ATO Interpretative Decision

ATO ID 2002/972

Goods and Services Tax

GST and the supply of accommodation in residential premises to school staff
FOI status: may be released
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Issue

Is the entity, a school, making an input taxed supply under section 40-35 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies accommodation to a staff member in residential premises?

Decision

Yes, the entity is making an input taxed supply under section 40-35 of GST Act when it supplies accommodation to a staff member in residential premises.

Facts

The entity is a school as defined in section 195-1 of the GST Act. The entity is not a charitable institution, a trustee of a charitable fund, a gift deductible entity or a government school.

The entity supplies accommodation to a staff member by way of lease or licence in residential premises.

These residential premises provided are houses, units or flats.

The entity is registered for goods and services tax (GST).

Reasons for Decision

Under section 40-35 of the GST Act, a supply of residential premises (other than commercial residential premises), by way of lease, hire or licence, is input taxed to the extent that the premises are to be used predominantly for residential accommodation.

The entity supplies the staff member with accommodation in residential premises by way of lease or licence. Therefore, the supply of the accommodation to the staff member is an input-taxed supply under paragraph 40-35(1)(a) of the GST Act unless the residential premises are commercial residential premises.

Under section 195-1 of the GST, commercial residential premises includes:

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

The entity is a school that supplies accommodation to a staff member in residential premises. Therefore, it is necessary to examine whether the accommodation is provided in commercial residential premises, as defined in paragraph (b) above.

An important rule of statutory interpretation is that the words in the legislation must be read in their context (K & S Lake City Freighters Pty Ltd v Gordon & Gotch Ltd (1985) 157 CLR 302).

Broadly, commercial residential premises have a particular character that removes them from the class of residential premises (paragraph 10 of GSTR 2000/20). Therefore, an interpretation of paragraph (b) must be made in context by reading the definition of 'commercial residential premises' in its totality.

As the premises described under paragraphs (a), (c), (d), (da) and (e) all have characteristics that exhibit a commercial flavour, paragraph (b) must be read in this context. This means that paragraph (b) also covers only those premises that exhibit characteristics that have a commercial flavour. In the context of paragraph (b), this limits its application to boarding houses in boarding schools and other similar premises.

Residential premises, such as houses, units or flats, that the entity provides to the staff member do not exhibit characteristics that have a commercial flavour. Therefore, the residential premises that the entity provides to the staff member are not premises of the type covered by paragraph (b) of the definition of commercial residential premises in section 195-1 of the GST Act.

The entity is supplying residential accommodation to the staff member in residential premises that are not commercial residential premises. Therefore, the entity is making an input taxed supply under section 40-35 of GST Act when it supplies accommodation to a staff member in residential premises.

History note:
The Note to this ATO ID was deleted on 3 December 2002 because it may have been misleading. The Note stated that a supply of accommodation by a charitable institution, a trustee of a charitable fund, a gift deductible entity or a government school to its staff member could be GST-free where it satisfied the requirements of section 38-250. The note was misleading because, following GSTR 2001/3, the supply of the accommodation to staff would normally be a fringe benefit and the consideration provided (namely, the monetary amount and the 'employees' work') would not meet the tests in section 38-250.

Date of decision:  30 August 2002

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   subsection 9-30(3)
   section 38-250
   section 40-35
   section 40-35(1)(a)
   section 195-1

Case References:
K & S Lake City Freighters Pty Ltd v Gordon & Gotch Ltd
   (1985) 157 CLR 309

Related Public Rulings (including Determinations)
Goods and Services Tax Ruling GSTR 2000/20

Keywords
Goods and services tax
GST education
GST property & construction
GST commercial residential premises
GST residential premises
GST supplies & acquisitions
Taxable supply
Input taxed supplies

Siebel/TDMS Reference Number:  3351787

Business Line:  Indirect Tax

Date of publication:  16 October 2002

ISSN: 1445-2782

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