Australia: Clarifying the GST Situation
When British sailors Philip and Sarah Tadd had repairs and maintenance done on their boat in Australia, they received different information about the GST situation. After contacting the Australian Tax Office for clarification, they eventually received a response which they wanted to share for the benefit of other foreign boat owners visiting Australia.
Published 2 weeks ago
We carried out a large amount of work on Serenity in New Zealand during the pandemic, where the tax rules are very generous to cruising yachts. When we arrived in Australia we needed sail repair and service, new standing rigging and new sail covers, amongst other work, and became quite confused about the GST situation for yachts in transit.
The sail maker in Bundaberg deducted tax automatically from our bill, but elsewhere we had to request that tax be deducted – sometimes successfully, but not always. Most suppliers say that you must pay GST and reclaim it when you leave the country, some like the sailmaker in Bundaberg ask for a copy of your control permit and don’t charge GST.
We were having some new rigging in Broken Bay, just north of Sydney, and the GST would have been over AU$1000, so I sought clarification from the Australian Tax Office (ATO).
Eventually I received the following information in an email response from ATO.
ATO Tax Guidance
Whether GST applies to the supply of parts for your yacht concerns the tax affairs of the suppliers of these parts.
See general guidance below.
This guidance is based on the facts you have provided in your correspondence and is of a general nature. If the facts are incorrect or not in accordance with your understanding or if you would like to discuss the matter in more detail, please contact me.
Question you have asked:
Is the supply of parts and associated repair services, for a yacht visiting Australia under a control permit, GST-free?
Facts you provided:
You are a British yachtsman on a British registered yacht. You entered Australia at Bundaberg in September last year and you were given a Control Permit. The yacht is in transit. When you had sails repaired/replaced the sail maker asked for a copy of the Permit and did not charge GST. When you replaced your HF radio, the supplier agreed that you did not need to pay GST.
Every other supplier has said that you must pay GST and reclaim it when you leave Australia.
At the moment, you are having new rigging fitted and the cost of this includes in excess of AU$1,000 GST.
GST exemptions for repairs on visiting yachts:
There are a few GST exemption provisions that can apply to yachts visiting Australia.
The international GST exemptions in the Australian GST law include GST-free treatment for sale of goods and services in the situations set out below:
Export of goods used to repair imported goods:
A supply of goods in the course of repairing, renovating, modifying or treating other goods from outside Australia whose destination is outside Australia is GST-free, but only if:
- the goods are attached to, or become part of, the other goods; or
- the goods become unusable or worthless as a direct result of being used to repair, renovate, modify or treat the other goods.
Goods become part of other goods if they are incorporated into the other goods.
Services involved in repairing imported goods:
A supply that is constituted by the repair, renovation, modification or treatment of goods from outside Australia whose destination is outside Australia is GST-free.
The two GST exemptions above apply to both the goods and labour components of a supply of a repair of a yacht visiting Australia on a cruising/control permit, provided that:
- the goods supplied by the repairer are attached to, or become part of the yacht, or
- the goods supplied by the repairer become unusable or worthless as a direct result of repairing the yacht.
The types of goods that can be covered by the repair exemption include sails and rigging as they are incorporated into the yacht and therefore, they form part of the yacht (this is a type of situation covered by the first dot point above).
A supply of a HF radio can also be GST-free under the repair exemption if the radio is attached to the yacht with a significant degree of permanence (this is a type of situation covered by the first dot point above).
However, a supply of goods for a yacht is not ‘in the course of’ repairing the yacht, if the supplier of the goods is not carrying out (or contractually responsible to arrange the carrying out of) a repair of the yacht.
For example, a yacht owner buys a part for a yacht and the yacht owner affixes the part to the yacht themselves. In such situations, the supplier of the part for the yacht does not make a GST-free supply under the GST exemptions relating to repair of visiting yachts. However, the ship’s stores and spare parts GST exemption provision, for example, would need to be considered (see below).
For more information on the repairs GST exemption, see link to GSTR 2005/2 below:
GSTR 2005/2 | Legal database (ATO)
Where a sale of a part for a yacht is GST-free under the GST law, but the repairer incorrectly charged GST on the part and the labour and the yacht is used for private purposes, there is no ability for the yacht owner to claim a refund of GST from the Australian Taxation Office.
The yacht owner could try to obtain a refund of GST from the repairer and suggest to the repairer that they seek advice from the ATO if they are not sure about the GST status of the transaction. If a supplier of goods or services etc incorrectly classifies a GST-free sale as subject to GST, they have the option of reversing the taxable treatment and refunding any GST it may have charged the customer.
Other GST concessions
- Goods exported – general 60 day export rule
A sale of goods is potentially GST-free if the buyer exports the goods within 60 days after they purchase the goods.
For more information, see link to GSTR 2002/6 below:
GSTR 2002/6 | Legal database (ATO)
- Ships stores and spare parts
A sale of ship stores, or spare parts, for use, consumption or sale on a ship from overseas is GST-free if the ship’s departure from Australia is imminent.
For more information, see link to GSTR 2003/4 below:
GSTR 2003/4 | Legal database (ATO)
- Tourist Refund Scheme
Travellers visiting Australia may be able to claim a GST refund from Australian Border Force (ABF) on goods they purchase while in Australia. The goods must be exported within 60 days after the day on which they were purchased.
For more information, see link to fact sheet below:
Tourist Refund Scheme (TRS) (ABF)
See link to ABF fact sheet on rules for visiting yachts below:
Yachts and pleasure craft (ABF)
The information was provided by David White, Technical Leadership and Advice – GST – Australian Taxation Office, Ph (+64)02 9374 1454.
I hope this information clarifies the situation and I hope it will be of help to other sailors visiting the country.
Phil and Sarah Tadd
SV Serenity of Swanwick
Phil and Sarah Tadd left the UK in 2015 on board Serenity of Swanwick, a 1988 Moody 376 monohull, and have slowly cruised to Australia via the Atlantic Islands, Caribbean, Panama Canal. In the Pacific they have visited the Galapagos, French Polynesia, Cook Islands, Niue, Tonga, Fiji and New Caledonia. After spending the years of the pandemic in New Zealand they arrived in Australia this year. The summer was spent cruising south to Tasmania and they are now on their way back north, intending to sail to Indonesia in July.
The opinions expressed in this article are the author’s own and do not reflect the view of Noonsite.com or World Cruising Club.
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Clear as mud …… a good example of Australian bureaucracy, the situation in New Zealand is absolutely transparent by comparison.