of the Australian Products booked?


7.no(written-seeItem1); 8.yes(seeItem2);9.no(seeItem3);10.no(seeItem4);11.yes(seeItem5)]



About the author