Wednesday, July 18, 2018

Price hike fears follow new OTA tax plan

Australian accommodation may cost more from next year as overseas travel agents pass on the pain of new tax laws.

Nathan Cloutman, a senior travel industry analyst with IBIS World, told the ABC that overseas booking agencies “will most likely increase prices” following the government’s budget announcement on Tuesday.

Booking websites like Booking.com, Trivago and Wotif will be expected to pay ten percent GST on all sales of hotel accommodation in Australia from July 1, 2019 to ensure fairness for local operators.

Mr Cloutman believes the agencies will seek to pass on some of the extra tax burden, making accommodation more expensive.

But he says they are unlikely to pass on the full ten percent because there is a “culture of cheap hotels in Australia”.

And he argues the competitive nature of the tourism industry could “limit the amount prices will go up” as offshore agencies compete with local booking sites like Webjet and Stayz, and rental models like Airbnb.

Airbnb will not be affected by the budget change because it falls under a different rental category for GST purposes, but it could be looked at more closely during the implementation of the policy.

The Australian Chamber – Tourism has welcomed the imposition of the new GST rules, saying it is pleased by the move to “tackle the inequity” between international and local booking providers.

The Accommodation Association of Australia has also welcomed the move, with CEO Richard Munro calling for the  national competition watchdog to ensure any financial hit is not passed on to accommodation businesses.

“While this crackdown on online travel agencies is an excellent initiative, the last thing we want is for these foreign giants to ramp up their commissions even more, meaning Australian accommodation businesses simply end up paying online travel agencies even more,” he said.

“Therefore, we would like the Australian Competition and Consumer Commission to take immediate steps to ensure this doesn’t happen.”

The government argued on Tuesday that the GST exemption for overseas accommodation agents was originally introduced for offshore tour operators, not overseas websites.

“Both Australian and foreign consumers are increasingly booking Australian hotel rooms through online services based offshore, which are taking advantage of the exemption designed for offshore tour operators,” federal treasurer Scott Morrison said.

“Removing the exemption will level the playing field by ensuring the same tax treatment of Australian hotel accommodation, whether booked through a domestic or offshore company.”

A spokeswoman for Expedia Group told the ABC: “Expedia Group abides by and respects applicable tax laws in the countries in which we conduct business.”

The budget proposal must be supported by all states and territories for it to come into effect next year.

About Kate Jackson

Kate Jackson
Kate Jackson is the editor of Accomnews and Accom Management Guide. You can reach her at any time with questions or submissions: [email protected]

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5 comments

  1. If Commissions go up then they get less rooms to sell and we will do our utmost to increase our direct bookings. We post frequently on our FB page about keeping $$’s in Australia by booking direct and cutting out the middle man. I am still really at a loss as to what these companies do to earn their commission they cause more pain than pleasure. But it comes down to education of the public especially for Aussie Tourists booking Aussie accommodation. Why use and OTA when you can book direct and get a better deal!

  2. Why does the ACCC let these leeches insist on being offered the best price on the internet and not let the accommodation providers discount on their own sites where they do not have to pay 12 or 15% commission to these third parties. Was not retail price maintenance outlawed in the 70’s?

  3. In this article, what does this mean ? AirBnB don’t pay GST or what ?

    ” Airbnb will not be affected by the budget change because it falls under a different rental category for GST purposes, but it could be looked at more closely during the implementation of the policy.”

    Please explain.

    • @Tony Yes, AirBnB do not pay GST!!! Really absurd since we as B&B operators do have to pay GST. Our guests are slowly understanding that using so called ‘last minute’ sites is actually increasing the prices as we have to pay so much commission. Don’t get me started!

  4. Hmmm… its complex, that is the tax law and where and when gst is applicable to sales of accommodation and its the difference between a hotel type/style of service where gst is applied to home rental. The ATO since the inception of gst sees no difference between residential ( long term ) and holiday ( short term ) however where short term does require GST to be charged is when there is on site management. For a property manager ( not onsite ) and promotes his properties through say, Booking.com I cannot understand how gst can be charged on anything other than the service they provide which is the booking fee.
    Many many pages on this at the ato website which without doubt will become more confusing as the changes draw nearer.

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