Property and Construction Industry Partnership - issues register - section 05 - employee accommodation/housing

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(a) added, (u) updated, (w) withdrawn

Issue Number	Index	Date
5	Employee accommodation
5.1	What are the GST implications for employee housing or accommodation?	03/11/2003(u)

"the GST Act"	A New Tax System (Goods and Services Tax) Act 1999
"the GST Regulations"	A New Tax System (Goods and Services Tax ) Regulations 1999
"the Transition Act"	A New Tax System (Goods and Services Tax Transition) Act 1999
"the Transition Regulations"	A New Tax System (Goods and Services Tax Transition) Regulations 2000
Relevant Public Rulings	GSTR 2000/20 "Commercial Residential Premises" GSTR 2001/3 "GST and how it applies to supplies of fringe benefits"
Relevant sections	Section 40-35 "Residential Rent" of the GST Act Division 87 "Long-term accommodation in commercial residential premises" of the GST Act

5.1 What are the GST implications for employee housing or accommodation?

For source of ATO view, refer to paragraphs 37 to 39 of

GSTR 2000/20 - Goods and services tax: commercial residential premises

ATO position

GSTR 2000/20 provides that if accommodation is provided by an employer, in premises controlled by the employer or their associate, the premises are usually residential premises. This includes premises such as houses, apartments or residential barracks or quarters provided by an employer. The reasoning is discussed below. Section 40-35 of the GST Act states :

(1) A supply of premises that is by way of lease, hire or licence (including a renewal or extension of a lease, hire or licence) is input taxed if:

(a) the supply is of residential premises (other than commercial residential premises), or
(b) the supply is of commercial accommodation and Division 87 of the GST Act (which considers long-term accommodation in commercial premises) would apply to the supply but for a choice made by the supplier under section 87-25 of the GST Act.

For section 40-35 of the GST Act to apply, the supply must be one of residential premises 'by way of lease, hire or licence'. A residential premise is land or a building that is occupied as a residence or is intended to be occupied, and is capable of being occupied as a residence and includes a floating home (section 195-1 of the GST Act).

It is considered that the accommodation discussed above falls within the meaning of 'licence' as defined in the Macquarie Dictionary:

Licence - formal permission or leave to do or not to do something.

The housing accommodation, being a licence to occupy a residential premise, is an input taxed supply under section 40-35 the GST Act. This is regardless of whether the employees are actually charged a rental fee. Whilst consideration is required for there to be a taxable supply under section 9-5 of the GST Act, consideration is not an essential element for there to be an input taxed supply under section 40-35 of the GST Act. Therefore, the supply of residential premises would be input taxed in accordance with section 40-35 of the GST Act, unless the supply is made in commercial residential premises.

Commercial Residential Premise is defined in section 195-1 (the Dictionary section) of the GST Act to mean:

(a) a hotel, motel, inn, hostel or boarding house, or
(b) premises used to provide accommodation in connection with a school, or
(c) a ship that is mainly let out on hire in the ordinary course of a business of letting ships out on hire, or
(d) a ship that is mainly used for entertainment or transport in the ordinary course of a business of providing ships for entertainment or transport, or
(da) a marina at which one or more of the berths are occupied, or are to be occupied, by ships used as residences; or
(e) a caravan park or a camping ground, or
(f) anything similar to residential premises described in paragraphs (a) to (e).

As this definition is exhaustive, the accommodation must be of a specified type of residential premises or must be similar to the residential premises described in paragraphs (a) to (e). To be considered commercial residential premises, the only possible category the employee accommodation might fall under would be that of a 'hotel, motel, inn, hostel or boarding house' or similar premises. GSTR 2000/20 sets out the main characteristics of commercial residential premises which must be satisfied to some degree. If the premises do not exhibit the characteristics to a sufficient degree, they are not commercial residential premises under paragraph (a) of the definition, nor are they included by paragraph (f) as 'similar' to those things listed in (a).

In the case of employee accommodation provided in premises operated by the employer, the characteristic of 'holding out to the public' is not satisfied. An establishment holds itself out to the public if it will receive travellers who are willing and able to pay for accommodation and/or it will accept reservations or contracts to let accommodation to guests or lodgers (GSTR 2000/20). There is also the probability that other characteristics will not be met. In the case of employee housing these include:

• commercial intention
• accommodation is the main purpose
• services offered
• status of guests.

Thus, regardless of whether there is an employee contribution for the supply of residential accommodation by the employer to their employees, in accordance with section 40-35(1) of the GST Act, the supply of the accommodation is an input taxed supply. This means that GST is not charged on the supply and input tax credits are not available for GST included in the price of purchases made in connection with that supply of accommodation.

Note that there are also measures which may affect the application of the GST on goods and services provided as Fringe Benefits to employees. Further guidance on the interaction of GST and FBT can be found in GST Draft Ruling GSTR 2001/3.

Employee accommodation that is provided by employers in hotels, hostels or the like or in premises not controlled by the employer or their associate, may be commercial residential premises. This will depend on the character of the premises in question. The supplier of the accommodation is responsible for any GST implications of the supply.

Accommodation provided by an employer on a short-term basis, to employees whose occupation carries conditions related to the terms of employment, is not normally accommodation in residential premises, nor, by extension, is the accommodation provided in commercial residential premises. Conditions related to the terms of employment include:

• the requirement to vacate the premises at the end of a tour of duty or set quota of work
• the sharing of accommodation as directed
• limitations on personal possessions.

In the current context, a 'short-term basis' would normally be for a period of less than 28 continuous days.

Accommodation provided in remote mining or prospecting sites on a 'fly-in/fly-out' basis, similar arrangements for accommodating workers on oil rigs, or for itinerant workers on rural properties (for example, fruit pickers or shearers), may be of this kind. Supplies of such accommodation are subject to the basic rules.