Flying QF on AA FF number - getting an upgrade process?

[Dave Noble]

I wouldn't mind betting that the ATO did not anticipate that Australians might be able to purchase airline tickets on the Internet from a foreign airline for travel wholly within Australia on an Australian domestic airline and thereby avoid paying GST.


The Internet has introduced some interesting challenges in the areas of taxation and copyright. The various governing bodies are yet to get these things straightened out. I wouldn't mind betting that if the ATO knew what was happening and felt that significant revenue was being lost, it might take AA to court for lost GST income.

Given that there is a specific exemption, there would be no problem for AA in court.

One v good reason for the exemption is that it is probably v hard ( if not impossible ) for an overseas company to be registered for GST in Australia not can Australia impose GST overseas.

Any loss of GST would be the remit of the Australian Customs Service rather than the ATO anyway as explained by NM.

As detailed on the customs site

"All goods (except for tobacco products and alcoholic beverages) may be imported duty and tax free if their value is $1,000 or less." (see When buying over the internet )

As long as the ticket value was less than $1000 ( which most domestic tickets are ) there would be no duty payable

Dave

 

[JohnK]

I wouldn't mind betting that the ATO did not anticipate that Australians might be able to purchase airline tickets on the Internet from a foreign airline for travel wholly within Australia on an Australian domestic airline and thereby avoid paying GST.

I would say that the ATO is not aware of this loophole. But as they say all good things must come to end sometime. AA will more than likely not be prosecuted but will be asked to close the loophole where an Australian resident and tax payer can buy a domestic airfare without corresponding international travel from AA website.

AA is not stupid otherwise they would not have put disclaimers in the fare rules. I refer you back to post #4 in the thread "Are fares usually cheaper on AA.com?" from odoherty quoting fare rules for a SYD-BNE domestic airfare.

Advance reservation ticketing restriction
RESERVATIONS ARE REQUIRED FOR ALL SECTORS. WAITLIST NOT PERMITTED. NOTE - IF TICKET IS SOLD OUTSIDE AUSTRALIA - THE TTL OF THE INTERNATIONAL FARE APPLIES. --- THIS FARE MUST BE ISSUED IN CONJUNCTION WITH A QF/AO/BA/AA INTERNATIONAL FARE. --- GROUPS NOT PERMITTED - CONTACT QF GROUPS DEPT

Sales restrictions
TICKETS MAY NOT BE SOLD IN AUSTRALIA/NEW ZEALAND. NOTE - ---ELECTRONIC TICKET REQUIRED--- TICKETS MUST BE ISSUED BY ELECTRONIC TICKETING. EXCEPT FOR - - TICKETS ON WHICH THIS FARE IS COMBINED WITH OTHER CARRIERS WHO DO NOT PARTICIPATE IN ELETRONIC TICKETING - TICKETS INCLUDING TRAVEL ON ALL LAUNCH SERVICES - FREQUENT FLYER BOOKINGS CLASSES X/T/U/Z - BOOKINGS THAT CONTAIN CODE CBBG - QANTAS CODESHARE NOT OPERATED BY AA/BA/JQ - REGIONAL AIRLINES / AIRPORTS WITH NO FACILITY TO ISSUE E TICKETS - EXCLUDED FLIGHTS -------------------------------------------------- TICKETS MUST BE ISSUED ON THE STOCK OF QF/AO/BA/AA ONLY -------------------------------------------------- WHEN SOLD OUTSIDE AUSTRALIA INBOUND TRAVEL MUST BE ON QF/AO/BA/AA. DOMESTIC FARE MUST BE ISSUED IN CONJUNCTION WITH THE INBOUND TICKET.

While it is not being enforced by AA, it is quite clear from the fare rules that the airfares are not intended to be sold in Australia and/or New Zealan unless they are sold in conjuction with international travel. Someone kindly explain why these disclaimers are there?

I am not even close to an expert on these matters but as far as I am concerned not paying GST on an airfare that is purely domestic is tax evasion.

And yes, YMMV.

 

[Dave Noble]

I am not even close to an expert on these matters but as far as I am concerned not paying GST on an airfare that is purely domestic is tax evasion.

And yes, YMMV.

Indeed you are not. It is not tax evasion since no tax liability is incurred, therefore no tax being evaded. This has also been checked with an Australian Chartered Accountant.

As clearly detailed the is NO GST payable on tickets issued outside of Australia and even if it was a paper ticket delivered by post, there is no duty payable if the cost of the ticket is < $1000

There is no law that prohibits australians purchasing products overseas, whether it be a book or an airline ticket

AA does not write the fare rules for the Qantas fares, they just sell them as an agent

Dave

 

[NM]

I would say that the ATO is not aware of this loophole.

Why do you keep insisting the ATO is concerned? The ATO has no jurisdiction over that AA sells, and the ATO has no interest in fare rules. In fact, as pointed out previously, the taxation liability for goods purchased overseas is defined and collected by Australian Customs, not the ATO.

Sales restrictions
TICKETS MAY NOT BE SOLD IN AUSTRALIA/NEW ZEALAND.

A ticket purchased on-line from aa.com, or over the phone from AA in the USA, cannot in any way shape or form be construed as being sold in Australia or New Zealand. And the fact that the ticket is ISSUED outside Australia explicitly exempts the ticket from GST.

THIS FARE MUST BE ISSUED IN CONJUNCTION WITH A QF/AO/BA/AA INTERNATIONAL FARE.

This ticket is being purchased from AA. The fare rules are published by AA and are therefore to be read and interpreted from AA's perspective. From AA's perspective, a flight which originates or terminates outside the USA is an international flight. Just ask Kiwi Flyer about QF's use of the term "domestic" in their FF program terms and conditions. From QF's perspective a flight from AKL-CHC is an international flight since it does not start and finish within Australia. So from AA's perspective a flight BNE-SYD is not a domestic flight, but an international flight, so the fare is being sold in conjunction with an international fare from BNE to SYD.

Now to be clear, I have never purchased a ticket from aa.com, nor do I have any plans to do so. But I cannot see any issue from a GST perspective with this being done. I do, however, regularly purchase other things from the USA (and other countries) because they are cheaper, partly due to not having to pay GST. If the delivered price is cheaper and I trust the company that is offering the better price, I will purchase from overseas. The ATO is not concerned, and Australian Customs deem that such purchases with a value of less than A$1000 will not incur any importation taxation or GST.

 

[Yada Yada]

Indeed you are not. It is not tax evasion since no tax liability is incurred, therefore no tax being evaded. This has also been checked with an Australian Chartered Accountant.

As clearly detailed the is NO GST payable on tickets issued outside of Australia and even if it was a paper ticket delivered by post, there is no duty payable if the cost of the ticket is < $1000

There is no law that prohibits australians purchasing products overseas, whether it be a book or an airline ticket

AA does not write the fare rules for the Qantas fares, they just sell them as an agent

You are basing your argument on your interpretation of the tax and customs rules. Nothing I've seen to date confirms this.

From my reading of the AA website, the spirit of their rules clearly infers that fares are not to be sold in Australia. You may be able to argue the point using "letter of the law" technicalities but it certainly is not supported by what is written.

Now, it may be insignificant enough that the ATO or Customs do not care. Ethically, it would seem to be the wrong thing to do. But that's for you to wrestle with.

 

[garyjohn951]

I might mention that while you can bring goods < $1000 in with you and not pay gst, you can however be charged be charged gst on any import thru the mail system.

 

[oz_mark]

This ticket is being purchased from AA. The fare rules are published by AA and are therefore to be read and interpreted from AA's perspective. From AA's perspective, a flight which originates or terminates outside the USA is an international flight. Just ask Kiwi Flyer about QF's use of the term "domestic" in their FF program terms and conditions. From QF's perspective a flight from AKL-CHC is an international flight since it does not start and finish within Australia. So from AA's perspective a flight BNE-SYD is not a domestic flight, but an international flight, so the fare is being sold in conjunction with an international fare from BNE to SYD.

I am going to steer clear of the GST issue here, but as I understand things, AA is selling a QF ticket as QF's agent, with ticketing rules provided by QF. If AA is acting as an agent, then I think the iterpretation should be from the QF perspctive.

Although, realistically I am sure this could keep lawyers employed for some time arguing over this.

 

[Dave Noble]

You are basing your argument on your interpretation of the tax and customs rules. Nothing I've seen to date confirms this.

The rules I stated were straight from the Customs website ; no interpretation

From my reading of the AA website, the spirit of their rules clearly infers that fares are not to be sold in Australia. You may be able to argue the point using "letter of the law" technicalities but it certainly is not supported by what is written..

The super saver fares state that they are not to be sold in Australia. The USA is not Australia. It is no different to ordering a book from Amazon.com.

The KIPOX/WIPOX/HOX/Y/DOX and J fares have no sales restrictions. Regardless, these are ticket rules and nothing to do with Customs

Now, it may be insignificant enough that the ATO or Customs do not care. Ethically, it would seem to be the wrong thing to do. But that's for you to wrestle with.

Customs specifically ( as shown on their website ) allow for goods of $1000 or less to be imported with no duty liable

Dave

 

[garyjohn951]

Yes, that is correct - no duty under $1000 value but GST is not a duty, so is liable on all imports not brought in by hand.

 

[Dave Noble]

Yes, that is correct - no duty under $1000 value but GST is not a duty, so is liable on all imports not brought in by hand.

If you check the site it details

item < 1000 , nothing to pay

$1001 + , customs duty plus GST is payable

Dave

 

[Altair]

Yes, that is correct - no duty under $1000 value but GST is not a duty, so is liable on all imports not brought in by hand.

The responsiblity for collection is with the seller or provider of the goods/service. If they are not registered for the GST they cannot collect it. Also I am sure that AA is not listed as an Australian Tax Resident so they do not have liabilities with the ATO.

 

[Yada Yada]

The rules I stated were straight from the Customs website ; no interpretation

The super saver fares state that they are not to be sold in Australia. The USA is not Australia. It is no different to ordering a book from Amazon.com.

The KIPOX/WIPOX/HOX/Y/DOX and J fares have no sales restrictions. Regardless, these are ticket rules and nothing to do with Customs

Customs specifically ( as shown on their website ) allow for goods of $1000 or less to be imported with no duty liable

Well, I think you are using some interpretation. In this case you are not importing anything. You are purchasing an Australian product (service) provided wholly within Australia and consuming it within Australia. The company selling it to you happens to be off-shore and therefore technically not required to charge GST, but I think it is debatable as to whether the sale transaction itself is occuring overseas or here. Your side of the transaction is happening on a computer in Australia.

 

[Dave Noble]

Well, I think you are using some interpretation. In this case you are not importing anything. You are purchasing an Australian product (service) provided wholly within Australia and consuming it within Australia. The company selling it to you happens to be off-shore and therefore technically not required to charge GST, but I think it is debatable as to whether the sale transaction itself is occuring overseas or here. Your side of the transaction is happening on a computer in Australia.

Where I am is irrelevent, what is relevent is where the ticket is issued and a ticket issued outside of Australia is exempt the UO tax. There is nothing to interpret

Even so, this is no different to someone ordering a book from Amazon. Since Amazon is in the US, there is no GST owing ( even though you were in Australia at the time of the purchase ). Under Australia Customs regulations, if the book is no more than $1000, then there is no duty to pay on importation

Dave

 

[serfty]

Yes, that is correct - no duty under $1000 value but GST is not a duty, so is liable on all imports not brought in by hand.

In a broad sense there is very little, if any actual "duty" payable on anything anymore; only GST and any applicable excise. This is specially true for most travellers.

 

[garyjohn951]

Interesting that Customs site, someone needs to tell Australia Post customs section as I got charged gst 2 months back on a $200 book from USA.
I do note it does say "may" which doesn't mean exempt of course.

 

[Yada Yada]

Where I am is irrelevent, what is relevent is where the ticket is issued and a ticket issued outside of Australia is exempt the UO tax. There is nothing to interpret

The AA website makes it quite clear that they only want to sell tickets to specific countries, and Australia is excluded. You are circumventing their policy. You can't argue with that.

BTW, when I last looked at AA.com I could get the QF schedule to display but as soon as I selected flights I received the following message:

Check below for errors:
We are unable to provide a price for your itinerary. Please contact your local American Airlines Reservations Office at 1-800-433-7300 in the U.S. and Canada, 0208-572-5555 inside London, or 08457-789-789 outside London for assistance.​

Is the loophole still working?

 

[Dave Noble]

Is the loophole still working?

It is not a loophole and it is still working

Dave

 

[Yada Yada]

It is not a loophole and it is still working

Is is a loophole and it's not working for me. Exactly what fields do you select so that this error does not come up?

 

[Anna]

A ticket purchased on-line from aa.com, or over the phone from AA in the USA, cannot in any way shape or form be construed as being sold in Australia or New Zealand. quote]

From a lawyer's point of view, it could well be construed as being sold in Australia.

To a lawyer, where something is "sold" is the place where the contract of sale is formed. The place where the contract of sale is formed is the place at which there is acceptance of an offer. So when I go on the AA website and AA offers me a fare from MEL to SYD at (say) $200 on QF flights, when I accept that offer at my computer in Australia the contract has been formed in Australia. Therefore legally the ticket has been sold in Australia - contrary to AA's stated rules.

The place where the ticket is issued is the place where the contract is performed. That is a different issue from the place where the contract is formed.

I am not an internet law specialist and there may well be legislation that has different provisions for where internet contracts are formed. If there is, I would be interested to know about it as I have found this discussion thread raises some very interesting issues of international trade.

However I have to say that it appears to me that somebody sitting in Australia purchasing tickets from the AA website for QF flights within Australia is contrary to AA's rules. Any lawyers out there who have a different view, let's debate it.

 

[NM]

From a lawyer's point of view, it could well be construed as being sold in Australia.

To a lawyer, where something is "sold" is the place where the contract of sale is formed. The place where the contract of sale is formed is the place at which there is acceptance of an offer. So when I go on the AA website and AA offers me a fare from MEL to SYD at (say) $200 on QF flights, when I accept that offer at my computer in Australia the contract has been formed in Australia. Therefore legally the ticket has been sold in Australia - contrary to A's stated rules.

Ahh, but from my long past UN days, I note that for a contract of sale the information on the AA web site is not the offer. It is generic information advertising the product. The offer comes about when the purchaser "offers" to purchase the product by offering payment for it. The contact is formed when the vendor accepts the offer of payment. So in your description, the "offer" is made by the purchaser sitting on their computer in Australia (or anywhere else in the world, it does not matter), and the offer is "accepted" by AA who are in the USA. So by your definition, the contract of sale has been formed in the USA at the point when AA accepts your offer of payment for the product or service they have advertised.

The place where the ticket is issued is the place where the contract is performed. That is a different issue from the place where the contract is formed.

No, the place where the ticker is issued is the place where the process of issuing the ticket takes place. And since AA is issuing the ticket through their computer system in the USA, the ticket is deemed to be issued in the USA. The process of issuing a ticket has very specific definition in the airline industry. Its not just the process of writing some details on a piece of paper, issuing the ticket is the process of associating an IATA ticket number to the reservation. And in AA's case, they associate one of their ticket numbers with the reservation as can been seen by the actual issued ticket number. All AA-issued tickets begin with 001 which is the ticket "stock" or number range allocated to AA by IATA. The place in which this ticketing process takes place is an important criteria in the application of fare rules, tax calculations and currency exchange calculations . All airline tickets purchase on-line at aa.com are deemed by IATA to be issued in the USA for the purpose of fare rules interpretation, tax calculations and currency exchange (via the IATA published ROE from NUC to local currency).

Now just where would the ticket be deemed to be issued if AA relocated their computer system to India or outsourced it to a company hosting the processing in Mexico? Hmm, that could be interesting.