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Edited version of your private ruling

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Ruling

Subject: GST and residential student accommodation

Question 1

Is a supply of student accommodation by you GST-free under sub-paragraph
38-250(1)(b)(i) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes

Question 2

Is the reference site chosen by you in applying the ATO Residential Colleges GST Tool correct in determining whether the requirements of section 38-250(1)(b)(i) of the GST Act have been met?

Answer

Yes

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You are an educational institution registered for GST.

You are endorsed as a Deductible Gift Recipient under Division 30 of the Income Tax Assessment Act 1997. You are therefore a gift-deductible entity for the purposes of the GST Act

You have a number of different campuses.

You provide residential accommodation for a nominal fee only to persons who are enrolled as students at your campuses ('Residential Student Accommodation').

You provide the Residential Student Accommodation for the purpose of providing accommodation support to your students.

You charge a weekly nominal fee to your students for your Residential Student Accommodation.

You have provided the specific details pertaining to the accommodation type, services and benefits provided in respect of each unit/type of Residential Student Accommodation offered by you and have used the 'ATO Residential Colleges GST Tool to input and calculate your details. This is also the case in respect of the reference site selected for applying the GST Tool.

In applying the GST Tool, it was necessary for you to select a reference site to the Residential Student Accommodation supplied by you. While default reference sites are available, you did not wish to apply the default reference sites, given their lack of comparability to the Residential Student Accommodation supplied by you.

Upon taking into account the above factors, you chose a reference site near your main campus. These details have been input into the GST Tool.

Relevant legislative provisions

All references are to the A New Tax System (Goods and Services Tax) Act 1999

Division 9

Division 11

Section 38-250

Division 165

Reasons for decision

Issue 1

Question 1

Summary

You have advised that your supplies of accommodation in the individual student residences within the colleges are GST-free under section 38-250 of the GST Act. In particular, you have advised that the supply is made for less than 75% of the GST inclusive market value.

Where this is the case the supplies will be GST-free.

Detailed reasoning

As you are the supplier of accommodation and you are also a gift deductible entity, Subdivision 38-G of the GST Act (Activities of charitable institutions etc.) must be considered in relation to your supplies of accommodation.

Relevantly, subsection 38-250(1)(b)(i) of the GST Act provides that a supply is GST-free if the supplier is a gift deductible entity and the supply is a supply of accommodation that is for less than 75% of the GST inclusive market value of the supply.

You have advised that your supplies of accommodation are GST-free under section 38-250 of the GST Act. In particular, you have advised that the supply is made for less than 75% of the GST inclusive market value.

You have advised that you utilised the ATO Residential College GST Tool in verifying your treatment of the accommodation as a GST-free supply.

Where you have acted in accordance with the information from the ATO Residential College GST Tool and the guidelines available from the ATO Market Value Guidelines in the Charities Consultative Committee Resolved Issues Document in determining that your supply of accommodation is for consideration that is less than 75% of the GST inclusive market value of the supply, we accept that the supply is a supply for nominal consideration and is GST-free.

Where you are entitled to treat the supplies as GST-free under section 38-250, this GST treatment overrides any other possible treatment (such as whether the underlying supplies may otherwise be an input taxed supply)(see subsection 9-30(3) of the GST Act). When a supply is GST-free no GST is payable on the supply, and an entitlement to an input tax credit for anything acquired to make the supply is not affected.

Question 2

Summary

You must establish whether the same supply exists in the open market (the same supply test) in establishing the GST inclusive market values of your supplies under subsection 38-250(1) of the GST Act.

Where the reference site chosen by you in applying the ATO Residential Colleges GST Tool is in a reasonably close proximity to your campus and offers similar accommodation then this site would be acceptable.

Detailed reasoning

We have published the Market Value Guidelines in the Charities Consultative Committee Resolved Issues Document to assist endorsed charities or gift deductible entities in establishing the GST inclusive market values of their supplies under subsection 38-250(1) of the GST Act. These guidelines are available on our website at www.ato.gov.au. They provide that in determining the GST inclusive market value of a supply, a charity must apply the following successive tests.

Firstly, the charity must establish whether the same supply exists in the open market (the same supply test). Where it does, the price of the supply as defined by the market is the market value that the charity should use. The other suppliers in the market may be charitable or profit making organisations. It is the supply that is compared in the market not the recipient of the supply or the provider of the supply. The comparison should be based on quality, quantity and conditions of supply.

Secondly, if no other organisation offers the same supply, the charity may identify similar supplies that exist in the open market and calculate the market value of its supply by reference to the prices charged for those supplies (the similar supply test). When establishing the market value of a service, the charity should seek to compare the services it offers with services of a similar nature and quality, of similar size or time length, and with similar conditions.

Whilst it is unrealistic to place a definitive figure upon how many GST inclusive prices should be obtained, we expect that, where possible, it would generally be more than one. The information collected would need to provide sufficient intelligence for the charity to be confident that the value they arrive at is representative of the supply in the market.

Thirdly, in the unusual event that a market value cannot be established using the same supply test and the similar supply test outlined above, the charity can use a 'cost plus' method. This method allows the charity to use full absorption costing and then apply a mark-up appropriate to the general market of the particular supply. In using this method, the charity can include an imputed cost for donated goods and voluntary labour. The cost plus method is used as a last resort to determine the GST inclusive market value of a supply. This method has no application in determining the consideration charities provided, or were liable to provide for acquiring the thing supplied.

In your case you have used the ATO Residential Colleges Tool in choosing the reference site and have selected firstly the nearest 'like' campus as 'your' site as you were not listed in the ATO Residential Colleges Tool and secondly you selected a nearby campus as the reference site.

As this campus is in a reasonably close proximity to your campus and offers similar accommodation it is acceptable as a reference site.

A link to the Market Value Guidelines in the Charities Consultative Committee Resolved Issues Document is provided below.

http://ato.gov.au/businesses/content.asp?doc=/Content/16250.htm&page=8&H8

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