Appendix 4 - Institute of Chartered Accountants in Australia (ICAA) – suggested amendments
Option 1: Input taxing the supply of
Australian tour packages by foreign tour operators to non-resident tourists
Under this option,
non-resident suppliers of Australian tour packages or components thereof would
not be able to claim input tax credits on acquisition of these. The ICAA suggests that this would be achieved
by inserting into the GST Act the following provision:-
40-XX Australian holidays supplied by non-residents
- A supply of an *Australian holiday is input-taxed if:
- the supplier is a *non-resident; and
- the supplier is not *carrying on an *enterprise in Australia.
- For
the purposes of subsection (1), the supply of an Australian holiday includes a
right to any one or more of transport, accommodation, meals, attractions and
other holiday-related supplies in Australia where:-
- the
supplier will not be making to the person undertaking the Australian holiday the underlying supplies to
which the right relates; and
- the
underlying supplies will be used by the person undertaking the Australian
holiday for purposes not connected with the *carrying on of an *enterprise by
the recipient of the supply.
Option 2: Limiting the existing GST registration
requirements to entities carrying on (or intending to carry on) an enterprise
within Australia
ICAA's Option 2 involves substituting the references to “carrying on an
enterprise” in sections 23-1, 23-5 and 23-10 of the GST Act to “carrying on an
enterprise in Australia”. As the
non-resident tour operators do not carry on enterprise in Australia, they would
not be entitled to register. The result
of this would be that foreign tour operators would cease to have a GST input
tax credit entitlement.
In addition, to ensure that entertainers or sportsmen/women who perform
in Australia will continue to be subject to GST, the ICAA suggest that a new
sub-section be inserted after section 23-5 stating that:
For the avoidance of doubt, you are *carrying
on an *enterprise in Australia if you make supplies that are *connected with
Australia within section 9-25(5)”.
In order to allow entities which are
considering investing in Australia or which do business in Australia (e.g.
negotiating the acquisition of products to be exported from Australia) to claim
input tax credits on qualifying business expenses incurred, the ICAA suggest
that either:-
- a
provision be inserted to allow registration in these limited circumstances; or
- a system similar to the
VAT Reclaim system utilised in some overseas countries, be set up to permit
businesses which do not carry on an enterprise in Australia to claim back GST
on qualifying business expenses which they incur in Australia.
Method 1
If the issue is resolved under the first of
these methods, the ICAA suggest that section 23-1 be amended as indicated below
in bold and that a provision be inserted as
indicated below:
23-1 Entities not carrying on enterprise in
Australia which may be registered
- You
may be *registered under this Act if you are a non-resident and you make or
intend to make *qualifying acquisitions in Australia in the course of carrying
on an enterprise (whether or not your turnover is at, above or below the
*registration turnover threshold).
- For
the purposes of subsection 23-12(1), qualifying acquisitions means acquisitions
which:
- are effectively used and
enjoyed by you; and
- are not supplied by you to
another entity.
The ICAA notes an
unresolved problem associated with this option, noting that FTOs could use this
to get registered and then claim ITCs, unless ITCs are also limited for
non-residents who are not carrying on enterprise in Australia to qualifying
expenses. The ICAA advised that time pressures had not permitted them to draft
provisions appropriate for this purpose.
Method 2
Alternatively, if
the issue is resolved under the second of those methods, the ICAA suggest a new
Division “Division 169 – Non-Resident Business Refund Scheme” with the
following provisions:-
169-1 What this
Division is about
If you are a
non-resident and you carry on an enterprise but not in Australia, you may be
entitled to a refund of the GST that was payable on certain acquisitions made
by you in Australia.
Non-Resident
Business Refund Scheme
- If:
- you are a non-resident; and
- you do not carry on an
enterprise in Australia; and
- you make
a *qualifying acquisition in Australia in the course of carrying on an enterprise; and
- the supply to you of the
qualifying acquisition is a *taxable supply;
the Commissioner must, on behalf of the Commonwealth, pay to you an
amount equal to:
- the amount of the GST
payable on the supply; or
- such proportion of that
amount of GST as is specified in the regulations.
- The amount is payable within the period and
in the manner specified in the regulations.
- For the purposes of subsection 169-5(1), a
qualifying acquisition means an acquisition which:
- is effectively used and
enjoyed by you; and
- is not supplied by you to
another entity.
Details of the
scheme should be set out in GST Regulations in terms similar to those of
regulations 168-5.04, 168-5.05, 168-5.11 to 168-5.17 (inclusive).
Option 3: Commissioner’s discretion to not
register non-residents that do not carry on an enterprise within Australia
Under this option,
the Commissioner would be granted a discretion to not register or to
de-register non-residents who do not carry on an enterprise in Australia. The exercise of this discretion would result
in the non-resident not being able to claim input tax credits. To implement this option, the ICAA suggest
that Division 23 be amended as indicated in bold below and insert provisions
into Subdivisions 25-B and 25-C as set out below:-
Who is required
to apply to be registered
Insert “to apply”
before the words “to be registered” in the title and in the body of the section.
23-10 Who may apply to be registered
Insert “to apply”
before the words “to be registered” in the title and both subsections 23-10(1)
and (2).
25-8 When the Commissioner has a discretion to not
register you
- The Commissioner has a discretion to not
*register you if:
- you are a *non-resident; and
- you are not *carrying on an
*enterprise in Australia.
- In exercising the discretion in subsection
25-8(1), the Commissioner must have regard to:
- whether you intend to *carry
on an *enterprise in Australia;
- whether
you are making supplies to non-residents where the use and enjoyment of the
supplies or, if the supplies are rights, the underlying supplies to which the rights relate takes place in Australia; and
- any other relevant matters.
- The Commissioner must notify you in writing
of any decision he or she makes in relation to you under this section. If the Commissioner decides to register you,
the notice must specify the following:
- the date of effect of your
registration;
- your registration number;
and
- the tax periods that apply
to you.
25-58 When the Commissioner has a discretion to
cancel your registration
- The Commissioner has a discretion to cancel
your *registration if:
- you are a *non-resident; and
- you are not *carrying on an
*enterprise in Australia.
- In
exercising the discretion in subsection 25-58(1), the Commissioner must have
regard to:
- how long you have been
*registered;
- whether
you previously *carried on an *enterprise in Australia, the nature of that enterprise and the length of time for
which it was carried on;
- whether you intend to *carry
on an *enterprise in Australia;
- whether
you are making supplies to non-residents where the use and enjoyment of the supplies or, if the supplies are rights,
the underlying supplies to which the rights relate takes place in Australia;
and
- any other relevant matters.
- The Commissioner must notify you in writing of
any decision he or she makes in relation to you under this section. If the Commissioner decides to cancel your
*registration, the notice must specify the date of effect of the cancellation.
Option 4: Leaving the amendments in their
present form, but providing to the non-resident supplier the right to elect
that its supplies of Australian tour packages be input-taxed
While this option
was not articulated in the ICAA's submissions to the Committee, it was
subsequently raised by an ICAA member and is considered by the ICAA to have
merit. It is a variation on Option 1 and
has a precedent in Subdivision 40-E of the GST Act in relation to supplies made
by school tuckshops.
If this option is
adopted, the ICAA suggests that subsection 9-25(5), as currently drafted,
should be extended as follows:
A supply of anything other than goods or * real property is connected
with Australia
if:
- the thing is done in
Australia; or
- the
supplier makes the supply through an *enterprise that the supplier *carries on in Australia; or
- all of the following apply:
- neither
paragraph (a) nor (b) applies in respect of the thing;
- the
thing is a right or option to acquire another thing;
- the
supply of the other thing would be connected with Australia.
Example: A holiday package for Australia that is supplied overseas
might be connected with Australia under paragraph (5)(c).
The ICAA considered
that in addition, a new Subdivision will need to be inserted into Division 40:
Subdivision 40-G – Non-resident suppliers of
rights
40-180 Non-resident suppliers of
rights
- A supply connected with
Australia under section 9-25(5)(c) is input taxed if:
- the supply is made by a non-resident through
an enterprise that is not carried
on in Australia; and
- the
recipient of that supply is a non-resident; and
- the
supplier chooses to have all supplies it makes through that enterprise that
are connected with Australia under section 25(5)(c) treated as input taxed.
- A
non-resident supplier may make the choice referred to in subsection 40-180(1)(c) at any time prior to the lodgment of a GST return in which
the supplies are reported.
- However, the non-resident
supplier:
- cannot revoke the choice within 12 months after
the day on which the non-resident
made the choice; and
- cannot make a further choice within 12 months
after the day on which the non-resident
revoked the previous choice.
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