The Federal Court of Australia has handed down a GST decision that raises issues for sellers of packaged tours. In the case of ATS Pacific Pty Ltd v Commissioner of Taxation FCA 341 (15 April 2013), it was held that a term could be implied into the contract between the entity selling the travel package and the travel agent purchasing it to the effect that the seller of the package would ensure that when tourists come to Australia they would be provided with a room which they believed they had paid for in advance.
The seller of the package had argued that there was no such promise and that all it provided was booking and arranging services.
The Court found there was an implied term that the seller of the package agreed to ensure that the holiday would be provided to the end consumer despite the absence of a written promise to this effect. The Court held that it was apparent that the written terms and conditions did not represent the totality of the contract between the seller of the package and the travel agent.
The case involved the goods and services tax (GST) characterisation of the packages from the perspective of the seller’s obligations. As the holiday in question was consumed in Australia, the sale of the holiday was found to be subject to GST and not GST-free as an export to an overseas travel agent. This is despite the fact that part of the supply (being the arranging services as agent) could be viewed as an exported service and this had been viewed by the seller as the appropriate characterisation of the package.