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Edited version of your written advice
Authorisation Number: 1012890908788
Date of advice: 8 October 2015
Ruling
Subject: GST and the supply of accommodation
Question
Are you required to pay GST on the supplies of accommodation to guests pursuant to section 7-1?
Answer
No, however, where your projected turnover exceeds $75,000 you will be required to register and charge GST accordingly.
Relevant facts and circumstances
You, provide accommodation to guests from your premises located in Australia (the Premises).
The Premises were acquired in YYYY. The Premises were previously operated as a backpacker hostel. The Premises are not connected with any particular university.
You hold a X bed license.
There are a mixture of rooms and dormitory style accommodation. Each guest is provided with a bed, cabinet and desk. The premises have a shared kitchen and laundry where guests can prepare and eat meals and do their own laundry.
Approximately 50%, but less than 70%, of the guests stay for periods greater than 27 days.
Your fees vary for depending on the individual guest.
Your current and projected GST turnover is below $75,000.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 Section 7-1
A New Tax System (Goods and Services Tax) Act 1999 Section 9-5
A New Tax System (Goods and Services Tax) Act 1999 Section 23-5,
A New Tax System (Goods and Services Tax) Act 1999 Section 40-35,
A New Tax System (Goods and Services Tax) Act 1999 Division 87 and
A New Tax System (Goods and Services Tax) Act 1999 Section 195-1.
Reasons for decision
In this reasoning, unless otherwise stated,
• all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)
• all legislative terms of the GST Act marked with an asterisk are defined in section 195-1 of the GST Act
Pursuant to section 7-1, GST is payable on taxable supplies.
Under section 9-5, an entity makes a taxable supply if:
(a) the supply is made for consideration
(b) the supply is made in the course or furtherance of an enterprise that it carries on
(c) the supply is connected with the Indirect Tax Zone (Australia) and
(d) the entity is registered or required to be registered for GST.
However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.
On the facts provided, your supplies of accommodation satisfy (a) and (c) above. Further, they are not GST-free under any provision of the GST Act.
Therefore:
• Where your supplies are made in the course of an enterprise
• You are required to be registered and
• Your supplies are not input taxed
then you will be making taxable supplies.
Enterprise
Enterprise is defined to include, amongst other things, an activity or series of activities done on a regular or continuous basis, in the form of a lease, license or other grant of an interest in property. When you allow students and others to live in the Premises, it is considered to be an activity or series of activities done on a regular basis in the form of a license, which therefore meets the definition of enterprise.
Input Taxed
Input taxed means that GST is not payable on the supply and there is no entitlement to an input tax credit for anything acquired to make the supply.
Under subsection 40-35(1), a supply of residential premises by way of lease, hire or licence (other than a supply of commercial residential premises or a supply of accommodation in commercial residential premises provided to an individual by an entity that owns or controls the commercial residential premises) is input taxed.
We consider that the premises from which the accommodation is supplied, satisfies the definition of residential premises under section 195-1.
However, if your supply of accommodation is a supply of accommodation in 'commercial residential premises', provided to an individual, by an entity that owns or controls the 'commercial residential premises' the supply will be a taxable supply provided you are required to be registered for GST.
'Commercial residential premises' is defined in section 195-1 of the GST Act to include (amongst other things):
(a) a hotel, motel, inn, hostel or boarding house; or
(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.
Goods and Services Tax Ruling GSTR 2012/6 Goods and services tax: commercial residential premises (GSTR 2012/6) provides the Tax Office view of the characteristics of commercial residential premises.
Paragraph 12 of GSTR 2012/6 lists the characteristics that are considered to be common to operating hotels, motels, inns, hostels and boarding houses:
• 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, and
• occupants have the status of guests.
Paragraph 41 of GSTR 2012/6 states that ultimately, in determining whether premises are commercial residential premises is a matter of overall impression involving the weighing up of all relevant factors.
Features of hostels and boarding houses are described in paragraphs 26 to 40 of GSTR 2012/6. These paragraphs are reproduced below:
Features of hostels
26. The term 'hostel' includes premises that can be described as a hostel, a hotel or inn. The features of hotels and inns identified at paragraphs 13 to 25 of this Ruling are relevant to these types of premises.
27. The term 'hostel' also includes a supervised place of accommodation usually supplying board and lodging provided at a comparatively low cost.
28. The physical characteristics of a hostel, or premises similar to a hostel, reflect that the premises are designed to supply accommodation at a comparatively low cost to the occupants. Physical characteristics may include a commercial kitchen where meals are prepared, a communal area suitable for a dining area for occupants, and a communal laundry.
29. Hostels are typically centrally managed by an on-site manager who manages the accommodation and arranges or provides services. The feature that a hostel, or premises similar to a hostel, be a supervised place of accommodation can be evident where occupants can raise queries and concerns pertaining to the management of the premises with an on-site manager.
30. Hostels provide accommodation for a commercial purpose. Non-profit entities can also operate commercial residential premises. For example, various non-profit organisations operate hostels in a business-like manner.
31. Hostels have the capacity to supply accommodation for multiple occupancies.
32. Accommodation in hostels may be provided either in a dormitory environment or in separate bedrooms.
33. Accommodation may be supplied within a hostel to occupants as the occupant's principal place of residence. It is not necessary for accommodation in the premises to be limited to guests who need or desire accommodation while away for business or pleasure.
34. The operator of the hostel supplies the accommodation in its own right and not in the capacity of agent for a third party. The arrangement between the parties will reveal whether there is an agent-principal relationship.
35. Occupants of a hostel may be provided meals by the operator of the premises. However, the provision of meals is not an essential feature of a hostel.
Features of boarding houses
36. A boarding house is a dwelling at which board and lodging are provided to guests or residents.
37. A boarding house provides accommodation for a commercial purpose. Non-profit entities can also operate commercial residential premises. For example, various non-profit organisations operate boarding houses in a business-like manner.
38. A boarding house has the capacity to supply accommodation for multiple occupancies.
39. While the term 'boarding house' indicates that the premises ordinarily consist of a single dwelling, premises are not precluded from being a boarding house where the premises consists of a building with an additional stand alone structure in which board (meals), or lodging, or both, is provided. However, premises are not a boarding house where the premises consist of a central building used as a communal dining/meeting area with a number of independent living units.
40. A boarding house may provide accommodation to occupants as the occupant's principal place of residence. It is not necessary for accommodation in the premises to be limited to guests who need or desire accommodation while away for business or pleasure.
We consider that the Premises are either a hostel or something similar to a hostel. Therefore, the Premises are commercial residential premises and the supplies of accommodation from the Premises are not input taxed supplies.
Are you required to be registered for GST?
Section 23-5 of the GST Act provides that you must register for GST if your enterprise meets the registration turnover threshold of $75,000 and you are conducting an enterprise.
Your GST turnover will meet the registration turnover threshold when
a) your current GST turnover is at or above the turnover threshold and the Commissioner is not satisfied that your projected GST turnover is below the threshold or
b) Your projected GST turnover is at or above the turnover threshold
Your current GST turnover at a time during a particular month is the sum of the value of all supplies that you have made or likely to make during the last 12 months ending at that month. Your current GST turnover is below the $75,000 threshold.
Your projected GST turnover at a time during a particular month is the sum of the value of all supplies that you have made or likely to make during that month and the next 11 months other than input taxed supplies. Your projected GST turnover is also below the $75,000 threshold.
As both your current GST turnover and your projected GST turnover are below $75,000, you are not required to be registered for GST
Where your GST turnover is less than $75,000, registering for GST is optional. However, if you choose to register, you generally must stay registered for at least 12 months.
Where you do register for GST you will be entitled to claim GST credits on your purchases and you will be required to charge GST on your taxable supplies.
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