Extension of GST – Offshore suppliers of hotel accommodation
From 1 July 2019, offshore suppliers of hotel accommodation in Australia will be required to include these sales when calculating their GST turnover.
Based on the wording of the current law, non-resident suppliers of Australian hotel accommodation are not generally required to register for GST. This is on the basis their supplies of rights to accommodation in Australia are excluded in determining whether the $75,000 turnover threshold is satisfied.
This means that these offshore operators do not impose GST on their supplies of Australian hotel accommodation.
Proposed amendments to the law
In order to amend the GST legislation, unanimous agreement of the States and Territories will be required. There is no guidance as to how the law will be amended, however, BDO considers this will involve alterations to the provisions dealing with the calculation of GST turnover.
The proposed change will mean that foreign suppliers of Australian hotel accommodation will now likely need to include the value of these supplies in calculating their GST turnover.
This will mean foreign operators will be in the same GST position as local providers of hotel accommodation.
Previous changes to the GST law have seen cross-border supplies of digital products and services to Australian consumers brought within the GST net. Along with the taxation of low value goods from 1 July 2018, the proposal to extend GST to offshore supplies of Australian hotel accommodation is unsurprising.
Based on recent observations, we note that enforcing these laws will be challenging and complex. Initially, the bulk of enforcement activity will be targeted at large players. However, given the lead time for implementation, large overseas providers will have an opportunity to consider the impact of these changes and update their systems and processes accordingly.