Decision impact statement

ECC Southbank Pty Ltd as trustee for Nest Southbank Unit Trust & Anor v Commissioner of Taxation

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Court Citation(s):
[2012] FCA 795
(2012) 205 FCR 505
2012 ATC 20-336
(2012) 87 ATR 902

Venue: Federal Court of Australia
Venue Reference No: NSD 1569 of 2010
Judge Name: Nicholas J
Judgment date: 31 July 2012
Appeals on foot: No.
Decision Outcome: Adverse

Impacted Advice

Relevant Rulings/Determinations:

Subject References:
Goods and Services Tax
Commercial residential premises
Premises that are, or similar, to a hotel, motel, inn, hostel or boarding house
Shared apartments and studio style apartments


Outlines the ATO's response to this case which concerned whether premises designed and operated to provide student accommodation are commercial residential premises.

Brief summary of facts

Under the terms of a development lease entered into with the State of Queensland, the trustee of the Nest Southbank Unit Trust (NSUT) had premises constructed that were designed for student accommodation and serviced apartments.

NSUT entered into a lease with the State of Queensland under which the premises were able to be operated for student accommodation and/or serviced apartment purposes. NSUT subsequently granted a sub-lease of the premises to the trustee of the Urbanest Southbank Leasing Trust (USLT) under which the premises were permitted to be used for managed residential accommodation.

The premises consisted of 132 shared apartments, 27 studio apartments and various common areas. The shared apartments incorporated a cluster of study/bedrooms (in 4, 5 or 6 room configurations) with a shared kitchen and living facilities. Some study/bedrooms were double occupancy rooms. Each study/bedroom included a single bed or bunk bed, private ensuite bathroom, study desk, air-conditioning and storage area. The studio apartments consisted of a bedroom with ensuite bathroom, private study and living space and a kitchen.

The premises incorporated within its common areas:

a coin operated laundry,
games rooms,
TV areas,
external garden with barbeque areas,
group study rooms and individual study booths,
meeting and presentation rooms,
a bike storage room,
a cafeteria-style eating area, and
a reception desk, operating 24 hours per day, which provided various services.

Accommodation was provided by USLT in the premises pursuant to a Rooming Accommodation Agreement (for shared apartments) or a Studio Accommodation Agreement, both incorporating terms mandated by the Residential Tenancies and Rooming Accommodation Act 2008 (Qld). The Rooming Accommodation Agreement required residents to comply with house rules.

USLT supplied accommodation to two individuals pursuant to Rooming Accommodation Agreements and to another individual pursuant to the Studio Accommodation Agreement.

Issues decided by the court

The issues in dispute were whether:

the supply, by way of sub-lease, by NSUT to USLT of the premises was a supply of commercial residential premises for the purposes of section 40-35 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act); and
the supplies of accommodation made to the three individuals were supplies of accommodation in commercial residential premises provided to individuals by the entity that owns or controls the commercial residential premises for the purposes of section 40-35 of the GST Act.

If the supplies were of commercial residential premises and accommodation in commercial residential premises respectively, the supplies would be taxable supplies under section 9-5 of the GST Act. If not, the supplies would be input taxed supplies by operation of section 40-35 of the GST Act.

NSUT and USLT sought declarations from the Federal Court that each of the supplies was a taxable supply.

Section 195-1 of the GST Act relevantly defines commercial residential premises as meaning:

(a) a hotel, motel, inn, hostel or boarding house; or
(f) anything similar to residential premises described in paragraph (a).

Nicholas J decided at [67] that the premises supplied by way of sub-lease by NSUT to USLT was either a hostel, or very similar to a hostel. The premises were therefore properly regarded as commercial residential premises for the purposes of the GST Act at [70]. In forming this view, his Honour considered the Macquarie Dictionary 5th Edition definition of the term 'hostel', being a supervised place of accommodation, usually supplying board and lodging, provided at a comparatively low cost, as one for students, nurses, etc.

His Honour concluded at [66] that the accommodation available at the premises was intended to be (at least in the case of the shared apartments) comparatively low in cost and was obviously configured with the needs of students seeking low cost accommodation in mind. The accommodation provided was supervised in the sense that the reception desk was staffed 24 hours a day. His Honour inferred that residents may lodge complaints with management through the reception desk about the behaviour of other residents or visitors including in relation to excessive noise, failures to maintain the cleanliness of shared apartments and like matters dealt with in the House Rules. The fact that meals were not provided to residents did not mean that the premises could not be described as a hostel, or similar to a hostel.

Nicholas J observed at [71] "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."

His Honour determined that there are a number of features that distinguish hotels and motels from the premises supplied by NSUT at [51 to 64]. His Honour also found that the premises were not similar to an inn or a boarding house at [68].

His Honour further found at [72] that each supply made to each of the three individuals was a supply to an individual of accommodation in commercial residential premises made by the entity (USLT) that controlled the premises. Accordingly, the supplies of accommodation were not input taxed by operation of paragraph 40-35(1)(a) of the GST Act and were therefore taxable supplies.

ATO view of Decision

Nicholas J observed at [50] that in considering whether premises are, or are similar to, a hotel, motel, inn, hostel or boarding house, the application of the test raises questions of fact involving matters of impression and degree.

On the facts of this matter, it was open to the Court to conclude that the premises met the ordinary meaning of the term 'hostel', or were similar to a hostel, and therefore commercial residential premises. His Honour's decision focuses upon a specific dictionary meaning of the term 'hostel' that is relevant to premises used to provide accommodation to students.

The decision does not support the preliminary view expressed in GSTR 2012/D1 that it is necessary for occupants to have the status of a guest in order for the premises to satisfy paragraphs (a) or (f) of the definition of commercial residential premises. His Honour characterised the premises as a hostel, or similar to a hostel, even though the shared apartments and studio apartments may be occupied by individuals as their principal place of residence.

His Honour did consider the status of the occupant to be a relevant factor in considering whether the premises were similar to a hotel or motel. He also observed that an inn is an establishment at which board and lodging is provided to travellers at [67].

Accordingly, we consider that the preliminary views expressed in GSTR 2012/D1 in respect to characterising premises as a hotel, motel, and inn are broadly consistent with his Honour's decision.

Administrative Treatment

Implications for ATO Precedential documents (Public Rulings & Determinations etc)

The Commissioner will review the preliminary views set out in GSTR 2012/D1, which will replace GSTR 2000/20 when finalised, to ensure that the views expressed are consistent with the Court's decision.

Implications for Law Administration Practice Statements


Legislative References:
A New Tax System (Goods and Services Tax) 1999 (Cth)
Pt 2-5
Div 87

Residential Tenancies and Rooming Accommodation Act 2008 (Qld)
s10-40, s247, s249, s253

Case References:
Meridien Marinas Horizon Shores Pty Ltd v Federal Commissioner of Taxation
[2009] FCA 1594
2009 ATC 20-158
(2009) 74 ATR 787

Marana Holdings Pty Ltd v Commissioner of Taxation
(2004) 141 FCR 299
2004 ATC 5068
(2004) 57 ATR 521

ECC Southbank Pty Ltd as trustee for Nest Southbank Unit Trust & Anor v Commissioner of Taxation history
  Date: Version:
You are here 28 September 2012 Response
  12 February 2013 Resolved