Goods and Services Tax Ruling

GSTR 2018/1

Goods and services tax: supplies of real property connected with the indirect tax zone (Australia)

Please note that the PDF version is the authorised version of this ruling.

There is a Compendium for this document: GSTR 2018/1EC .

Contents	Para
LEGALLY BINDING SECTION:
Summary - what this Ruling is about	1
Relevant provisions	4
Previous rulings	5
Ruling	6
Date of effect	15
NOT LEGALLY BINDING SECTION:
Appendix 1: Detailed contents list	17

This publication provides you with the following level of protection:

This publication (excluding appendixes) is a public ruling for the purposes of the Taxation Administration Act 1953.

A public ruling is an expression of the Commissioner's opinion about the way in which a relevant provision applies, or would apply, to entities generally or to a class of entities in relation to a particular scheme or a class of schemes.

If you rely on this ruling, the Commissioner must apply the law to you in the way set out in the ruling (unless the Commissioner is satisfied that the ruling is incorrect and disadvantages you, in which case the law may be applied to you in a way that is more favourable for you - provided the Commissioner is not prevented from doing so by a time limit imposed by the law). You will be protected from having to pay any underpaid tax, penalty or interest in respect of the matters covered by this ruling if it turns out that it does not correctly state how the relevant provision applies to you.

Summary - what this Ruling is about

1. This Ruling discusses when a supply of real property is connected with the indirect tax zone under subsection 9-25(4) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

2. For a supplier to be liable for goods and services tax (GST) on a taxable supply, one of the requirements is that the supply must be connected with the indirect tax zone.^[1] In this Ruling, the 'indirect tax zone' is referred to as 'Australia'.

3. While this Ruling does not address whether a particular supply of real property is a taxable supply, references and examples are included to explain the effect of certain provisions on whether a supply of real property is a taxable supply.

Relevant provisions

4. The following diagram shows how the provisions dealt with in this Ruling fit in with the other requirements for a supply to be a taxable supply.

The diagram shows how the provisions dealt with in this Ruling fit in with the other requirements for a supply to be a taxable supply

Previous rulings

5. This Ruling replaces the Commissioner's view on supplies of real property as provided in Goods and Services Tax Ruling GSTR 2000/31 Goods and services tax: supplies connected with Australia and replaces Goods and Services Tax Determination GSTD 2004/3 Goods and services tax: Is a supply of rights to accommodation a supply of real property for the purposes of the A New Tax System (Goods and Services Tax) Act 1999?

Ruling

Supplies of real property

6. A supply of real property is connected with Australia if the real property, or the land to which the real property relates, is in Australia.^[2] 'Land' in this context means the physical land.

7. Real property is defined to include:

(a): any interest in or right over land
(b): a personal right to call for or be granted any interest in or right over land, or
(c): a licence to occupy land or any other contractual right exercisable over or in relation to land.^[3]

8. The reference in subsection 9-25(4) to 'land to which the real property relates' means that an interest in, or right over land is connected with Australia if the physical land to which the interest or right over it relates, is in Australia. The test is the location of the land and not the location of the right.^[4]

9. A supply of real property^[5] is connected with Australia if it involves, for example:

•: the sale of land situated in Australia
•: the grant, assignment or surrender of a lease or licence of land situated in Australia
•: a personal right to call for or be granted any interest or right over land in Australia
•: the grant of a put or call option over land situated in Australia
•: a licence to occupy land in Australia, or
•: the grant of contractual rights to occupy or stay at accommodation in Australia. This would include a stay at a hotel or motel on presentation of a voucher or travel document.^[6]

Supplies of rights to accommodation in Australia

10. There are a variety of different means by which accommodation in Australia may be provided. The supply of such accommodation, including a supply of rights to the accommodation, will be a supply of real property connected with Australia when the accommodation is in Australia. This is because the supply is:

•: the supply of a licence to occupy property situated in Australia, or
•: a contractual right exercisable over or in relation to land situated in Australia.

11. The supply of rights to accommodation will be a supply connected with Australia irrespective of whether it provides any actual accommodation to the guest. For example, the supplier could be a tour operator which grants a traveller the right to stay at a hotel in Australia, where the hotel is operated by a different entity.^[7] The tour operator is making a supply of rights to accommodation in Australia which is a supply of real property connected with Australia.

Example 1: contractual right exercisable over or in relation to land - Australian tour operator

12. Australian tour operator Big Bight Pty Ltd acquires 140 nights of accommodation in Perth from an Australian hotel chain. This entitles Big Bight Pty Ltd to on-sell these nights of accommodation to its customers. The reservations will then be honoured by the Australian hotel chain. Big Bight Pty Ltd makes the following supplies of the accommodation rights they acquired:

•: supply the rights to 20 nights accommodation to an Australian traveller
•: supply the rights to 110 nights accommodation to a New Zealand tour operator, and
•: supply the rights to 10 nights accommodation as part of a package tour of Australia to an Argentinian tourist.

13. In each of these cases, Big Bight Pty Ltd is making a supply of real property connected with Australia. This is because the accommodation is situated in Australia.

Example 2: a supply of real property - non-resident tour operator

14. Following on from Example 1 of this Ruling, the New Zealand tour operator on-sells (as principal) five nights accommodation in Perth to two New Zealand resident tourists, as part of a package tour of Western Australia. The supply of accommodation by the New Zealand tour operator to the New Zealand tourists is also a supply of real property connected with Australia, even though it is supplied by a non-resident tour operator.^[8]

Date of effect

15. This Ruling applies from 22 August 2018.

16. Additionally, the Ruling will not apply to taxpayers to the extent that it conflicts with the terms of a settlement of a dispute agreed to before the date of issue of this Ruling (see paragraphs 75 and 76 of Taxation Ruling TR 2006/10).

Commissioner of Taxation
22 August 2018

Appendix 1 - Detailed contents list

17. The following is a detailed contents list for this Ruling:

	Paragraph
Summary - what this Ruling is about	1
Relevant provisions	4
Previous rulings	5
Ruling	6
Supplies of real property	6
Supplies of rights to accommodation in Australia	10
Example 1: contractual right exercisable over or in relation to land - Australian tour operator	12
Example 2: a supply of real property - non-resident tour operator	14
Date of effect	15
Appendix 1 - Detailed contents list	17

You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).

Footnotes

[1]

The 'indirect tax zone' is the area to which Australia's GST applies.

[2]

Subsection 9-25(4).

[3]

Section 195-1.

[4]

Explanatory Memorandum to the A New Tax System (Goods and Services Tax) Bill 1998 at 3.11.

[5]

Paragraphs 82 to 109 of Goods and Services Tax Ruling GSTR 2003/7 Goods and Services Tax: what do the expressions 'directly connected with goods or real property' and 'a supply of work physically performed on goods' mean for the purposes of subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999? provide further detail on supplies that are properly characterised as a supply of real property.

[6]

Saga Holidays Limited v. Commissioner of Taxation [2006] FCAFC 191.

[7]

Saga Holidays [2006] FCAFC 191 at [38] and [74]. In addition, paragraphs 94 and 95 of GSTR 2003/7 explain the Commissioner's view that a supply of hotel accommodation is a supply of real property.

[8]

Under paragraphs 188-15(3)(c) and 188-20(3)(c) these supplies may not be counted in the operator's turnover when determining if the New Zealand tour operator is required to be registered. Goods and Services Tax Ruling GSTR 2001/7 Goods and services tax: meaning of GST turnover, including the effect of section 188-25 on projected GST turnover considers the supplies included and disregarded in determining if a supplier is required to register.

Previously released in draft form as GSTR 2017/D2

References

ATO references:
NO 1-AGGKRHV

ISSN: 2205-6157

Related Rulings/Determinations:

GSTR 2001/7
GSTR 2003/7
TR 2006/10

Business Line: ITX

Legislative References:
ANTS(GST)A 1999
ANTS(GST)A 1999 9-5
ANTS(GST)A 1999 9-5(a)
ANTS(GST)A 1999 9-5(b)
ANTS(GST)A 1999 9-5(c)
ANTS(GST)A 1999 9-5(d)
ANTS(GST)A 1999 9-25(4)
ANTS(GST)A 1999 38-190(1)
ANTS(GST)A 1999 188-15(3)(c)
ANTS(GST)A 1999 188-20(3)(c)
ANTS(GST)A 1999 188-25
ANTS(GST)A 1999 195-1
TAA 1953

Case References:
Saga Holidays Ltd v. Commissioner of Taxation
[2006] FCAFC 191
2006 ATC 4841
(2006) 64 ATR 602
(2006) 156 FCR 256
(2006) 237 ALR 559

Other References:
Explanatory Memorandum to the A New Tax System (Goods and Services Tax) Bill 1998

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