The ATO has released a Decision Impact Statement on the Full Federal Court's decision in ATS Pacific Pty Ltd v FCT
(2014) 219 FCR 302. In this case, the Full Federal Court unanimously upheld the ATO Commissioner's argument that a supply made by an Australian inbound tour operator (ITO) to overseas customers was fully subject to GST. The High Court refused the taxpayer special leave to appeal the Full Federal Court's decision.
Although the decision relates to specific facts, the ATO said the Commissioner remains of the view that the decision applies to all ITOs that:
- transact as principal (and not as an agent of a non-resident travel agent); and
- are engaged by non-resident travel agents to enter into contracts with Australian providers for the provision of products to non-resident tourists.
The ATO was of the view that, under the Court's reasoning, the supplies made by the ITOs to their non-resident travel agent clients are properly characterised as supplies of promises to ensure products are provided, and the supplies are wholly taxable.
In relation to agency arrangements, the ATO said the Court's decision has no implications for an ITO in relation to the supply of any given product if:
- the contract for the supply of that product is between the non-resident travel agent and the Australian provider, with the result that the non-resident travel agent has rights against the Australian provider in the event the product is not provided; and
- the ITO acts as an agent of the non-resident travel agent, and is not itself a party to the contract.
The ATO said the Commissioner considers that an ITO would fit within this scenario if, in documentation with both the non-resident travel agent and each Australian provider, the ITO indicates that it is acting as an agent for the non-resident travel agent and the arrangements as a whole are not inconsistent with the conclusion that the contract for the supply of the product is between the provider and the non-resident travel agent.
If the documentation between the parties does not expressly indicate that the ITO is acting as agent, the ATO said the Commissioner may not conclude that the contract for the supply of the product is between the non-resident travel agent and the Australian provider. However, it said each case would need to be assessed on its merits.
The ATO said the Court's reasonings were consistent with its views in GST Rulings GSTR 2001/8, GSTR 2005/6, GSTR 2006/9, and GST Determination GSTD 2004/3. It said it will update these GST Rulings and GST Determination to include references to the Court's decision. The ATO said the Court's reasonings were also generally consistent with Goods and Service Tax Industry Issue: Land product supplied to non-residents (as principal).
The ATO said it will update this public ruling to reflect the Court's characterisation of the taxpayer's supply as the supply of a promise to ensure the products would be provided. It will also expand the scope of the ruling so that it covers the agency arrangements.
The Commissioner has requested that all ITOs that have transacted as principal and have an outstanding amount due to the ATO to contact the ATO within 28 days of the publication of the DIS (ie by 10 December 2014) to discuss payment of the amount owed. In working out the total amount owed, the Commissioner will have regard to any entitlement an ITO has to a refund of overpaid income tax that arises because it did not take into account the correct amount of GST payable in working out its assessable income.
ITOs that consider they are not affected by the decision on the basis that they operate as an agent are also asked to contact the ATO within the 28-day period.
Following the expiration of the 28-day period, the ATO said the Commissioner will take steps to identify any ITO with an outstanding liability that has not approached voluntarily. The Commissioner may commence recovery action without any further notice being provided to these entities, it said.
In determining whether remission of GIC and penalties (if applicable) is warranted for any ITO that has an outstanding liability, the ATO said the Commissioner will have regard to all relevant factors including the steps taken by an ITO to engage with the ATO and resolve their outstanding liability.
The ATO contact is: Craig Morelande, phone (07) 3149 5173 or email email@example.com
Source: ATO Decision Impact Statement on the Full Federal Court's decision in ATS Pacific Pty Ltd v FCT (2014) 219 FCR 302, http://law.ato.gov.au/atolaw/view.htm?docid=%22LIT%2FICD%2FNSD991of2013%3BNSD994of2013%2F00001%22.