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Edited version of your written advice
Authorisation Number: 1051280463051
Date of advice: 12 September 2017
Ruling
Subject: GST and input tax credits relating to input tax supplies of residential properties
Question 1
Is the rent received by the entities from the tenants considered as input-taxed rent?
Answer
Yes.
Question 2
Is the rent received by the entity from a motel operator considered as input-taxed?
Answer
Yes.
Question 3
According to Section 23-5 of the GST Act the registration turnover threshold is $75,000. Does it mean the GST portion is $75,000?
Answer
See the answer to question 3 below.
Question 4
Can the entities deregister for the GST if all supplies they made are related to input taxed supplies of residential properties?
Answer
Entities making only input taxed supplies of residential properties may choose to deregister for GST if they decide to.
Relevant facts and circumstances
You bought residential properties under numerous entities.
All the residential properties are leased to tenants.
One of the properties is a unit and the tenant is a motel operator which uses the property to operate a motel.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 23-5
A New Tax System (Goods and Services Tax) Act 1999 section 40-35
A New Tax System (Goods and Services Tax) Act 1999 Division 188
Reasons for decision
Question 1
Summary
Yes.
Detailed reasoning
Section 40-35 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that 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 the supply is of residential premises.
Therefore, if you rent out residential premises for residential accommodation, your rent is input-taxed and you don't include GST in the rental charge. You also can't claim credits for the GST included in any costs relating to the rental, such as agent's commission or repairs and maintenance on the premises.
Question 2
Summary
Yes.
Detailed reasoning
You informed us that you have a unit that you lease to a motel operator.
The motel operator will group your apartment with other apartments in the complex and let them out as part of their motel enterprise.
Even though your apartment is located within commercial residential premises, your apartment does not, by itself, have the characteristics of commercial residential premises – it is residential.
This means that you are not liable for GST on the income and cannot claim GST credits for anything you purchase or import to lease the premises.
Question 3
Summary
See the answer to question 3 below.
Detailed reasoning
Section 23-5 of the GST Act sets the threshold at which an entity is required to be registered for GST. Currently the GST registration threshold is $75,000 ($150,000 for not for profit entities).
This means that if an entity is carrying on an enterprise and its GST turnover meets the registration turnover threshold then it will have to register for GST. However, entities making only input taxed supplies of residential premises do not need to register for GST if they decide to.
Question 4
Summary
Yes.
Detailed reasoning
According to the facts provided your supplies of residential premises are input taxed.
Division 188 of the GST Act provides among other things that supplies that are input taxed are not included in current or projected annual turnover.
As supplies that are input taxed are not included in current or projected annual turnover an entity making only input taxed supplies does not need to be registered for GST if it so chooses.
This means that you may deregister for GST if you choose to.