Find out what your GST obligations are if you buy, sell, lease or supply commercial residential property.
Goods and services tax (GST) applies to the supply of certain property types if the seller (vendor) is registered or required to be registered for GST purposes. Work out the income tax and GST consequences of subdivided land sales and if it's a capital gain or ordinary income.
We define 'supply' as a sale, lease, transfer of rights, or similar dealings in property. The GST treatment of property varies depending on the type or its purpose.
Commercial residential property has a special meaning for GST purposes. While there may be some similar features between it and residential property, they are not the same.
Commercial residential property includes:
- hotels, motels, inns (or similar)
- hostels, boarding houses (or similar)
- caravan parks, camping grounds.
Characteristics of commercial residential property include:
- It is operated on a commercial basis or in a business-like manner.
- It has the capacity to provide accommodation to several unrelated guests or residents at once, either in separate rooms or a dormitory.
- Accommodation is offered to the public or a segment of the public.
- The main purpose is providing accommodation.
- There is central management to accept reservations, allocate rooms and arrange services for guest.
- The operator supplies accommodation in their own right, for example not as an agent.
- Management provides or arranges services and facilities for guests.
- Occupants usually have the status of guests.
For more information about commercial residential property, see:
- Goods and Services Tax Ruling 2012/6 Goods and services tax: commercial residential premises
- Goods and Services Tax Bulletin 2001/2 Accommodation in caravan parks and camping grounds
- Commercial property
If you sell commercial residential property, you are generally making a taxable sale.
You may also sell commercial residential property:
You can claim GST credits on purchases made relating to selling your property, for example, the GST included in real estate agent or solicitor fees. To claim GST credits, you must be registered for GST.
If you purchase commercial residential property, you may be entitled to claim the GST included in the purchase price of the property (unless the seller used the margin scheme to work out the GST).
If you lease commercial residential property to someone who uses it to run their own accommodation business, you are making a taxable supply. You are liable to pay GST at the rate of one-eleventh of the rent you receive.
You can claim GST credits on purchases made relating to leasing your property, for example the GST included in real estate agent fees.
Commercial accommodation is accommodation in commercial residential property. If you're registered or required to be registered for GST, you're liable for GST on any payments made to you for commercial accommodation.
The amount of GST you're liable for depends on:
- whether you provide short-term or long-term accommodation
- if your property is predominantly for long-term accommodation.
Short-term commercial accommodation
You provide short-term accommodation when your guests stay for less than 28 continuous days. You must pay GST of one-eleventh of the price you charge for the accommodation.
You can work out the amount you need to pay using the:
- accounts method – work out the amount of GST you need to report on your BAS at label 1A GST on sales or label 1B GST on purchases
- calculation worksheet method – calculate the amount to be reported at labels 1A and 1B.
The accommodation you provide in your commercial residential property is:
- considered long-term when the stays are 28 continuous days or more
- predominantly long-term accommodation if at least 70% of your guests stay for 28 continuous days or more.
If you supply long-term commercial accommodation, you're eligible to choose one of the following treatments to account for GST:
- treating all supplies of long-term accommodation as input taxed
- applying the concessionary treatment for long-term accommodation if your guests are not predominantly long-term
- applying the concessionary treatment for predominantly long-term accommodation.
GST concessions apply to both the supply of the accommodation and incidental supplies, such as:
- air-conditioning or heating
- cleaning and maintenance
- phone, wifi, television and radio.
If the fees for services are charged separately, you must charge GST on your supply of these services at the normal rate. For example, this could include phone calls, mini-bar items, meals, personal laundry or in-house entertainment.
See more about long-term commercial accommodation in GSTR 2012/7 Goods and services tax: long-term accommodation in commercial residential premises.
If you choose this option, you:
- don't pay GST on long-term accommodation you supply
- can't claim GST credits for GST included in the price of goods and services you purchase for the long-term accommodation
- must apply this treatment to all long-term accommodation for a period of at least 12 months.
You don't pay GST under this option, so you don't report purchases used to supply long-term accommodation.
Report the amount for all long-term accommodation supplied in the reporting period at:
- label G1 Total sales on your activity statement
- label G4 Input-taxed sales – if you use the calculation worksheet method.
The concessionary treatment for long-term accommodation consists of charging:
- full GST for the first 27 days
- concessionary GST from day 28 onwards.
The concessionary GST for long-term accommodation is determined by calculating GST on half of the normal GST-inclusive price of the accommodation.
Example: concessionary GST for long-term accommodation
Joshua accepts a temporary transfer to Brisbane for 6 months. He stays for the whole time at Eiffel Towers, a hotel that usually provides short-term accommodation.
Eiffel Towers usually charges $220 a night, including GST ($200 plus GST at 10%).
For the first 27 days of his stay, Joshua is charged at the normal rate – $220.
On day 28, Eiffel Towers calculates the concessionary GST. Half of the usual GST-inclusive price ($220) is $110. GST on that is $11 (10% of $110). Eiffel Towers adds that amount to the normal GST-exclusive charge ($200) – charging the new price of $211.
So, Joshua is charged:
- $220 a night for the first 27 days
- $211 a night for the rest of his stay.
If you mainly provide long-term accommodation, calculate GST on half of the normal GST-inclusive price of that accommodation from the beginning of the occupant's stay.
Example: concessionary GST for mainly long-term accommodation
Moon River is a motel that mainly provides long-term accommodation. The standard short-term room rate is $66 a night – $60 plus $6 GST.
To calculate the GST on its supplies of long-term accommodation, Moon River Motel halves the normal GST-inclusive price of $66 to $33 and calculates 10% of $33 ($3.30).
It adds GST of $3.30 to the GST-exclusive rate of $60, and charges long-term occupants $63.30 a night. This is the amount Moon River Motel would report for one night of long-term accommodation at label G1 Total sales on its activity statement.End of example
If you paid for long-term commercial accommodation, you need to report this on your activity statement if both of the following occurred:
- you paid for it for business purposes
- GST was included in the amount.
Report the total amount of GST you paid (usually shown on the tax invoice) at label G11 Non-capital purchases.
If you use the:
- accounts method – work out the amount of GST to report at label 1A GST on sales or the amount of GST credit to report at label 1B GST on purchases
- calculation worksheet method – calculate the amount of GST to report at label 1A GST on sales or label 1B GST on purchases.
A single holiday apartment or unit is classed as 'residential property', even when it's within commercial residential property.
If you lease your apartment or unit to either a guest, or a property manager that uses it as part of commercial residential property, it is an 'input-taxed supply'.
This means you:
- aren't liable for GST on payments received
- can't claim GST credits for purchases related to leasing the property.
Example: residential apartment in a commercial residential complex
Alex owns a strata-titled apartment in an apartment complex. She leases it to Mink Management Services (MMS).
MMS groups Alex's apartment with other apartments in the complex and rents them out as part of their boutique hotel business.
Even though her apartment is located within other property being operated by MMS as commercial residential property, her apartment doesn't, by itself, have the characteristics of commercial residential property. It is residential property.
This means the lease to MMS is input-taxed and Alex:
- isn't liable for GST on the lease payments
- can't claim GST credits for anything she purchases relating to leasing the property – however, the supply by MMS is taxable.
Selling your holiday apartment or unit
If your holiday apartment or unit is not a new residential property and you sell it, the sale is input taxed regardless of the apartment being located within commercial residential property.