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Goods and Services Tax Industry Issues
Tourism and Hospitality Industry Partnership

Land fall requirement

  • Please note that the PDF version is the authorised version of this ruling.
    This publication is extracted from the Tourism and Hospitality Industry Partnership - issues register. See travel agents issue 11 of that register. This publication should be read in conjunction with the related content of that register where further context is required.

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.

1. An entity may supply scenic charter flights in international airspace that depart from and arrive in Australia. However, these flights do not make land fall or otherwise land outside Australia.

Issue

2. What is the GST treatment of charter sightseeing flights which depart from Australia, fly in international airspace but do not land at a destination outside Australia and arrive for disembarkation in Australia?

Decision

3. In relation to 'the transport of a passenger' by air, section 38-355 of the GST Act sets out the three defined circumstances in which the supply can be made GST-free:

38-355 Supplies of transport and related matters

4. The third column of this table sets out supplies that are GST-free:

Supplies of transport and related matters
Item Topic These supplies are GST-free ...
1 Transport of passengers to, from or outside Australia

the transport of a passenger:

(a)
from the last place of departure in Australia to a destination outside Australia, or
(b)
from a place outside Australia to the first place of arrival in Australia, or
(c)
from a place outside Australia to the same or another place outside Australia.
2 Transport of passengers on domestic legs of international flights

the transport of a passenger within Australia by air, but only if:

(a)
the transport is part of a wider arrangement, itinerary or contract for transport by air involving international travel
(b)
at the time the arrangement, itinerary or contract was entered into, the transport within Australia formed part of a ticket for international travel, or was cross referenced to such a ticket, issued at that time.
3 Domestic air travel of non-residents

the transport of a passenger within Australia by air, but only if:

(a)
the passenger is a *non-resident
(b)
the supply was purchased while the passenger was outside Australia.

* denotes a defined term in the A New Tax System (Goods and Services Tax) 1999 (GST Act)

5. If the supply is a charter sightseeing flight which departs from Australia and returns to the place of departure in Australia without landing at a destination outside Australia, then Item 1 in the table in section 38-355 is not satisfied. If the aircraft does not make land fall, passengers may not disembark and there is no destination or predetermined end to the journey while overseas.

6. The conditions of Items 2 and 3 in the table in section 38-355 are not satisfied as the transport does not take place within Australia as the charter sightseeing flight takes place outside Australia once the aircraft passes the 12 nautical miles limit of the Australian territorial sea.

7. Thus, the flight is not GST-free under items 1 to 3 in the table in section 38-355.

8. Although there are no specific legislative provisions to cover this particular supply, the flight may be GST-free to the extent it meets the requirements of item 3 in the table in subsection 38-190(1).

9. Item 3 requires the recipient of the supply not to be 'in Australia' when the supply is done; and the effective use and enjoyment of the supply to take place outside Australia.

10. As the flight services take place partly in Australia and partly outside Australia, the supply would contain taxable and non-taxable components.

11. Two reasonable methods by which the consideration for the supply can be apportioned are on a time basis or on a distance basis. The use of distance as the basis of apportionment is appropriate because it is easier to estimate distance and the estimate is less likely to be distorted by things such as flight delays etc. Where this method gives an accurate reflection of the taxable component, the Tax Office accepts it as a fair and reasonable basis by which the consideration for the supply can be apportioned.

References


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