Edited version of private ruling

Authorisation Number: 1011750211723

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Ruling

Subject: GST and Supply of long term lodging

Question 1

Do you need an Australian business number (ABN) to conduct your activities of operating a boarding house?

Answer

No, you are not required to have an ABN to conduct your activities that you have referred to as operating a 'boarding house', if you are making a supply of private residential accommodation. However, if you are required to be registered for the goods and services tax (GST), you must obtain an ABN.

Question 2

Do you have a liability to remit GST on your supplies of accommodation?

Answer

No. You do not have a liability to remit GST on the supplies of accommodation you make.

Relevant facts and circumstances

· You are the owner of a 'boarding house'.

· You do not have an ABN and are not registered for the GST.

· You let out rooms and bed-sitters to lodgers at fortnightly rates.

· Your annual turnover, which is entirely derived from operating the boarding house, is above the registration threshold.

· You have several single rooms and bed-sitters for letting out to lodgers. The rooms and bed-sitters are in a dwelling which has been adopted for this purpose.

· The bed-sitters consist of a bedroom, a small kitchenette with a sink, and a bar fridge which enables light meals to be prepared by the lodgers.

· The single rooms only have a small stove in the room.

· The toilets and bathrooms are common to all the bed-sitters and single rooms.

· You let these premises to lodgers who require accommodation for minimum stay of two months. Some of your lodgers have been with you for several years.

· All bed-sitters and single rooms are provided with basic furniture such as beds.

· You do not generally provide linen, but occasionally you may loan such linen where a lodger so requests. Such linen is returned to you after the end of the lodgers stay. The lodger is responsible for the laundry of the linen loaned to them.

· There are no common facilities for your lodgers other than bathrooms, toilets and laundry facilities.

· You clean the premises, including vacuuming of rooms and bed-sitters.

· In the past, you occupied one of the rooms in the dwelling but moved out as your personal circumstances have changed. However, you still have your furniture in the dwelling.

· You obtain the equivalent of two weeks rent (for use of furniture) which is refundable at the end of the occupation. You also charge two weeks rent in advance.

· The rent includes the provision of gas, electricity and water. These are not metered separately nor billed to the residents.

· You issue receipts for all the payments you received from the lodgers.

· At the inception of GST you were told by the Australian Taxation Office (ATO) that you do not require an ABN as there is no GST on residential rents.

Reasons for decision

1. Australian business number

Under section 8 of the Australian Business Number Act 1999 (ABN Act), you are entitled to an Australian Business Number (ABN) if you are carrying on an enterprise in Australia, or, in the course or furtherance of carrying on an enterprise, you make supplies that are connected with Australia,

Section 9-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states that an "enterprise" is an activity, or series of activity, done (among other things)

· in the form of a business, or

· in the form of an adventure or concern in the nature of trade, or

· on a regular or continuous basis, in the form of a lease, licence or grant of an interest in property.

Based on the facts you have provided, you are carrying on the activity of letting out rooms to lodgers on a regular or continuous basis. These activities constitute an enterprise for the purposes of the GST Act. Consequently, you are entitled to have an ABN if you so wish.

However, if you are required to be registered for the GST, you must obtain an ABN for this purpose.

Under section 23-5 of the GST Act, you are required to be registered for GST if:

· you are carrying on an enterprise; and

· your GST turnover meets the registration turnover threshold.

In your case, the applicable GST turnover is $75,000 ($150,000 or more for non-profit organisations). Whether or not you are required to be registered would depend on whether your GST turnover meets the registration threshold.

You are carrying on an enterprise of providing residential accommodation. Currently, you are not registered for the GST. Although your turnover exceeds the registration threshold, it is derived entirely from the revenue you receive from renting residential premises.

Under section 40-35 of the GST Act, residential rent is input taxed, provided the premises you let are not commercial residential premises. Under provisions in sections 188-15 and 188-20 of the GST Act, input taxed supplies are not included in calculating both your current and projected GST turnover.

You state that you are the owner of a boarding house. The term "boarding house" is not defined in the GST legislation. The Macquarie Dictionary defines boarding house as "a place, usually a home, at which board and lodging are provided". The term "board" is defined in the Macquarie Dictionary as "daily meals, especially as provided for pay, often as part of accommodation". As you do not provide meals, the services you supply are not that of a boarding house.

Further, boarding houses, depending on the services provided, can fall within the classification of 'Commercial Residential Premises'. Goods and Services Tax Ruling GSTR 2000/20: commercial residential premises (GSTR 2000/20) provide the Commissioner's view on commercial residential premises.

From the facts of this case, and the explanation provided in GSTR 2000/20, it appears that the supplies you make through your enterprise do not meet the characteristics of a supply of commercial residential premises. Therefore the premises you are letting to your clients is captured within the meaning of 'residential premises'. As residential rent is input taxed pursuant to the provisions in section 40-35 of the GST Act, revenue you derive from this activity is not taken into consideration for determining your GST turnover. As your turnover does not meet the registration threshold, you are not required to be registered.

2. Liability to remit GST

Section 9-40 of the GST Act states that you must pay the GST payable on any taxable supply that you make. Section 9-5 of the GST states that you make a taxable supply if:

· the supply is for consideration, and

· it is made in the course or furtherance of an enterprise that you carry on, and

· the supply is connected with Australia, and

· you are registered or required to be registered for the GST.

However, this section also states that a supply is not a taxable supply to the extent that it is GST-free or input taxed.

You provide residential accommodation for consideration, the supply is made in the course of an enterprise you are carrying on and the supply is connected with Australia. Therefore, you satisfy the first three element of section 9-5 of the GST Act stated above.

However, you are not registered for the GST. You are not required to be registered for the GST because your GST turnover does not meet the registration threshold.

Further, even if you did satisfy all of the four positive limbs of section 9-5 of the GST Act, as the supplies you make are considered to be input tax, the supplies would not be taxable supplies.

Accordingly, you do not meet all the requirements in section 9-5 of the GST Act and the supplies you make are not taxable supplies.

Therefore, you are not required to remit GST on the supplies of accommodation you make.

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