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GST – travel agents and commissions

For GST, Luxury Car Tax and Wine Equalisation Tax purposes, from 1 July 2015, where the term ‘Australia’ is used in this document, it is referring to the ‘indirect tax zone’ as defined in subsection 195-1 of the GST Act.

If you are a travel agent, you may receive fees – such as travel agents' commissions – for arranging transport and land content. A travel agents' commission can be any type of payment for agency services.

If the sale is for GST-free travel, the commission is also GST-free.

GST-free sales include:

  • passenger transport to or from Australia or between destinations outside Australia
  • domestic passenger transport by air where the passenger is a non-resident and the

    travel was purchased while the passenger was outside Australia

  • some passenger transport within Australia connected with international transport
  • transport insurance connected with the international transport of passengers
  • a sale made in the course of carrying on your enterprise as a travel agent that is

    used or enjoyed outside Australia.

Who is considered a travel agent for GST purposes?

The term 'travel agent' is not limited to registered travel agents. It can include other tourism enterprises, such as:

  • airlines
  • hotels
  • professional conference organisers, who arrange domestic and overseas travel on

    behalf of another person or persons.

When is arranging land content for international travel GST-free?

Arranging land content for international travel is GST-free if you, in the course of carrying on your enterprise as a travel agent, makes a sale, the will be used or enjoyed outside Australia.

Example 1

Dale and her cousin Lauren are planning an overseas trip. They take advantage of a special offer from a local travel agent, and book a return flight from Sydney to London. The travel agent's commission for arranging the overseas air transport is GST-free.

Dale and her cousin Lauren return to the travel agent to complete their itinerary. The travel agent arranges accommodation, car hire in London and a European tour that includes dinner and a show at a night-club in Paris. The travel agent's commissions relating to the land content of the overseas trip are GST-free.

Example 2

XYZ Co., an entity in Australia, wishes to arrange an executive retreat in New Zealand for 12 of its managers. XYZ Co. contracts with Conventions Ltd. (a professional conference organiser) to arrange motivational talks, accommodation, meals and sightseeing tours. The commissions received by Conventions Ltd. from the sale of transport and land content in relation to the retreat are GST-free.

How do you work out the amount of GST payable?

If you provide a combination of taxable sales and GST-free sales, the commissions for arranging those sales need to be apportioned.

The following two examples explain how this works.

Example 3

Mike operates a travel agency in Sydney, and has a regular client, Samantha. She is participating in a convention in London and would like to combine this with a short tour of France. However, before the overseas travel, she wishes to travel to the Gold Coast with her family. Further, before departing overseas she needs two days at a Sydney hotel to prepare her papers.

Mike contacts various suppliers of land content and passenger transport to arrange a travel package and price suitable for Samantha.

Mike also arranges for adequate travel insurance cover.

Samantha's itinerary includes:

  • both taxable and GST-free sales
  • sales that are not subject to GST because they are not connected with Australia.

Mike will receive commissions from the various suppliers. To work out the total amount of GST payable on the commissions, he must identify the sales that are:

  • taxable
  • GST-free
  • not subject to GST.

Samantha's itinerary

  • Domestic flight – Sydney-Coolangatta-Sydney – taxable sale
  • Accommodation – Coolangatta – taxable sale
  • Hire car – Coolangatta – taxable sale
  • Hotel accommodation -– Sydney two days – taxable sale
  • Domestic flight Sydney-Melbourne-Sydney (international flight departs

    and arrives Melbourne) – GST-freesale

  • International flight Melbourne-London-Melbourne – GST-freesale
  • Theatre tickets - London – not subject to GST
  • European flight – London-Paris-London – GST-freesale
  • Accommodation – Paris – not subject to GST
  • Car hire – Paris – not subject to GST
  • Travel insurance for international and connecting flights – GST-free sale
  • Travel insurance for other travel – taxable sale

Therefore GST is payable on commissions received for items 1-4 and item 12.

Example 4

Jill is a travel agent, and arranges a sea voyage to Fiji for a client's honeymoon. The package provides for a connecting domestic flight from Melbourne to Sydney. The ocean liner embarks from Sydney, berths at Brisbane and Cairns then cruises to Fiji and returns to Sydney. Jill receives commissions from both the airline and the cruise-ship operator.

  • Domestic flight Melbourne-Sydney-Melbourne – taxable sale
  • Cruise Sydney-Brisbane-Cairns-Fiji-Sydney – GST-free

In this case GST is payable only on the commissions received for the flights.

What about override commissions?

You receive commissions for selling airline tickets and may receive extra commissions if you achieve set airline ticket sales over a specified period. These additional commissions are known as either:

  • an override commission
  • a bonus commission
  • a volume commission.

In most cases, the override commissions will relate to both the arranging of GST-free transport and taxable transport.

The override commissions that relate to the arranging of GST-free transport are GST-free. However, those override commissions that relate to taxable transport are taxable.

The payment of an override commission is considered an adjustment event rather than a separate sale.

Credits:Australian Government-Australian Tax Office
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