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Information for Management Letting Rights - GST on Foreign Travel Agency Bookings

AG tropical island 101117.pngIn your management rights business, do you use online travel agents (OTAs) to book travel products and services online?

Do you know if you need to pay GST on your commission to the OTAs if they are based overseas?

We find this topic can be quite confusing for management rights operators. Therefore we have put together the following information to clarify the situation and point you in the right direction.

Supply of digital products by non-resident companies to Australian consumers

Recent amendments to the GST Act, relating to digital products and services supplied by non-resident companies to Australian consumers, have had a great impact on travel agents and Management Rights (MR) owners operating within the short stay accommodation industry.

How do these changes apply to MR businesses?

When making a travel booking, many MR owners receive an email from Booking.com with instructions to login to their online account and answer the following question:

  • Please fill in you ABN (if applicable) and tick ‘Yes’ or ‘No’ to the question "Is your accommodation registered for GST purposes in Australia?".

This is a simple Yes or No question but it has created enormous confusion for all MR operators as they are unsure how to respond.

Archer Gowland’s view

In retrospect, we believe that Booking.com has modelled the question incorrectly. It should be:

  • "Is your business registered for GST purposes in Australia?"

According to the GST legislation, a supply of services (other than goods or real property) provided by an OTA to an Australian consumer must be connected with Australia. Where the supply is connected with Australia and the OTA is registered for GST (effective from 1 July 2017), the supply would be taxable and subject to GST if:

  • The recipient of a supply is an Australian resident / business
  • The recipient of a supply is not registered for GST

As a consequence of these rules, MR operators without a valid ABN and / or not registered for GST purposes, will be subject to GST of 10% on commission provided by the OTA.

Where the recipient of the supply is an Australian-based business and registered for GST, the supply would not be subject to GST.

Based on our assessment, the majority of MR operators are classed as Australian-based businesses, with valid ABNs and are registered for GST, hence supply of online booking services would NOT be subject to GST.

Our interpretations of the GST Act concerning this matter concurs with the ATO’s recent tax ruling.

More information

For more information on how to manage your GST obligations and GST on OTA commissions, please contact Smiljan Jankovic from the Archer Gowland Management Right's team on 07 3002 2699 or email smiljanj[@]archergowland.com.au. 

    
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