Edited version of your written advice

Authorisation Number: 1051248702526

Date of advice: 10 July 2017

Ruling

Subject: GST and accommodation

Question

Are you making a taxable supply when you supply accommodation in premises situated at a specified location?

Answer

Yes

Relevant facts and circumstances

You are registered for GST.

You entered into a lease agreement with a related entity leasing a building situated at a specified location (the Property) containing X self-contained residential apartments with on-site parking facilities.

The lease term is for a period of five years.

You carry on an enterprise of providing accommodation in the apartments on a short-term basis to the public.

Subsequent to entering the lease with the related entity one of the apartments was sold. After the sale, you continued to lease the apartment from the new owner to use in your enterprise to provide short-term accommodation to the public.

One of the apartments you lease is used as a management office with facilities to accept reservations, allocate rooms and receive payments.

The remaining X apartments are advertised as serviced apartments on a number of websites

You provide overnight and short term accommodation to multiple unrelated guests.

The main purpose of your premises is to provide accommodation.

Occupants of the apartments are typically travellers on either business or pleasure who have their principal place of residence elsewhere.

The apartments are provided to the public fully furnished and equipped with linen, cooking utensils, etc.

The Property does not contain commercial infrastructure such as a bar, restaurant or pool.

Guests have access to a 24 hour phone line for security and guest services.

Linen is replaced at least weekly or at the end of guest stays.

The apartments are cleaned at the end of a guest's stay.

The average guest stay is X nights.

The premises are centrally managed.

You have entered into a X year agreement with the owners of the apartments (Owners Corporation) to act as the Owners Corporation's agent. The agreement provides that you will carry out services including:

● Managing the funds of the Owners Corporation including paying invoices for water charges, rates, maintenance, etc on behalf of the Owners Corporation.

● Issuing levy notices for standard levies.

● Preparing accounts and budgets including financial statements.

● Assisting in arranging insurance and preparing and lodging routine insurance claims.

● Prepare and distribute notices of Annual General Meetings.

● Arranging building inspections and reports and arranging for appropriately qualified contractors to undertake works including routine repairs to and maintenance of the common property.

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 Section 9-40

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

A New Tax System (Goods and Services Tax Act) 1999 Paragraph 40-35(1)(a)

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

Reasons for decision

Note: In this reasoning, unless otherwise stated,

● all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)

● reference material(s) referred to are available on the Australian Taxation Office (ATO) website www.ato.gov.au

Section 9-40 provides that you are liable for GST on any taxable supplies that you make.

Section 9-5 provides you make a taxable supply if: 

● you make the supply for consideration

● the supply is made in the course or furtherance of an enterprise that you carry on

● the supply is connected with the indirect tax zone, and

● you are 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.

Section 40-35 provides that 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.

In your case the premises will satisfy the definition of 'residential premises' as the premises provide shelter and basic living facilities as explained at paragraph 9 of Goods and Services Tax Ruling GSTR 2012/5 Goods and services tax: residential premises.

The primary issue in this case is whether your supplies fall within the exclusions in paragraph 40-35(1)(a), being a supply of commercial residential premises or a supply to an individual of accommodation in commercial residential premises that you own or control. If this is the case, your supplies will be taxable.

Commercial residential premises are defined in section 195-1 to include, amongst other things: 

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

(b)   …

…

(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.

The definition of 'commercial residential premises' encompasses similar establishments or establishments that exhibit characteristics that place them on a similar footing to hotels, motels, inns, hostels and boarding houses. Goods and Services Tax Ruling GSTR 2012/6 Goods and services tax: commercial residential premises (GSTR 2012/6) provides the ATO view of the definition of commercial residential premises.

The terms hotel, motel, inn, hostel and boarding house are not defined in the GST Act and take their ordinary meaning. The Macquarie Dictionary 5^th Edition provides the following definitions:

Hotel a building in which accommodation and food, and alcoholic drinks are available

Motel a roadside hotel which provides accommodation for travellers in self-contained, serviced units, with parking for their vehicles.

Inn a small hotel that provides lodging, food etc., for travellers and others

Hostel a supervised place of accommodation, usually supplying board and lodging provided at a comparatively low cost, as one for students, nurses, etc.

Boarding house a dwelling in which lodging is provided to paying residents who share common facilities such as a kitchen, laundry, living room, etc.

In their ordinary meanings, these terms share the common attribute of providing accommodation to guests. Paragraph (f) of the definition of commercial residential premises extends the scope of the definition to premises that are 'similar' to one of the class of establishments described in paragraphs (a) to (e). Premises that are 'similar' to establishments that are commercial residential premises must have sufficient characteristics in common with one of the class of premises described.

In addition to the physical characteristics of the premises, paragraph 12 of GSTR 2012/6 lists the following eight 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, determining whether premises are commercial residential premises is a matter of overall impression involving the weighing up of all relevant factors.

In your case the premises in your hands exhibits all of the above characteristics.

On the facts provided we consider the premises in question bear the closest resemblance to a 'motel'. Paragraphs 13 through 25 of GSTR 2012/6 describe the features typical of hotels, motels and inns with the qualification that a motel primarily caters to the needs of motorists seeking roadside accommodation. In considering those features the following is noted:

● Motels provide accommodation for a commercial purpose. In this case we consider your activities are conducted for a commercial purpose given the extent and nature of your activities.

● The apartments are advertised on a number of websites with the premises having the capacity to provide accommodation to multiple, unrelated guests or occupants at once (multiple occupancy).

● Whilst motels will usually offer meals to guests and may have a kitchen to prepare such meals, the apartments in this case are fully self-contained with kitchen and dining facilities in each apartment.

● Guest rooms in a motel are invariably furnished and always include a bed and some living area. Your apartments are fully furnished and equipped with linen, cooking utensils, etc.

● Motels will usually provide linen and towels with rooms typically cleaned and serviced by staff on a daily basis. Costs of such services being included in the tariff. You provide linen and towels that are replaced at least weekly or at the end of a guest's stay.

● Predominately, the guests of motels are travellers who ordinarily have their principal place of residence elsewhere which is the situation in your case with guests of the premises typically staying for X nights for either business or pleasure.

● Guests of a motel do not usually let a room for a term with accommodation usually charged on a daily rate multiplied by the number of days of occupancy which is the case in your premises as indicated on the booking facility on your website.

● Motels typically have a reception desk to handle the requirements of both management and guests particularly when guests check in or check out of the establishment. In your case, the premises are centrally managed with one of the apartments used as a management office with facilities to accept reservations, allocate rooms and receive payments. In addition, guests have access to a 24 hour phone line for security and guest services. Management is also available to arrange for the provision of other services.

● Motels do not normally provide shared accommodation to guests in the sense of having a number of unrelated guests sharing a kitchen and living facilities. As discussed above, the apartments are fully self-contained with guests not required to share kitchen and living facilities.

● Accommodation in a motel is supplied by the operator of the motel in its own right and not in the capacity of agent for a third party. In this case you lease the premises from a related entity and supply the accommodation to the guests in your own right.

● You also provide on-site parking facilities for each of the self-contained apartments.

As stated above, determining whether premises are commercial residential premises is a matter of overall impression involving matters of impression and degree and weighing up all relevant factors.

In this case, weighing up all the relevant factors as discussed above, we consider that the premises exhibit sufficient characteristics typically inherent to a motel to be classified as being similar enough to this type of establishment under paragraph (f) of the definition of 'commercial residential premises' at section 195-1.

As such, your supplies of accommodation in the premises are not input taxed, but rather are taxable supplies under section 9-5, being supplies of accommodation in 'commercial residential premises'.

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