• The impact of this case on ATO policy is discussed in Decision Impact Statement: Wynnum Holdings No 1 Pty Ltd and Federal Commissioner of Taxation; FD Dunn & JW Dunn and MAM Sky Superannuation Fund and Federal Commissioner of Taxation (2008/5986; 2011/5618).

WYNNUM HOLDINGS NO 1 PTY LTD & ANOR v FC of T

Members:
SE Frost SM

Tribunal:
Administrative Appeals Tribunal, Sydney

MEDIA NEUTRAL CITATION: [2012] AATA 616

Decision date: 14 September 2012

---

SE Frost (Senior Member)

INTRODUCTION

1. These applications involve four GST issues arising from the purchase of a property by the First Applicant (Wynnum) in 2003. For convenience I describe the issues as the "timing issue", the "ruling issue", the "enterprise issue" and the "commercial residential premises issue".

2. I have already dealt with the timing issue and the ruling issue by resolving them in favour of the Commissioner:
Wynnum Holdings No. 1 Pty Ltd and Commissioner of Taxation [2011] AATA 296 (the Earlier Decision). If I had decided either of those issues in favour of Wynnum, then the dispute would have been at an end. Instead, my conclusion on those two issues has made it necessary for the Tribunal to decide the enterprise issue and the commercial residential premises issue as well.

THE TIMING ISSUE AND THE RULING ISSUE

3. In brief terms, the timing issue concerned the question whether the Commissioner was out of time to recover what he considered were overclaimed input tax credits (ITCs). The ruling issue turned on the question whether Wynnum was protected from the Commissioner's proposed adjustment by a ruling that Wynnum claimed the Commissioner had made.

4. For present purposes, it is not necessary to go into any further detail about these two issues. Instead, I incorporate into these reasons what I said in the Earlier Decision at [7]-[44] as the background to and the reasons for disposing of the timing issue and the ruling issue in the way that I did.

THE REMAINING ISSUES

5. That leaves the enterprise issue and the commercial residential premises issue.

6. The enterprise issue originally concerned the question whether Wynnum was carrying on an enterprise at the time of purchase of the property. It has since been expanded to include the question whether, in the alternative, the Second Applicant was doing so. Throughout these reasons I refer to the Second Applicant as the Joint Venturers.

7. The commercial residential premises issue is simply whether the premises are properly characterised as "commercial residential premises", as the Applicants contend, or as "residential premises", as the Commissioner contends. The answer to that question will have a bearing on the level of ITCs that are available to either Wynnum or the Joint Venturers.

THE LEGISLATION

8. An "enterprise" is defined in s 9-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), so far as relevant, as "an activity, or series of activities, done in the form of a business".

9. Subject to some exceptions, if you acquire something "in carrying on your enterprise" then you acquire it for a "creditable purpose": s 11-15(1) of the GST Act. That will usually make the acquisition a "creditable acquisition" within s 11-5, and if that is the case, you will be entitled to an ITC equal to the GST included in the purchase price of the thing acquired: ss 11-20 and 11-25.

10. Carrying on an enterprise is a necessary condition for the entitlement to an ITC, but it is not sufficient. Even for an entity carrying on an enterprise, an ITC is not available to the extent that an acquisition "relates to making supplies that would be input taxed": s 11-15(2).

11. Input taxed supplies are dealt with in Division 40 of the GST Act. Of relevance to this part of the dispute is s 40-35(1), which provides that a "supply of premises that is by way of lease, hire or licence" is input taxed if:

… the supply is of *residential premises (other than a supply of *commercial residential premises or a supply of accommodation in commercial residential premises provided to an individual by the entity that owns or controls the commercial residential premises) …

12. Both the expressions "commercial residential premises" and "residential premises" are defined in the Dictionary in s 195-1 of the GST Act, as follows:

commercial residential premises means:

• (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).

However, it does not include premises to the extent that they are used to provide accommodation to students in connection with an *education institution that is not a *school.

…

residential premises means land or a building that:

• (a) is occupied as a residence or for residential accommodation; or
• (b) is intended to be occupied, and is capable of being occupied, as a residence or for residential accommodation;

(regardless of the term of the occupation or intended occupation) and includes a *floating home.

THE ENTERPRISE ISSUE AND THE PARTIES' POSITIONS IN RELATION TO IT

13. The parties agree that someone was carrying on an enterprise at the time of purchase of the property in 2003, but they disagree as to which entity was doing so. The Commissioner submits that it was the Joint Venturers. The Applicants submit that it was Wynnum.

14. The Commissioner has taken the position that he has, because of Wynnum's purported status as "nominee and bare trustee" of the Wynnum Holdings No 1 Joint Venture Trust (the Trust). According to the Commissioner, that status leads to the necessary conclusion that Wynnum did not carry on an enterprise at any relevant time. He explains his view this way^[1] Respondent’s Outline of Submissions [17] :

… the company was acting, at all relevant times, as a bare trustee and nominee for the joint venturers. While there are obvious commercial reasons for the joint venturers to wish to arrange for a trustee to hold property on their behalf, the only persons who could properly be said to be carrying on an enterprise were the joint venturers themselves.

15. The Applicants disagree. They submit that^[2] Applicants’ Final Submissions [29]-[30] :

… the characterisation of an entity's activities as an enterprise will be determined, by and large, by what it does. While foundational documents like, in this case the Deed Poll and the Joint Venture Deed will be relevant, of primary importance will be the relationships and dealings that the entity has with third parties like customers and suppliers.

It is the Applicants' submission that Wynnum Holdings has, since August 2003, carried on the Enterprise in its own right either in its own name or through its agent, Village Life Pty Limited ( Village Life ). Wynnum Holdings has also undertaken a range of functions additional to those performed by its agent, Village Life, in relation to the operation of the Property. This is consistent with the Applicants' submission that Wynnum Holdings conducted the Enterprise.

[Emphasis in the original]

The purchase of the property

16. The evidence provided to the Tribunal in these proceedings by Mr Stokes, one of the Joint Venturers, is that in 2003, he and the other Joint Venturers formed a syndicate to invest in a Village Life retirement village. The investment structure and the various agreements were set up by a leading law firm to allow, in his words, "investment monies from a number of investors to be pooled in order to acquire the business and property without using a partnership and at the same time protect the investors/beneficiaries"^[3] Exhibit A5 [60].

17. The purchase of the property in question was completed on 15 August 2003. The purchaser is shown in the contract as "Wynnum Holdings No 1 Pty Ltd A.C.N. 103 394 716 as trustee for the Wynnum Holdings No 1 Joint Venture Trust". The purchase price was $4.27 million and the contract notes that the purchase price included GST. The contract describes the "Present Use" of the land as "Residential Pensioner Units" and the "Nature of Buildings" as "Residential Pensioner Accommodation".

The documentary background

18. Special Conditions 1 and 2 of the contract state:

• 1. This contract is subject to and conditional upon the execution by the Purchaser at or prior to Completion of a Joint Venture Deed and Deed Poll on terms acceptable to the Purchaser in all respects. …
• 2. In addition to the Purchase Price to be paid to the Vendor at Completion, the Purchaser shall on or before the Completion Date deliver to the Vendor three copies of the Wholesale Management Services Agreement …

19. The Joint Venture Deed (JVD), referred to in Special Condition 1, contains the following recitals (the "Trustee" is Wynnum):

• A. The Joint Venturers have agreed to become joint venturers for the Joint Venture for the purchase by them (in the name of the Trustee as their nominee and bare trustee), of the Property and the management and leasing business and possible re-sale of the Property as joint owners as tenants in common in their Respective Proportions …
• B. The Joint Venturers purchased the Property on the terms and conditions of the Contract, in the name of the Trustee, as their nominee and bare trustee.
• C. …
• D. The Trustee, at the request of the Joint Venturers, purchased the Property as nominee and bare trustee for the Joint Venturers and all monies for the purchase were and are to be provided by the Joint Venturers in their Respective Proportions …
• E. In consideration of the mutual covenants and agreements contained in this Deed, the Joint Venturers and the Trustee have agreed to enter into this Deed to record the terms and conditions of the purchase, ownership, management and re-sale of the Property, and their respective rights and obligations in the case of the Joint Venturers, as joint venturers, and in the case of the Trustee, as nominee of and bare trustee of the Property, for the Joint Venturers.

20. Clause 2.1 of the JVD states:

• (1) By entering into this Deed, the Joint Venturers associate themselves as joint venturers for the purpose of acquiring the Property through the Trustee, in their Respective Proportions as tenants in common, and then managing, leasing and on-selling the Property.
• (2) It is acknowledged and agreed among the Joint Venturers that the leasing and management of the Property is the principal plan and goal of the Joint Venturers …

21. The JVD also states:

• 3.1 At the request and direction of the Borrowing Joint Venturers the Trustee as their nominee and bare trustee, must borrow an amount not exceeding the Maximum Loan Amount, upon the terms and conditions contained in the preliminary letter of offer …
• 3.2 The Loans made to each of the Borrowing Joint Venturers must:
  • (1) not, in the aggregate exceed the Maximum Loan Amount;
  • (2) be on the basis of a limited recourse Loan;
  • (3) be for a term of 5 years;
  • (4) be at a fixed interest rate for the term; and
  • (5) otherwise be on such terms and conditions as are approved by an Ordinary Resolution of the Borrowing Joint Venturers.
• …
• 4.1 The parties agree that the management of the Joint Venture is vested in the Joint Venturers each of which is eligible and invited to attend all meetings for matters of day-to-day management of the Joint Venture.

22. The Deed Poll referred to in Special Condition 1 of the contract contains the following recitals:

• A. The Trustee, at the request of the Joint Venturers, has purchased the Property in its name and as the nominee of and as bare trustee for the Joint Venturers, by way of Contract.
• B. All monies required to be paid for the Deposit in the Contract were provided by the Joint Venturers from the Joint Venturers' funds in the same proportion or share referred to in Schedule 2.
• C. The Trustee, at the request and direction of the Borrowing Joint Venturers has entered into a Mortgage with the Bank under which the Property is provided as security.
• D. All future monies to be paid for the balance of the Purchase Price in the Contract (excluding any loan monies and expenses directly relating thereto, which are payable by the Borrowing Joint Venturers), stamp duty, legal fees and other expenses are to be provided by the Joint Venturers from the Joint Venturers' funds in the same proportion or share referred to in Schedule 2.
• E. The Trustee has at all relevant times agreed to act as nominee of and as bare trustee for the Joint Venturers on the terms of this Deed.

23. Clause 2.1 of the Deed Poll states:

The Trustee declares that the Assets held by or registered in the name of the Trustee are held by the Trustee as nominee for and as bare trustee for all of the Joint Venturers as tenants in common in respect to their share as set out in Schedule 2.

24. The term "Assets" is defined in clause 1.1(1) as follows:

"Assets" means the property of the Joint Venturers paid, acquired or received by them in accordance with and subject to the terms of the Joint Venture Agreement, including:

• (a) the Property;
• (b) all rental and income which is paid or accrues in respect of the Property;
• (c) such of the Bank Accounts as are held in the name of the Trustee;
• (d) all money, investments and property of every description, including income, contributed by, payable to, or received by the Joint Venturers; and
• (e) the net proceeds of sale or realisation of any property referred to in paragraphs (a), (b), (c) or (d).

25. The Deed Poll also states:

• 3.1 The Trustee must at the request and cost of the Joint Venturers transfer the Assets to the Joint Venturers in accordance with their respective shares as set out in Schedule 2 or otherwise deal with the Assets in such manner as the Joint Venturers direct in accordance with a Resolution.
• 4.1 Nothing in this Deed entitles the Trustee to beneficial ownership of the Assets or to deprive the Joint Venturers of the right of beneficial ownership (including the right of possession) of the Assets.
• …
• 5.1 The Trustee agrees to deal with the property as the Joint Venturers may from time to time direct …
• …

26. The Wholesale Management Services Agreement (WMS Agreement) referred to in Special Condition 2 of the contract was made on 27 August 2003 between Wynnum and Village Life Ltd^[4] T7-115 . It provided for the management, by Village Life, of the "Village Life Wynnum 1" Complex on the terms set out in the Agreement.

The undertaking of the activities

27. Mr Stokes explained that the Joint Venturers purchased Wynnum as a shelf company with the assistance of a solicitor, Mr Spencer. It was always proposed that Mr Stokes would become the director of Wynnum shortly after it was purchased, but for some reason that did not occur until June 2009. Until that time Mr Spencer was the sole director and secretary of Wynnum. Mr Stokes was not aware of this oversight until early 2009, when Mr Spencer phoned him to tell him. In the interim, he "didn't turn [his] mind to the question"^[5] Transcript, p. 35.42-43 whether Mr Spencer had arranged for Mr Stokes to become the director of Wynnum.

28. Mr Stokes has a background in accounting and financial management. He is the person who, over the years, has provided to the Australian Taxation Office (ATO) much of the information it has requested in relation to the Applicants' activities. In a letter dated 29 November 2006 he told the ATO:

[Wynnum] is the bare trustee for a small private property syndicate trust, [the Trust], which is a bare trust. As such the bare trust and bare trustee merely act as a clearing entities (sic) and do not have any interest in the syndicate property, loan or equity. The property is owned by the syndicate members as tenants in common and as such each member reports their share of income and expenses in their own income tax returns.

29. In cross-examination he explained that he "was only referring to the fact that moneys came in and went out of Wynnum, so therefore it was only acting merely as a clearing entity in that sense"^[6] Transcript, p. 44.35-37 .

30. In fact, he said, there were other things that Wynnum did in relation to the management and operation of the accommodation complex. These were things which, he said, were done by him "on behalf of Wynnum"^[7] Transcript, p. 44.40-41 . He explained that he received rental reports from Village Life, and he would review these to ensure that the net income being paid into Wynnum's bank account was correct. He would also:

• • review occupancy levels and compare them with the target occupancy rates in the WMS Agreement;^[8] Transcript, p. 45.14-19 and
• • review expenditure, compare it with previous levels and with forecasts, and if necessary, approve suppliers' quotes^[9] Transcript, p. 46.19-27 .

31. Mr Stokes acknowledged that these activities were not mentioned anywhere in the formal documents. They were "something reached between [the] parties at the time they started the management"^[10] Transcript, p. 46.31 .

32. But that evidence is not consistent with his earlier explanations to the ATO. On 20 February 2007^[11] T47-288 the ATO had asked Mr Stokes to provide:

Particulars of duties to be performed by the trustee, if not outlined in the trust deed or other documentation …

33. His answer was^[12] Letter dated 28 February 2007, T49-291 :

As noted in the Deed Poll the trustee acts as bare trustee on behalf of each participant. The trustee's duty is to act as the representative of the participants as tenants in common and as directed by them. It holds the property, receives the rent, pays certain expenses, lodges a BAS return and reports income and expenses for and to the participants. It derives no income nor incurs expenditure in its own right.

34. That response makes no reference to the things that Mr Stokes identified in his oral evidence as duties performed by Wynnum (actually, he said they were performed by him, "on behalf of Wynnum") in addition to those that had been formally documented. Instead, it focuses on Wynnum's status as "bare trustee" of each participant, on its duty to act as their "representative" and "as directed by them", and on the fact that it does not derive income or incur expenditure "in its own right".

35. Mr Stokes' oral evidence, while given honestly, is problematic. He has characterised the activities as having been undertaken "on behalf of Wynnum". That characterisation, however, appears to be at odds with the constituting documents, which make it clear that the management and leasing of the accommodation complex would be undertaken by the Joint Venturers (Recital A and clauses 2.1 and 4.1 of the JVD). In other words, when Mr Stokes says that he undertook activities "on behalf of Wynnum", he appears to be mistaken.

36. That is not particularly surprising. He is himself one of the Joint Venturers. He is Wynnum's accountant. And as far as he knew, he was meant to be appointed a director of Wynnum shortly after the purchase of the property. Those three roles make it difficult for him to identify, with any precision, in what capacity he acts when he does things.

37. The fact is that Wynnum and the Joint Venturers agreed that Wynnum held the "Assets", including the property, as nominee and bare trustee of the Joint Venturers. The concept of a bare trust was explained by Gummow J in
Herdegen v Commissioner of Taxation [1988] FCA 419 at [37], as follows:

Today the usually accepted meaning of "bare" trust is a trust under which the trustee or trustees hold property without any interest therein, other than that existing by reason of the office and the legal title as trustee, and without any duty or further duty to perform, except to convey it upon demand to the beneficiary or beneficiaries or as directed by them, for example, on sale to a third party. The beneficiary may of course hold the equitable interest upon a sub-trust for others or himself and others: see Halsbury's Laws of England, 4th Ed., Vol. 48, "Trusts", para. 938. The term is usually used in relation to trusts created by express declaration. But it has been said that the assignor under an agreement for value for assignment of so-called "future" property becomes, on acquisition of the title to the property, trustee of that property for the assignee (
Palette Shoes Pty. Ltd. v Krohn [1937] HCA 37; (1937) 58 CLR 1 at 27) and this trust would answer the description of a bare trust. Also, the term "bare trust" may be used fairly to describe the position occupied by a person holding the title to property under a resulting trust flowing from the provision by the beneficiary of the purchase money for the property.

38. It must follow from the use of the expression "bare trustee" in the JVD and the Deed Poll that Wynnum and the Joint Venturers were acknowledging that Wynnum did not have "any duty or further duty to perform …" in relation to the Assets, as explained by Gummow J in Herdegen.

39. The Applicants say that Wynnum "was authorised to perform and did perform a range of duties that were active duties requiring decisions and activities that took it beyond being a mere bare trustee"^[13] Applicants’ Final Submissions [32] . They point to the powers given by clause 10.1 of the Deed Poll, including to "purchase, leas[e] or engag[e] in any transaction relating to the Assets, including Property …" and "in the name of the Borrowing Joint Venturers to raise moneys …". But clause 5.1 obliges Wynnum to deal with the property "as the Joint Venturers may from time to time direct". Clause 10.1(2) specifies that borrowings are to be undertaken "upon such terms … as the Trustee [and] the Joint Venturers agree to", and clause 10.1(3) empowers Wynnum to give guarantees or indemnities "if so directed by the Joint Venturers, and as nominee for the Joint Venturers". Those provisions impose significant qualifications and restrictions on Wynnum's powers.

Conclusion on the enterprise issue

40. The answers Mr Stokes provided to the ATO in 2006 and 2007 are consistent with the documents created in 2003. In my view, they are more reliable than the oral evidence he has given, which is not consistent with the documents. His earlier answers to the ATO, and the documents themselves, do not support a contention that Wynnum was the entity carrying on the relevant enterprise. The fact that the WMS Agreement was entered into by Wynnum, rather than the Joint Venturers, does not sway me from that view. On the material before me I must conclude that Wynnum was not carrying on an enterprise when it purchased the property in 2003.

41. The Commissioner accepts that, if it was not Wynnum carrying on an enterprise at the relevant time, then it was the Joint Venturers. I agree.

THE COMMERCIAL RESIDENTIAL PREMISES ISSUE

42. In case I am wrong in concluding that it was not Wynnum carrying on the enterprise, I will also deal with the commercial residential premises issue.

The grounds and buildings

43. The Applicants have provided a plan and several photographs of the property. The property is 6310 m² in area. There are in total six buildings constructed on it. Five of the buildings (all of them single level) comprise the accommodation units, of which there are 40. The sixth building contains the community centre on the ground level and the manager's private apartment on the first level. Walkways, all of them apparently covered, connect the buildings.

44. In addition to the buildings there are extensive landscaped grounds, and an uncovered car park which contains ten parking spaces. Two of the spaces are designated disabled parking spaces. The car spaces are not allocated to any unit. The car park is suitable for use by visitors and residents of the property and is used for that purpose. There is also a reserved double carport designated for use by the on-site manager.

The community centre

45. The community centre is about 170 m² in area and functions as the main dining area and meeting place for the Complex. As Mr Stokes explained^[14] Exhibit A5 [11] :

The community centre comprises the following:

• (a) A dining area which adjoins the commercial kitchen. This is the largest area in the community centre. It has a vinyl floor covering and contains 6 dining room tables with 6 to 8 dining chairs per table. It is suitable for use as a meeting area/dining area. It is mainly used as a dining area. …

  All meals are served in the dining area. Residents have the option of eating their meals in the dining area or taking the meals back to their rooms. Residents are provided with a fully prepared meal. …

  At the back of the dining room there is one large fridge. It is suitable for keeping food items cool. The fridge is used to store milk, biscuits and other snack items available for the residents to take back to their rooms. Adjacent to the fridge there is a bench top with cupboards underneath and coffee and tea making facilities.

  The dining area is also used as a meeting and function space where residents can gather for various social activities.

• (b) A covered verandah and patio. This is adjacent to the dining area. It has a chair which can fit three people.
• (c) A commercial kitchen with adjoining walk through pantry. The kitchen has a vinyl floor covering with tiled walls and contains stainless steel preparation areas, servery area, central cooking bench, three (3) stainless steel sinks, exhaust hood, gas burners for cooking, stove, other cooking equipment, refrigerators, freezers and two (2) pantries. It is suitable for use as a commercial kitchen for a small restaurant or bistro. It is used in the Complex as a kitchen for the preparation and cooking of all meals for residents. …
• (d) A TV area which adjoins the Library area. It has a large flat TV screen with a few chairs and a small table. This area is available for residents and their guests. …
• (e) A library area. The library area has a number of chairs for residents to use at their leisure. This area is suitable for use as a meeting area or quiet area. This area is available for residents to use at their leisure. The library area also contains bookcases containing various reading material in the form of books and magazines which can be read in the library area or taken back to the resident's room.
• (f) An office. The office includes a computer with internet access, printer, phone, facsimile machine, various filing cabinets and the usual office furniture. The office also has a lockable door. The office is used by the on-site manager.
• (g) A toilet facility with wash basin. There is only one unisex toilet in the community centre which is suitable for general use by residents and visitors.
• (h) A commercial laundry with separate external access. The commercial laundry is tiled and contains four (4) large commercial washing machines and commercial driers and tubs. It is not coin operated and is free to the residents to use. It is suitable for use as a laundry facility for 40 or so people. … These washing machines and driers are available for residents to do their personal washing. Linen and towels are separately washed by an external provider off-site.

The manager's unit

46. The manager's unit, located above the community centre, is a self-contained three-bedroom apartment which houses the on-site husband and wife management team.

The accommodation units

47. Each of the five single-level separate buildings houses eight one-bedroom units. These units typically have an internal area of 35 m² (with the exception of six corner units which have an internal area of 38 m²). Five of the 35 m² units have adjoining doors which allow them to be used as two-bedroom units.

48. Each building is separately identified and each unit has an individual unit number which is identified on its door. Each resident is provided with keys to access their unit and the manager has the master key to all rooms.

49. Most of the accommodation units are standard in size and layout. They are also furnished identically. All furnishings, furniture and fixtures are supplied by the operator of the Complex.

50. A hinged entry door opens to the combined lounge/dining area at the front of the unit. The lounge/dining area includes a single lounge chair, a small coffee table, a small television and a small dining table with two dining room chairs.

51. The lounge/dining area leads through to a kitchenette. The kitchenette is suitable for warming meals or preparing snacks, tea and coffee. It can also be used to store refreshments and pantry items. Standard equipment in the kitchenette comprises a single small sink, a microwave oven, a small fridge, a kettle and toaster, crockery consisting of two teacups, two saucers, two dinner plates, two side plates, two glasses, and two sets of knives, forks and spoons. All of this equipment is supplied by the operator of the Complex.

52. The kitchenette leads through to the bedroom. The bedroom has sliding glass doors that open to a concreted area at the rear of the unit, partitioned on either side with a lattice barrier. This area can be used as a patio or small courtyard.

53. The bedroom itself contains a single bed, a built-in wardrobe and a small bedside table. Linen for the bed is provided by the operator of the Complex and is changed and washed on a weekly basis.

54. Backing onto the kitchenette, and accessible only from the bedroom, is the ensuite bathroom, which contains a shower area with curtain, a single wash basin, a cabinet with mirror above the wash basin, and a toilet. Towels, provided by the operator of the Complex, are changed and washed on a weekly basis.

55. Mr Stokes explained that the single bedroom units are only capable of housing one occupant at a time. The corner one-bedroom units could house individual disabled occupants or a couple.

56. Accommodation is provided to seniors on a basis that is matched to their pension income. To live in the Complex, residents must not require higher care nursing facilities.

57. The following services are also provided to residents:

• • linen and towels change and wash service;
• • provision of meals; and
• • optional 24-hour per day emergency call monitoring system, operated by use of a pendant which the resident wears around the neck. The pendant is able to signal an alert in the event of an emergency. The Complex obtains a deposit from each resident for use of the pendant/emergency call system which is refunded upon return of the pendant when the resident leaves.

58. Mr Stokes said that the Complex operates now in the same way that it was operating when the property was purchased in 2003. In fact, he said, it had been operating that way for six months prior to the purchase^[15] Transcript, p. 29.32-33 . I accept that. It is quite plain that the purchasers envisaged operating the Complex in accordance with the "Village Life" system and it is no surprise to hear from Mr Stokes that this is what they have done. See also the WMS Agreement referred to earlier in these reasons.

The accommodation agreements

59. As already mentioned, Village Life was appointed to manage the Complex immediately upon its purchase in 2003. That is exactly what it did, until 2009, when Village Life went into voluntary liquidation.

60. In the capacity of manager of the Complex, it was Village Life who entered into "Standard Residential Services Agreements" (SRSAs) with residents. The Tribunal has in evidence two particular SRSAs, one of them entered into in 2004 and the other in 2005^[16] Exhibit A2 . They are each described as "Form R18" under the Residential Services (Accommodation) Act 2002 (Qld). They provide as follows:^[17] There may be some minor variations in language between the 2004 and 2005 agreements, but the variations are immaterial.

• • The occupant of the accommodation unit is referred to as the "Resident";
• • Item 3 notes: "The unit is provided furnished. A Unit Inventory Checklist will be signed by the parties upon the resident taking possession, and a signed copy given to the resident.";
• • Item 4 states that the agreement is for "a Periodic Term", starting on a specified date;
• • Item 5 describes the amount to be paid by the occupant as "Rent". (Clause 4.3 of the WMS Agreement^[18] T7-118 provides, consistently with Item 5, that the "rent" to be charged is 85% of the age pension, plus 100% of the Commonwealth Government rent assistance available to age pensioners.) Rent is to be paid by direct debit to the "service provider" (Village Life);
• • Item 7 specifies the "Services" to be provided as follows:

  Food - The Resident is entitled to three (3) meals each day to the Village Life standard, provided in the designated common dining area or made available for the Resident to consume in his/her unit.

  Linen - The Resident will be supplied weekly with two single sheets, a pillowcase and a bath towel for his/her use during the term of this tenancy. The manager will launder these items weekly. If the Resident elects to use his/her own sheets the manager will launder them weekly if the Resident indemnifies the manager against any loss or damage of these items.

61. Item 9 sets out the "Special Terms". The Special Terms for the 2004 agreement differ somewhat from those for the 2005 agreement. For the 2005 agreement the Special Terms are as follows:

Resident - This agreement may be terminated by Village Life if the Resident is assessed by the Aged Care Assessment Team to be unable to care for himself or herself or if Village Life reasonably forms the view that it can no longer meet the Resident's needs.

Alterations - Any internal or external alterations to the unit, including attaching a hanging device to the wall, may only be made with the prior approval in writing of Village Life, at its complete discretion. Any markings, holes or other damage must be made good by the Resident upon their departure, at the Resident's expense.

Cleaning - A cleaning fee of $150.00 (one hundred and fifty dollars) must be paid by the Resident. The cleaning fee may increase by the following amounts:

• (a) an additional $150 (one hundred and fifty dollars) must be paid if the Resident is a smoker;
• (b) an additional $150 (one hundred and fifty dollars) must be paid if the Resident has a pet (dog or cat).

The cleaning fee is to cover the professional cleaning of the carpet, bed and lounge chair in the unit. The cost of any cleaning or repairs above this must be met by the Resident within 7 (seven) days of any claim being made by Village Life.

…

Telephone, Electricity, Gas - It is the Resident's responsibility to arrange and pay for the connection of these services. Such services will be in the name of the Resident.

Village Life Procedures - The Resident must observe the Village Life house rules applicable to the village from time to time.

Contents - The Resident is responsible for securing the contents of their unit. The unit provided by Village Life is capable of being secured. It is the responsibility of the Resident to lock the unit when it is unattended and otherwise at their discretion. Village Life recommends the Resident insure their belongings.

Departure - The Resident acknowledges and agrees that:

• (a) The Resident must return the unit to its pre-hire condition, prior to the Resident's departure;
• (b) Upon receiving a notice to vacate, and before their departure, the Resident must complete an entry/exit condition report in the form supplied by Village Life Ltd.

Inspection - Without limiting its rights under any applicable legislation Village Life Ltd may conduct inspections of the unit, during business hours, upon giving reasonable written notice to the Resident.

Car Park - This tenancy arrangement does not include an allocated reserved car park.

62. The Special Terms for the 2004 agreement are as follows:

Resident - The Resident acknowledges that Village Life is not a care facility. The Resident acknowledges that his/her tenancy will terminate if the landlord, acting reasonably, forms the view that Village Life can no longer meet the needs of the Resident.

Cleaning - A cleaning fee of $150.00 (one hundred and fifty dollars) must be paid by the tenant. If the tenant has a pet (dog or cat), an additional $150 cleaning fee will apply.

Telephone, Electricity & Gas - It is the tenant's responsibility to arrange and pay for the connection of these services. Such services will be in the name of the tenant.

The resident acknowledges and agrees that:

• (a) Village Life is not a care facility and that his/her tenancy may be terminated by the Village Life if it forms the view that it can no longer meet their needs acting reasonably.
• (b) The accommodation detailed in this agreement is an adjoining accommodation unit between which is an internal door so that the resident's unit and the adjoining unit can be used as a 'couples unit' by you and a related party.
• (c) If the related party occupying the adjoining unit for any reason vacates the adjoining unit then the resident will upon the request of Village Life, move to alternative accommodation in the Village within 7 days of being so requested.
• (d) If Village Life requests that the resident move to alternate premises costs incurred in relation to the move from the original accommodation unit to the new unit will be paid by Village Life, limited to reasonable cleaning and removal costs, and telephone and […^[19] The paragraph is incomplete in the document before the Tribunal, and finishes mid-sentence. ]

63. The 2005 agreement was signed by the "Resident", and also by a representative of Village Life, on the date on which the "periodic term" commenced. The 2004 agreement was signed (by a representative of Village Life, but not by the Resident) 22 days before the commencement of the "periodic term".

64. The Special Terms for the 2004 agreement seem to have been drafted specifically to cover the circumstances of the particular resident. But Mr Stokes emphasised in his witness statement that the movement of residents between different units, provided for in those Special Terms, was not an isolated occurrence. He said^[20] Exhibit A5 [35] :

I can provide three recent examples of residents who have been moved within the Complex though I note that these examples are not isolated and similar situations have occurred since the commencement of the operations in 2003:

• (a) Example one - one resident, [name deleted], moved from one unit (unit 13) to another unit (unit 9) in the same building in May 2011 because she wanted to be in a corner unit.
• (b) Example two - currently the on-site manager has plans to move one resident, [name deleted], from [a unit in one building to a unit in another] because there are issues with her immediate neighbour who can be rather loud and disruptive.
• (c) Example three - during 2009 and 2010 one resident, [name deleted], moved in and out of the Complex and between units in the Complex no less than seven (7) times. She moved to the complex from Melbourne to escape the colder months and returned to Melbourne each time to avoid the hotter months. Each time the resident returned, she occupied a different unit. The following is a chronological record of the units occupied by [this resident]:
  • (i) on 24 January 2009 moved into Unit 26 in Building 5 and left on 10 March 2009;
  • (ii) came back on 10 July 2009 and occupied Unit 21 in Building 4 and left on 15 December 2009;
  • (iii) came back on 10 July 2010 and occupied Unit 5 in Building 2 and on 13 October 2010 moved to unit 3 in Building 2 (birds at the back of Unit 5 bothered her) and left 27/11/2010.
• (d) In addition to the examples above, every year a number of residents are either requested by the Complex or alternatively advise the Complex that they need to move to higher care facilities due to poor health. This is a common occurrence.

Is the property "commercial residential premises"?

65. The property will be characterised as commercial residential premises if it answers the description in either paragraph (a) or paragraph (f) of the definition in s 195-1 of the GST Act: in other words, if at the time of purchase it was either a hotel, motel, inn, hostel or boarding house (paragraph (a)), or was "similar to" any of those types of premises (paragraph (f)). As Nicholas J observed in
ECC Southbank Pty Ltd as trustee for Nest Southbank Unit Trust v Commissioner of Taxation [2012] FCA 795 (a case in which judgment was delivered after I reserved my decision in the current proceedings) at [50]:

The test to be applied for the purpose of determining whether [the premises] are commercial residential premises involves asking whether [it] is a hotel, motel, inn, hostel or boarding house or whether it is similar to - in the sense that it has a likeness or resemblance to - any of those types of establishment. The application of this test necessarily raises questions of fact involving matters of impression and degree.

66. None of the expressions used in paragraph (a) of the definition is defined in the GST Act, so they will take their ordinary meaning. The Macquarie Online Dictionary^[21] Macquarie Dictionary Online at http://www.macquariedictionary.com.au viewed 29 August 2012 provides the following relevant meanings:

Hotel

• 1. a building in which accommodation and food, and sometimes other facilities, are available.
• 2. a building which houses a business selling beer and other alcoholic drinks; pub.

Motel

• 1. a roadside hotel which provides accommodation for travellers in self-contained, serviced units, with parking for their vehicles.

Inn

• 1. a small hotel that provides lodging, food, etc., for travellers and others

Hostel

• 1. a supervised place of accommodation, usually supplying board and lodging, provided at a comparatively low cost, as one for students, nurses, etc.

Boarding house

• 1. a dwelling in which lodging is provided to paying residents who share common facilities such as a kitchen, laundry, living room, etc.
• 2. a dwelling, usually a private house, in which board and lodging are provided for payment.

67. The definitions of "hostel" and "boarding house" refer to the concepts of "board" and "lodging", which are defined in the following ways^[22] Macquarie Dictionary Online at http://www.macquariedictionary.com.au viewed 29 August 2012 :

Board

• 14. daily meals, especially as provided for pay, often as part of accommodation.

Lodging

• 1. accommodation in a house, especially in rooms for hire.

68. The Commissioner considers it "manifestly clear" that the property could not properly be characterised as a hotel, motel or inn. He submits^[23] Respondent’s Outline of Submissions [53] :

To the extent that there is any evidence concerning the physical characteristics and operation of the accommodation complex at the relevant time, that evidence makes it quite clear that the complex was not a hotel, motel or inn. The complex bore no physical resemblance to a hotel, motel or inn. For all intents and purposes, the accommodation complex bore the physical characteristics of an apartment or unit complex. The residential units were all self-contained with a kitchenette and en suite facilities and were nothing like a standard hotel or motel room. The fact that there was a community or communal dining and leisure area is unremarkable. Many modern apartment complexes have common leisure and community facilities. None of the other hallmarks of a hotel, motel or inn were present at the accommodation complex. For example, there was no staffed reception desk or reception area and there was no licensed bar or restaurant (a feature of virtually all hotels). Nor did the accommodation complex hold itself out to be a hotel, motel or inn.

69. Overall, I accept those submissions. That is despite the fact that the accommodation units themselves bear a resemblance to rooms of a kind commonly available in motels or hotels. The combination of a sleeping area; a "living" area with chairs, coffee table and television; a kitchenette (with a modest inventory of crockery and cutlery, a small fridge and tea and coffee making facilities); and an ensuite bathroom, is a familiar combination of features in hotel and motel accommodation.

70. But the property itself could not fairly be described as a hotel or a motel (an inn, being a small hotel, need not be dealt with separately). Hotels and motels are generally patronised by travellers "who ordinarily have their principal place of residence elsewhere and who need or desire accommodation while away for business or pleasure": ECC Southbank, at [54]. That is not the arrangement here, where those who occupy the accommodation units do so on a permanent (or at least long-term) basis, apparently as their principal place of residence. And in any event, a property like this one, with 40 accommodation units but only ten car parking spaces, would not fall within any reasonable description of a "motel".

71. Nor would I regard the property as a "boarding house" or as "similar to" a boarding house. It cannot fairly be described as a "dwelling", a concept from which it differs so significantly that it would not be apt to describe it as "similar".

72. The property does, however, seem to have some of the attributes of a "hostel", and at least in some respects to be "similar to" a hostel. With an on-site manager, it could hardly be said that it is not a "supervised place of accommodation". Its layout includes a commercial kitchen where meals are prepared, and a communal area suitable for, and used as, a dining area for residents. Three meals a day are provided to residents. There is a communal laundry. Segregated sleeping areas (in the sense that residents have their own place to sleep, rather than in a dormitory) might be regarded as unusual in a hostel, but that factor was not fatal to the taxpayer's claim in the ECC Southbank case.

73. It might be said that the long-term nature of the residents' occupancy of the property is a factor that tends against a finding that the property can be regarded as commercial residential premises. Such a proposition would be based on the notion that occupants (to use a neutral term) of commercial residential premises are more likely to be described as "guests" than, as here, "residents". (This notion is referred to in more detail below, at [79], in relation to GSTR 2000/20.)

74. I accept that, as a general rule, an occupant of a hotel or motel (with the possible exception of "residential" hotels) would be described as a "guest". But it seems to me to be entirely unremarkable that hostels (and perhaps boarding houses) would be occupied by "residents", at least to some extent. The fact is that hostels and boarding houses are different from hotels, motels and inns - that is why they are separately referred to in paragraph (a) of the statutory definition. If they were sufficiently similar to hotels, motels and inns, they need not have been specified in paragraph (a), for they would come within paragraph (f) in any event.

75. In saying this I do not overlook the fact that some hostels - youth hostels provide one example - might be regarded as very similar to hotels. But if the youth hostel example were the only type of hostel intended to be within the definition of commercial residential premises, paragraph (f) could have done that work. There would not have been a need to include "hostel" in paragraph (a). The "hostel" in paragraph (a) must be, at least in some respects, different from a hotel, motel or inn. This property is different from a hotel, motel or inn. It is also similar to a hostel. But is there enough similarity?

76. Clearly enough, there are factors that tend towards a conclusion that the property is commercial residential premises for the purposes of the GST Act. Factors that tend that way are set out in [72] above. But there are factors that tend away from such a conclusion. Those factors are:

• • that occupants agree to occupy the units in the Complex for a "Periodic Term", often for months or years at a time;
• • that a "condition report" is prepared at the commencement and conclusion of the term of occupation;
• • that a cleaning fee is imposed when an occupant leaves;
• • that the possibility of alterations to the unit by the occupant is contemplated;
• • that the possibility of keeping pets is contemplated; and
• • that occupants must separately arrange and pay for the connection of telephone, electricity and gas services to their units.

77. Those factors are, in my view, when taken together, quite out of place in the context of hotels, motels, inns, hostels and boarding houses, or premises similar to them. Their presence renders it impossible to conclude that the property is, or at any relevant time was, commercial residential premises.

GSTR 2000/20

78. For completeness, I should refer to the Commissioner's public GST ruling, GSTR 2000/20, dealing with commercial residential premises. I do this because the ruling was referred to in the parties' written submissions, although I note that the Commissioner stated in his Submissions in Reply that:

[C]ontrary to the impression given by the applicants' submissions at [110]ff, the respondent has not sought to rely upon any public ruling in support of his construction of the definition of "commercial residential premises".

79. The attributes that are mentioned in the ruling are^[24] See paragraphs 81-109 :

• • commercial intention - the establishment is operated on a commercial basis. It possesses the characteristics of a business, but may be operated by non-profit body;
• • multiple occupancy - the establishment provides sleeping accommodation on a multiple occupancy basis. The establishment may be a building, a part of a building, a precinct within a building, or a collection of buildings. The establishment may be partly owner occupied;
• • holding out to the public - the establishment holds itself out as premises that will receive travellers who are willing and able to pay for accommodation and/or that it will accept reservations or contracts to let accommodation to guests or lodgers;
• • accommodation is the main purpose - the provision of accommodation is the establishment's primary purpose, or one of its main purposes, after the service of food and/or drink;
• • central management - the establishment has central management to accept reservations, allocate rooms, receive payments and arrange the services provided throughout the premises;
• • management offers accommodation in its own right - the management has control of the premises as a whole, whether or not they own the property or any part of it and lets them in its own right, rather than as an agent;
• • services - services are provided to guests. These may include periodic cleaning (usually daily or weekly), provision of food, laundering services, telephone (usually through a centralised system, allowing the guest to be billed for calls made), and minor services, like wake-up calls or taxi bookings;
• • status as guests - those being provided with accommodation are guests, boarders or lodgers. Guests or lodgers can expect a reasonable amount of privacy from management, their staff and other guests, but not to the same level expected by a tenant.

80. Those eight attributes are the very same ones that were listed in the Explanatory Memorandum^[25] Paragraph 15.12 (EM) to the Tax Laws Amendment (2006 Measures No. 3) Bill 2006 (the 2006 Bill), a bill that introduced amendments to the GST Act in an attempt to reverse aspects of the decision of the Full Federal Court in
Marana Holdings Pty Ltd v Commissioner of Taxation (2004) 141 FCR 299; [2004] FCAFC 307. Some of them were referred to briefly by Greenwood J in
Meridien Marinas Horizon Shores Pty Ltd v Federal Commissioner of Taxation (2009) 74 ATR 787; [2009] FCA 1594. All of them were referred to by Nicholas J in ECC Southbank.

81. In my view, the property under consideration exhibits all eight attributes, except the last one. As far as that last attribute is concerned, Nicholas J said in ECC Southbank, at [71]:

[T]he legislative policy upon which the respondent's submissions focused explains why the supply of residential premises (though not commercial residential premises or accommodation in commercial residential premises) is input taxed. However, it must also be recognised that the legislature has drawn a distinction between residential premises and commercial residential premises such that accommodation provided in commercial residential premises, even if of a long-term nature, is taxable if the entity that supplies the accommodation owns or controls the commercial residential premises in which such accommodation is provided. The fact that such accommodation (which might as in this case take the form of either a shared apartment or a self-contained apartment) is the principal place of residence of the individual concerned does not mean that the supply is not taxable. In such circumstances, however, the value of the supply may be substantially reduced for GST purposes: see Div 87.

[Emphasis added]

82. On that basis, it is fair to conclude that, even though the eighth attribute is not exhibited in the case of the property under consideration here, the property may still be capable of being considered commercial residential premises if the enquiry went no further than to have regard to the attributes set out in the ruling. That would not be the right outcome. Perhaps what that demonstrates is how difficult it is to prescribe the factors that are relevant to the enquiry, when the enquiry is, as Nicholas J said in ECC Southbank, a question of "impression" and "degree".

Conclusion on the commercial residential premises issue

83. In my view, the property is not, and was not at any relevant time, commercial residential premises for the purposes of the GST Act.

DECISION

84. Having found against Wynnum on the timing issue, the ruling issue and the enterprise issue, and effectively against both Applicants on the commercial residential premises issue, I must affirm the Commissioner's disallowance of both objections.