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Authorisation Number: 1012419223660

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Ruling

Subject: GST and student accommodation

Issue 1

Question 1

Is your supply of student accommodation a supply of commercial residential premises?

Answer

Yes

Issue 1

Question 2

If they are a supply of commercial residential premises, are they taxable supplies and are input tax credits available on acquisitions?

Answer

Supplies

Your supply of student accommodation is a supply of accommodation in commercial residential premises and is a taxable supply.

Your supplies of accommodation for periods of up to 28 days are fully taxable.

However, under Division 87 of A New Tax System (Goods and Services Tax) Act 1999 (GST Act) you may

· modify the value of these taxable supplies for periods of 28 days or more; or

· choose to treat supplies of accommodation for periods of 28 days or more as input taxed.

Acquisitions

You are entitled to input tax credits for an acquisition to the extent that you acquire it in carrying on your enterprise and it does not relate to making input taxed supplies providing the remaining elements of section 11-15 of the GST Act are satisfied.

Issue 2

Is an input tax credit available for the purchase of premises?

Answer

Input tax credits are available on this acquisition to the extent that it does not relate to making input taxed supplies providing the remaining elements of section 11-15 of the GST Act are satisfied.

Relevant facts and circumstances

· You are registered for GST.

· You purchased premises in Australia after 1 July 2000.

· The purchase price included an amount of GST of $x.

· These premises were acquired to use as:

· Your business premises

· To provide accommodation

o for visiting students studying temporarily in Australia

o visiting university groups; and

o teaching staff

· The main purpose of the premises is to provide multiple occupancy accommodation on a temporary basis, in a centrally managed facility controlled by you.

· The premises provides

· hostel style accommodation

· offices

· accommodation for a resident assistant,

· An office is maintained on the premises to see to residents' health, safety and well-being, to administer accommodation matters and to maintain the whole building.

· A full-time resident staff member will provide essential services and enforce the housing agreement which students are required to sign.

· You guarantee housing for students who participate in your programs.

· You intend to make the facility available for other education institutions and their staff for jointly sponsored programmes and to use the facilities for conferences.

· The program fee includes accommodation but does not include costs for meals or meal plans and assumes self catered shared accommodations.

· All utilities are included.

· Program fees and housing fees are separately charged.

· The length of accommodation varies from periods of one week to four months.

· The accommodation consists of twin bedded rooms supplied with linen. Each room has its own sink, desks and wardrobes with share shower rooms and toilets over two floors.

· This is a self catering facility with a fully equipped kitchen and dining facilities.

· There is a separate meeting room, coin operated laundry facilities, study room and lounge.

· Residents will be charged a commercial rate comparable with hostel style accommodation in this area, being at least above Y% of the market rate in the area.

· You are presently unable to determine the length of time which students may stay.

Relevant legislative provisions

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

A New Tax System (Goods and Services Tax) Act 1999 Division 11

A New Tax System (Goods and Services Tax) Act 1999 Subdivision 40-B

A New Tax System (Goods and Services Tax) Act 1999 Division 87

A New Tax System (Goods and Services Tax) Act 1999 section 195-1

Reasons for decision

Issue 1 Question 1

Detailed reasoning

Is your supply of student accommodation a supply of commercial residential premises?

Under section 7-1 of A New Tax System (Goods and Services Tax) Act 1999 (GST Act) a GST registered entity will be required to remit GST on any taxable supplies that it makes

Under section 9-5 of the GST Act,

You make a taxable supply if:

(a) you make the supply for *consideration; and

(b) the supply is made in the course for furtherance of an *enterprise that you *carry on; and

(c) the supply is *connected with Australia; and

(d) 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.

[note: the terms marked with an * are defined in section 195-1 of the GST Act.]

From the facts you have provided you meet the requirements in paragraphs (a) (b), (c) and (d). However, it remains to be determined if the supply is GST-free or input taxed.

Sub-section 40-35(1) of the GST Act provides that a supply of premises by lease, hire or licence is input taxed if:

· the supply is of residential premises (other than a supply of commercial residential premises or a supply of accommodation in commercial residential premises provided to an individual by the entity that owns or controls the commercial residential premises); or

· the supply is of commercial accommodation and Division 87 of the GST Act would apply but for a choice made by the supplier under section 87-25.

'Residential premises' is defined in section 195-1 of the GST Act to mean land or a building that:

(a) is occupied as a residence or for residential accommodation; or

(b) is intended to be occupied and is capable of being occupied as a residence or for residential accommodation.

(regardless of the term of the occupation or intended occupation…)

Guidance on whether premises are considered residential premises is provided in Goods and Services Tax Ruling GSTR 2012/5: residential premises.

Paragraphs 9, 10 and 15 of GSTR 2012/5 highlight a single test that looks to the physical characteristics of the property to determine the premises suitability and capability for residential accommodation. Premises need to have the physical characteristics to provide shelter and basic living facilities to be residential premises to be used predominantly for residential accommodation. Given the physical characteristics of your premises it is considered that they exhibit the characteristics of 'residential premises'.

However it is necessary to further consider whether they have characteristics that align with commercial residential premises and therefore whether you are making a supply of commercial residential premises or a supply of accommodation in commercial residential premises. These supplies are excluded from sub-section 40-35(1) of the GST Act and are taxable supplies.

'Commercial residential premises' is defined in section 195-1 of the GST Act to mean:

(a) a hotel, motel, inn, hostel or boarding house;

…

(f) anything similar to residential premises described in paragraphs (a) to (e).

However, it does not include premises to the extent that they are used to provide accommodation to students in connection with an education institution that is not a school.

Guidance on whether premises are commercial residential premises is provided in Goods and Services Tax Ruling GSTR 2012/6: commercial residential premises. The terms in paragraph (a) above are not further defined in the GST Act and therefore take their ordinary meaning in context.

Paragraph 12 of GSTR 2012/6 outlines the common characteristics of operating hotels, motels and hostels that are relevant (but not necessarily determinative) when characterising premises as commercial residential premises:

· Commercial intention

· Multiple occupancy

· Holding out to the public

· Accommodation is the main purpose

· Central management

· Management offers accommodation in its own right

· Provision of, or arrangement for, services

· Occupants have status as guests

The features of hotels, motels and inns are further outlined at paragraphs 13-25 of GSTR 2012/6. These features are also relevant to the term "hostel", in addition to features outlined in paragraphs 26 - 35.

In your case:

· This is a self catering facility with a fully equipped kitchen and dining facilities.

· There is a separate meeting room, coin operated laundry facilities, study room and lounge.

· A full-time resident staff member will provide essential services, supervise cleaning staff and facility services; and facilitate student needs within a central management structure.

· You will provide multiple occupancy accommodation:

· The accommodation consists of twin bedded rooms supplied with linen. Each room has its own sink, desks and wardrobes with share shower rooms and toilets over two floors.

· The period of accommodation is variable.

· All utilities are included as well as professional cleaning, janitorial and repair services.

· Students

o do not have an exclusive right to occupy rooms as they may be reassigned by you

o must agree to accept a roommate as assigned by you and may not make building or room changes without the permission of the housing officer

o are responsible for the care of the rooms, furnishings and equipment in the residential facilities and for keeping the assigned unit in a clean and sanitary manner;

o are liable for any damage to property and agree to pay restoration or replacement of property;

o are issued keys to the room and main entrances;

o are responsible for securing the assigned building at all items and taking such precautions as are necessary for personal and property protection;

o are not able to attach materials to the wall or ceiling and no alteration to the decoration or fittings of the room are allowed.

· Residents will be charged a commercial rate comparable with hostel style accommodation in this area.

· The accommodation is only available to students who are enrolled in study full time.

Ultimately, whether premises are commercial residential premises is a matter of overall impression involving the weighing up of all relevant factors. In weighing up the characteristics of 'commercial residential premises' and on objective assessment of the characteristics of the premises being supplied by you we consider that the premises are a hostel or something similar.

The definition of commercial residential premises in section 195-1 of the GST Act expressly excludes premises to the extent that they are used to provide accommodation to students in connection with an education institution that is not a school.

The term 'education institution' is defined in s 195-1 of the GST Act as having the meaning given by subsection 3(1) of the Student Assistance Act 1973 (SAA). Guidance on whether premises fall within this exclusion may be found in Goods and Services Tax Ruling GSTR 2001/1: supplies that are GST- for tertiary education courses.

Reference to paragraph 150 of this ruling outlines some factors to be considered in determining this question. It is apparent that a close nexus is anticipated between the provision of the accommodation and the education institution. In this case you provide accommodation for students across a number of different campuses, where they attend courses provided by entities other than yourself. There is not considered to be a sufficiently close nexus in this case. Accordingly, the accommodation you provide is not caught by the exclusion in the definition of 'commercial residential premises'.

As the accommodation is accepted as a hostel or something similar the supply of accommodation by you may be properly characterised as a supply of accommodation in commercial residential premises provided to an individual by the entity that owns or controls the commercial residential premises.

Issue 1 Question 2

If they are a supply of commercial residential premises, are they taxable supplies and are input tax credits available on acquisitions?

Detailed reasoning

Supplies

A supply of accommodation in commercial residential premises provided to an individual by the entity that owns or controls the commercial residential premises is a taxable supply.

You advise that the length of time for which the accommodation may be provided will vary from one week to four months.

Division 87 of the GST Act contains concessional treatment for entities that supply commercial accommodation that is provided to an individual as long-term accommodation by either:

· modifying the value of the taxable supply, thereby reducing the amount of GST payable (emphasis added); or

· allowing you to choose not to apply Division 87

In Goods and Services Tax Ruling GSTR 2012/7: long term accommodation in commercial residential premises the Commissioner provides guidance on the application of Division 87 of the GST Act.

To qualify as long-term accommodation under Division 87 of the GST Act, the accommodation must be provided for a continuous period of 28 days or more. Where the supply of accommodation is to individuals for periods of less than 28 days, it does not fall within Division 87 and GST will be fully payable on those supplies.

Where there is a supply of long term accommodation the value of this taxable supply may be modified by section 87-5 or section 87-10 of the GST Act depending on whether or not the accommodation is provided in commercial residential premises that are predominantly for long- term accommodation.

Commercial residential premises are predominantly for long-term accommodation under subsection 87-20(3) of the GST Act where at least 70% of the supplies of accommodation in the commercial residential premises are for a continuous period of 28 days or more and may, under the terms of the agreement, be taken up by an individual. (GSTR 2012/7 paragraph 15)

Any fair and reasonable method may be used to determine whether the 70% requirement is satisfied.

You are not presently in a position to determine whether the accommodation supplied will satisfy the definition of section 87-20(3) of the GST Act as being 'predominantly for long term accommodation'.

Currently then, the value of the taxable supply of accommodation provided for a continuous period of 28 days or more should be calculated under section 87-10 of the GST Act. GST should be calculated on the full value of the supply for the first 27 days of the continuous accommodation and at 50% of the price of the supply provided after the first 27 days.

If you determine that the long term accommodation is provided in premises that are 'predominantly for long term accommodation', then the value of the supply will be calculated under section 87-5 of the GST Act and will be 50% of the price of the supply.

Choosing not to apply Division 87

Under section 87-25 of the GST Act you may choose not to apply Division 87 to the supplies of long term accommodation in commercial residential premises. In that case paragraph 40-35(1)(b) of the GST Act would apply and the supply of the accommodation will be an input taxed supply. You will not be liable for GST and you will not be able to claim the GST credits that relate to the input taxed supplies of this accommodation.

If you choose to input tax supplies of long term accommodation the choice remains in force for at least 12 months after the day on which the choice was first made. However, the choice may be revoked after 12 months or more.

Importantly, as Division 87 of the GST Act only applies to supplies of long term accommodation, you do not have the choice of treating supplies of shorter term accommodation as input taxed. Your supplies of accommodation for periods of 27 days or less will be taxable supplies and you will be liable for GST on these.

Acquisitions.

You are entitled to an input tax credit under section 11-20 of the GST Act when you make a creditable acquisition. You make a creditable acquisition if

(a) you acquire anything solely or partly for a creditable purpose; and

(b) the supply of the thing to you is a taxable supply; and

(c) you provide, or are liable to provide, consideration for the supply; and

(d) you are registered or required to be registered.

You acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise and it does not relate to making input taxed supplies and is not of a private or domestic nature.

Generally, the supply of accommodation in the commercial residential premises by you

· for periods of 27 days or less

o is a taxable supply.

· For periods of 28 days or more may be

o A taxable supply; or

o treated as an input taxed supply where you make the choice available under section 87-25 of the GST Act

To the extent that your acquisition relates to making those taxable supplies of accommodation, they will be for a creditable purpose. However, if you make the choice under section 87-25 to input tax the supplies of long term accommodation (ie supplies of 28 days or more) you will not be entitled to ITCs to this extent as your acquisitions would not be creditable.

Where an acquisition is partly creditable and partly non-creditable, you will need to apportion your claim for input tax credits. [Further information is contained in Goods and Services Tax Ruling GSTR 2006/4 'determining the extent creditable purpose for claiming input tax credits and for making adjustments for changes in extent of creditable purpose'.]

Issue 2 Question 1

Is an input tax credit available for the purchase of premises?

Detailed reasoning

Please see above for entitlement to input tax credits. In relation to the acquisition of the above property, you are entitled to claim input tax credits to the extent that you have acquired it for a creditable purpose providing the remaining elements of section 11-15 of the GST Act are satisfied. Input tax credits are not available to the extent that you intend to use the property to make input taxed supplies.

If you make the choice under section 87-25 of the GST Act to input tax the supplies of long term accommodation (ie supplies of 28 days or more) you will need to apportion the claim for input tax credits as outlined above.

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