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Ruling

Subject: GST and residential premises

Question

Is the leasing of your houses input taxed supplies?

Answer

Yes

Relevant facts and circumstances

You are registered for GST.

You own a number of houses.

A number of these houses are stand alone houses.

House X is connected in a row of townhouses, however does not have common use of facilities with other townhouses.

House Y is leased on a long term residential lease through a real estate agent.

Houses Z, and W are leased on a short term basis.

Houses Y, Z and W are leased to families and groups with sleeping facilities for up to a number of guests.

There are no services provided to occupants during stays at any of the houses.

You clean houses Y, Z and W between leases.

You manage the bookings and other requirements for houses Y, Z and W.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 9-5 and

A New Tax System (Goods and Services Tax) Act 1999 40-35.

Reasons for decision

Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides you make a taxable supply if:

· you make the supply for consideration; and

· the supply 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.

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

Section 40-35 of the GST Act provides that a supply of premises by way of lease, hire or licence is input taxed if it is a supply of residential premises, other than a supply of commercial residential premises. A supply of commercial residential premises will not be input taxed. A supply of residential premises is input taxed to the extent it is used predominantly for residential accommodation, regardless of the term of occupation.

Residential premises are defined in section 195-1 of the GST Act and include land or buildings that are occupied as a residence or for residential accommodation, regardless of the term of occupation. Goods and Services Tax Ruling GSTR 2000/20 Goods and Services Tax: commercial residential premises provides the characteristics of residential premises include:

· the premises provide the occupants with sleeping accommodation and at least some basic facilities for day to day living

· the premises may be in any form, including detached buildings, semidetached buildings, strata-title apartments, single rooms or suites of rooms within larger premises

· the purpose or context of the premises' use is for personal accommodation, rather than another purpose, such as for a business

· the tasks of day to day living, such as, preparing food, cleaning and laundering, are performed by the occupant, or by others under private arrangements

· the status of the occupant is most commonly that of owner, tenant or lessee. Any boarders, lodgers or guests occupy the premises by private arrangement with the owner, tenant or lessee

· the premises will be in an area zoned by Council or Shire regulations as suitable for human habitation

You own and lease a number of houses which provide occupants with sleeping accommodation and basic living facilities. X houses are detached buildings. House Y is a semidetached building. All houses are used for personal accommodation and occupants perform the day to day living tasks.

Your houses fit the definition of residential premises under section 195-1 of the GST Act. The characteristics of your houses are comparable to the characteristics of residential premises given in GSTR 2000/20. Your houses will be residential premises, providing they do not show sufficient characteristics of commercial residential premises.

Commercial residential premises are defined in section 195-1 of the GST Act to include a hotel, motel, inn, hostel, boarding house or anything similar.

Draft Goods and Services Tax Ruling GSTR 2012/D1 Goods and services tax: residential premises and commercial residential premises list's the characteristics of commercial residential premises to include:

· commercial intention

· accommodation being the main purpose

· multiple occupancy

· occupants have status as guests

· holding out to the public

· central management

· the provision of, or arrangement for, services

· management offers accommodation in its own right

Paragraphs 51 to 54 of GSTR 20012/D1 provide that the above characteristics and other objective factors should be used to identify residential premises that are similar to a hotel, motel, inn, hostel or boarding house.

House X is a stand alone residential house leased through a real estate agent for residential accommodation. It does not display any characteristics of commercial residential premises.

Houses Y, Z and W are let for short term stays in holiday locations and display some of the features associated with commercial residential premises. They are held out to the public, accommodation is the main purpose, you manage all the bookings and you offer accommodation in your own right.

However it is necessary to weigh up all of the characteristics and consider the overall character of the premises to determine if they meet the requirements to be commercial residential premises.

Paragraph 201 of GSTR 2012/D1 provides that premises only offering accommodation to one person or a small group living or travelling together do not demonstrate the characteristic of multiple occupancy. For example, a cottage let as a weekender does not display this characteristic.

Although houses Y and Z provide accommodation for up to 14 and 12 people, they are only provided to one group or family. The houses do not have the capacity to provide accommodation to multiple, unrelated guests at once in separate rooms. The houses do not demonstrate the multiple occupancy characteristic.

Example 16 at paragraphs 77 to 80 of GSTR 2012/D1 provides a situation where individual holiday apartments do not amount to commercial residential premises. The apartments are let out for short-term stays and have a level of basic services offered. The holiday apartments are not characterised as commercial residential premises.

The characteristics of houses Y, Z and W are comparable to this example. They are let out for short term periods offering accommodation to guests who are temporarily away from their usual homes. You clean the houses between stays, but do not provide any services to tenants.

Therefore while your houses display some characteristics of commercial residential premises, they are not sufficiently similar to a hotel, motel, inn, hostel or boarding house to be commercial residential premises as defined in section 195-1 of the GST Act.

Your supply of premises by way of lease, hire or licence will be an input taxed supply of residential premises under section 40-35 of the GST Act.

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