Do you know your GST obligations as an offshore supplier of Australian commercial accommodation, rights or options?
In this article, Jeroen Krabbe and David Penpraze explain the GST obligations for hotels, motels and other commercial accommodation suppliers.
If you’re an offshore supplier that carries on business involved in directly selling Australian commercial accommodation, then from 1 July 2019, you will be required to register for Australian GST purposes if your GST turnover is at or exceeds the GST registration threshold of AU$75,000.
When do the new rules become effective?
From 1 July 2019, offshore suppliers of rights or options to use commercial accommodation in the indirect tax zone are required to include these supplies in determining their GST turnover. The term ‘indirect tax zone’ means Australia other than the external territories and certain offshore areas.
This means that entities that supply rights to use Australian commercial accommodation, such as hotels, motels, hostels, student accommodation, or caravan parks but carry on their business offshore are required to register for GST if their GST turnover, including those supplies, equals or exceeds the GST registration threshold.
What does it mean for you?
The amendments only apply to supplies where the offshore entity acquires rights or options to use commercial accommodation in the indirect tax zone and on-sells those rights to a consumer. In those circumstances the offshore entity is contracting with the consumer in its own right.
If you are an offshore entity and supply rights or options to use commercial accommodation in the indirect tax zone to consumers, you will be required to remit GST in respect of such supplies, however you will also be entitled to claim input tax credits in respect of GST incurred on any purchases of Australian commercial accommodation that you make.
When do the new rules not apply?
The amendments do not apply to supplies of rights of commercial accommodation that are merely facilitated by the offshore entity acting as an agent on behalf of the commercial accommodation supplier.
Whether an offshore supplier is acting as an agent or is acting in its own right requires a careful consideration of all relevant facts and circumstances including a review of the relevant contractual arrangements applicable between the commercial accommodation provider and offshore entity.
Access to concessional rules
Offshore suppliers can apply for concessional arrangements for sales made from 1 July 2019 to 1 July 2020 whilst they transition into the Australian GST system. The concession is not automatic and offshore suppliers need to apply to access it.
The concessions include deferral of lodgement or payment, remission of general interest charge and failure to lodge on time penalties, and shortfall penalties where a business activity statement needs to be amended to include sales affected by the amendments. Please note that the concessions do not change the GST amount payable as offshore suppliers are required to pay the GST due on all their taxable sales of Australian accommodation.
We have the expertise to help you
Please contact our Tax Advisory team if you require advice as to whether your client has a GST registration obligation in Australia and/or want assistance with access to the concessional arrangements.