Advertised as part of its campaign to ensure multinationals pay their fair share of tax in Australia, the Federal Government has recently amended the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (“GST Act”), significantly changing the GST landscape for offshore sellers of Australian accommodation.

The changes legislated through the Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Act 2019 (Cth) (“the Amendments”) aim to level the playing field between domestic and offshore sellers of commercial accommodation, such as hotels.

 

Key changes

Significantly, the Amendments require offshore sellers of Australian commercial accommodation (including online sellers) to add GST in circumstances where the supplier is selling Australian based accommodation, when these sales exceed the GST registration turnover (i.e. $75,000) in a 12 month period.

The Australian Taxation Office considers the measures as levelling the GST playing field for Australian hotel room sales. ATO Deputy Commissioner Deborah Jenkins said the change means regardless of whether you book an Australian hotel room through a domestic or offshore seller, GST will now apply.

“We’re pleased to see this loophole closed. This change removes the competitive advantage that offshore sellers had over domestic accommodation providers. It also allows businesses that book accommodation through offshore sellers to obtain a tax invoice and claim GST credits.” Ms Jenkins said.

 

What type of accommodation will the changes apply to?

The ATO considers that the type of accommodation the Amendments will impact include:

  • hotels, motels, and hostels
  • serviced apartments
  • student accommodation
  • caravan and tourist parks
  • house boat hire or cruise operator
  • bed and breakfast accommodation.

While these changes are only intended to affect offshore sellers of Australian accommodation, it is likely that any GST liability will be passed on to consumers.

 

What impact will the changes have?

The Amendments are intended to only affect offshore sellers of Australian commercial accommodation (e.g. online sellers). We note that these changes do not affect offshore agents who organise Australian accommodation on behalf of domestic accommodation providers. In these circumstances, a purchaser will generally pay the Australian based hotel provider directly, who will charge the GST.

Sales of Australian based accommodation paid for (in part or in full) before 1 July 2019 are not affected by the law change.

Offshore sellers impacted by this amendment will need to consider changes to its systems, policies and documentation.