ATO Interpretative Decision
ATO ID 2005/189
Goods and Services Tax
GST and supply of student accommodation by a hostel whose primary purpose is to accommodate overseas studentsFOI status: may be released
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is the entity, a hostel that provides accommodation to students that undertake a secondary course at a separate institution, making a GST-free supply under subsection 38-105(2) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when:
- •
- it provides accommodation to students who are from outside of Australia and to students who are from rural or remote locations in Australia, and
- •
- its primary purpose is to provide accommodation to students from outside of Australia?
Decision
No, the entity is not making a GST-free supply under subsection 38-105(2) of the GST Act. The entity is making a taxable supply under section 9-5 of the GST Act.
Facts
The entity is a hostel and its stated and demonstrated primary purpose is the provision of accommodation to students from outside of Australia.
Occasionally it will supply accommodation to students from rural or remote locations in Australia.
All students being accommodated are undertaking a secondary course at a separate institution.
The entity is registered for goods and services tax and the supply satisfies the other positive limbs of section 9-5 of the GST Act.
Reasons for Decision
A supply is GST-free under subsection 38-105(2) of the GST Act if:
- •
- it is a supply of student accommodation to students undertaking a primary, secondary or special education course, and
- •
- the accommodation is provided in a hostel whose primary purpose is to provide accommodation for students from rural or remote locations who are undertaking such courses.
The entity is supplying accommodation in a hostel to students who are undertaking a secondary course. The remaining requirement in subsection 38-105(2) of the GST Act is that the hostel's primary purpose must be to provide accommodation for students from 'rural or remote locations'.
The entity's primary purpose is the provision of accommodation to students from outside of Australia. Therefore, it must be determined whether overseas students are from 'rural or remote locations'.
The GST legislation only applies to Australia and its States and Territories. Therefore, it excludes areas outside Australia unless specified. The term 'rural or remote locations' is not defined in the GST Act and as such is considered to be rural or remote locations in Australia only.
Rural or remote locations in Australia are listed in the Rural, Remote and Metropolitan Areas Classification (RRMA) (see Note 1), which delineates Australia into a seven-scale classification system. Of the seven classifications, two are metropolitan, three are rural and two are remote. A student will be from a rural or remote location if they are from an area designated as R1, R2, R3, Rem 1 or Rem 2 as described in the following table.
| RRMA Category | Code | Description |
|---|---|---|
| Capital City | M1 | Capital city urban area |
| Other Metropolitan | M2 | Other metropolitan centres with population >100,000 |
| Large Rural Centre | R1 | Large rural centre with population 25,000-99,999 |
| Small Rural Centre | R2 | Small rural centre with population 10,000-24,999 |
| Other Rural Centre | R3 | Other rural areas with population <10,000 |
| Remote Centres | Rem1 | Remote centres with population >5000 |
| Remote Other Areas | Rem2 | Remote area with population <5001 |
The entity's primary purpose is to provide accommodation to students from outside of Australia, not to provide accommodation to students from 'rural or remote locations'. Therefore, the entity does not satisfy the requirements in subsection 38-150(2) of the GST Act and is not making a GST-free supply even when made to students from rural or remote locations.
The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. The supply is neither GST-free under any other provision in Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act.
Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
section 9-5
subsection 38-105(2)
Division 87
ATO ID 2004/977
Other References:
Department of Primary Industries and Energy and the Department of Human Services 1994, Rural, Remote and Metropolitan Area Classification
Keywords
Goods and services tax
GST free
GST education
Student accommodation
ISSN: 1445-2782
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