Holmans Tax Alert
GST changes for Online Travel Agent Commissions
You may be aware from recent news articles that there will be some GST law changes coming into effect on 1 July 2017 which relate to foreign owned Online Travel Agents such as Booking.com.
In many cases you will have also received an email from Booking.com asking you to answer the question “Is your accommodation registered for GST purposes in Australia?”.
As accommodation specialists, we have many clients who may be impacted by these changes so it is important that you have clear instructions on the way to proceed.
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…If you operate a motel, hotel, caravan park or hostel.
You need to answer “YES” to the question “Is your accommodation registered for GST purposes in Australia?”.
This will ensure that Booking.com can continue to charge you without imposing additional GST on the commissions they charge.
If you do not answer “Yes” to the question in time, your Booking.com invoices from 1 July 2017 onwards will have an amount of GST on them and you will need to claim back the GST paid in your next Business Activity Statement.
…If you are a Management Rights Operator
As a Management Rights Operator you will be aware that you are acting as an agent for your unit owners and you currently would not be charging GST on the tariff’s charged to guests.
You are being charged the Booking.com fee as the agent for the unit owner so you are essentially answering the question as though you were the unit owner.
This means that you will need to answer “NO” to the question “Is your accommodation registered for GST purposes in Australia?”.
What will change after 1 July
For Management Rights Operators, the Booking.com invoices will include a 10% markup for the GST charged. If the commission is $100, then the invoice you receive after 1 July will total $110 ($100+ $10 GST).
- You need to answer “No” to the Booking.com question.
- Notify the unit owners of this change because it will impact the returns they receive from gross revenue each month (See our suggestion below).
- From 1 July Booking.com will apply the GST to the charges and you will need to pay the invoice inclusive of GST.
- Update your Trust Software so that GST is calculated on all Agent Commissions.
Managing your trust account Supplier/Agent Payments
Some managers already pay their Booking.com invoices directly from the trust account. You may wish to take this opportunity to review how payments are made to your suppliers and agents.
Instead of paying Booking.com directly from the general account and waiting to be reimbursed at the end of the month, it may be worthwhile making payment directly to the OTA.
There are a few considerations below which you should consider in conjunction with discussions with your software provider:
- There is usually a timing difference between when Booking.com calculates their commission (on departure date) and when your software calculates the commission (on arrival date).
- Booking.com statement cycle does not coincide with the calendar month.
- You cannot set up an automatic payment from the trust account for the commissions – the payment will have to be made by BPAY or Electronic Transfer.
- You cannot pay the supplier/agent if there are insufficient funds in the ledger.
Usually, the payment for Booking.com is due around mid-month and could be included as part of the processes surrounding your mid-month review of non-trust monies.
Managing your owners
The changes do not affect you but they will mean that the cost of Booking.com has just increased by 10% for your owners. We suggest that in your next mail out correspondence (the Financial Year Statement may be a perfect opportunity) you include something similar to the following:
Note to Unit Owners: Changes to Foreign Online Travel Agent Commissions
As you may be aware, changes to the GST laws will apply from 1 July 2017 and these changes will require foreign OTA’s like Booking.com to charge GST on its commissions.
In accordance with our current agreement, we will continue to remit these commissions on your behalf (now with GST attached) to Booking.com. We wish to re-iterate we will not be receiving any benefit as a result of these legislative changes and they will only affect commissions on foreign OTA’s.
Please feel free to contact us if you have any questions regarding the changes.