Inbound tour operators and collecting, and remitting, GST

A draft “practical compliance guideline” from the ATO deals with the requirement for “inbound tour operators” to collect and remit GST.

An inbound tour operator is an Australian entity that enters into agreements with non-residents to arrange the supply of Australian tour packages (that can include accommodation and non- accommodation components).

Whether GST is required to be remitted on these supplies depends on whether they are acting as an agent or principal. If they act as an agent of the non-resident, any commission charged to the non-resident will be GST-free as it is an export. If they act as principal, the entire supply (which includes mark-up or a profit margin) may be subject to GST as they are providing the service to be used in Australia.

Under this draft PCG, an inbound tour operator can assume they are an agent, if:

• there is a written agreement is in place with the non-resident, which authorises the inbound tour operator to act as agent
• any agreement with an Australian product provider acknowledges that the operator acts as authorised agent for the non-resident and that the contract is between the non-resident and the product provider
• the non-resident is either aware of the commission or fee they pay for the agency services, or expressly allows the inbound tour operator to retain (as commission or fee) the difference between a purchase price and the amount negotiated with the product provider
• any fee charged by the inbound tour operator if the non-resident cancels a booking cannot exceed the sum of the commission or fee
• the inbound tour operator is able to give the non-resident details of transactions entered into on the non-resident’s behalf, including a breakdown of the prices of all transactions, and
• the inbound tour operator does not adopt a different position for income tax purposes.

The ATO understands that an operator, having acted as an agent for a non-resident in arranging an Australian tour package, may also provide other services while the non-resident tourist is in Australia. The ATO considers that in providing these other services and/or products, you may act as a principal.

These other services or products may include but are not limited to:

• meeting and greeting tourists on arrival in Australia
• customer assistance while tourists are in Australia including amending tourist itinerary
• bus / transit services
• guided tours (for example walking or shopping tours)
• provision of gifts.

The provision of these other services or products by you as a principal may be subject to GST.

It is therefore possible for income to not be wholly GST-free if it relates to both supplies of arranging services (GST-free) and supplies of other products or services (subject to GST). In these circumstances an operator may need to apportion a commission to taxable and non-taxable parts in accordance with the GST rules.

Tax residency rules set for change

The Board of Taxation (BoT) says it will be undertaking further consultation on what reforms are desirable for the tax residency rules for individuals. This follows previous reviews of Australia’s residency rules going back to 2016 and also 2017.

It says the objective of any changes will be to ensure that any proposed new residency rules can be appropriately designed for present day realities and properly targeted. The BoT consultation, it says, will have a particular focus on maintaining, or indeed improving, the integrity of Australia’s residency rules.

The BoT’s consultation will cover the following issues:

• options for a two-step model for individual tax residency;
• the integrity risk posed by ‘residents of nowhere’ and related schemes to circumvent the tax residency rules; and
• updating the superannuation test.

The BoT’s preferred option includes a primary bright-line test based on the time spent and a secondary test taking into account individual circumstances.