Edited version of private advice

Authorisation Number: 1052117745563

NOTICE

The private ruling on which this edited version is based has been overturned on objection.

This notice must not be taken to imply anything about the correctness of other edited versions.

Edited versions cannot be relied upon as precedent or used for determining how the ATO will apply the law in other cases.

Date of advice: 12 May 2023

Ruling

Subject: GST - commercial residential premises

Question

Will the property at a specified address, Entity A, be "commercial residential premises", as defined in section 195-1 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No.

This ruling applies for the following period

DDMMYYYY-DDMMYYYY

The scheme commenced on:

1 January 20xx

Relevant facts and circumstances

Entity A (you) is registered for GST.

You received development approval (DA) to convert an existing building at a specified address (the Property) on DDMMYYYY.

The building, once completed, will have a specified number of self-contained rooms, as well as communal areas on a number of levels (the Premises).

The Premises consists of:

• A specified number of furnished rooms each with ensuite, wardrobe and kitchenette
  • The ground level rooms have courtyards
• A common area with a fully equipped kitchen, dining and lounge area and a communal open space
• Bicycle parking areas
• Communal laundry, with two washers and two dryers, operated on a pay per use
• Store rooms.

No meals will be provided at the Premises.

The Manager

The Premises will be managed under a management agreement by Entity B (the Manager).

The Manager does not live on site, the Manager has another facility nearby and the manager of that facility lives on that site and will also fulfill the duties at the Premises.

Role:

•         Responsible for the issuance and return of all access cards, locks and keys to the building and each room and coding of the keys for new occupants

•         Responsible for all mail and deliveries to occupants

•         Arranging regular communal activities and events such as BBQs, cooking nights, movie and activity nights on premises

•         Managing and Monitoring internet usage and switching access from new occupants and departing occupants

•         Managing and monitoring water and electricity for each occupant and ensuring billing for excess usage

•         Arranging new furniture and fittings in the event of damage (including all cutlery, cups, pots and pans to each individual room as well as common areas)

•         Arranging and undertaking maintenance including annual maintenance and upkeep of the property

•         Accounting and reporting back to the Owner on a periodic basis in respect of the "Boarding House Business" as defined in the Management Agreement.

•         Ensuring the annual fire safety statements are completed on time.

Development approval

The document provided as part of the application includes the following information:

A clause of the DA states the building must be used as a boarding house only.

A sign must be placed in a clearly visible position at the entrance of the Premises with the name of the manager and mobile phone number.

The use of the outdoor communal area shall be restricted to between the hours of 7:00am and 10:00pm.

Bicycle parking and end of trip facilities must comply with the table provided in the document.

Management agreement

The management agreement between you and the Manager provides the following:

Commencement date: not stated

Term: X Years

Renewal term: X Years

Fees (a) Management fee X%

(a)  Letting fee X%

(b)  Marketing fee: X%

Profit share percentage: X%

You grant the Manager exclusive possession of the Premises to provide the services in respect of the property during the term.

You will not appoint any other person to provide any management of related services in respect of the Premises during the term.

The Manager will have exclusive control and discretion to take all necessary actions in the operation, direction, management and supervision of the Business, including but not limited to carrying out the functions listed in the document.

You must pay all rates, taxes and other outgoings in relation to the Premises, and all operating costs of the business.

You agree that prior to the commencement date, you will open a bank account in your name for the purpose of the operation of the Business (Business Account). The Business Account will be operated jointly by you and the Manager.

You will ensure that at all times there is not less than $X in the Business Account for use by the Manager to operate the business.

All funds received by the Manager in the operation of the Business, including all Gross Revenue and working capital provided by the owner will be deposited into the Business Account.

The Owner must not unreasonably disturb or interfere with the Manager in the proper exercise and performance of the Manager's powers and functions to provide the Services under this Agreement and the Owner grants the Manager all necessary rights of access to, and use of, the Property for those powers and functions to provide the Services.

Boarding House Plan of Management - Proposal MM YYYY

The Boarding House Plan of Management document provides:

The boarding house is to be managed by the owner, or by a managing agent (manager) appointed by the owner, who will be responsible for ensuring the site is regularly monitored.

The owner/manager is to ensure the House Rules are being adhered to.

At no time is any room to be advertised as or made available for short stay accommodation such as that associated with back packer hostels, motels, hotels, or the like.

Each lodger of the premises is required to sign an Occupancy Agreement and House Rules upon occupation of the boarding house.

The Occupancy Agreement is to be for a minimum term of 3 months.

Cleaning contractors will be responsible for the ongoing cleaning internal and external common and communal areas including waste area, bicycle parking area, corridors, stairs and laundry.

Tenants will be responsible for cleaning their boarding room and transporting waste from their room to the waste storage area.

Not more than X person shall occupy each boarding room.

X Rooms are to be made available for persons with a disability.

The total number of persons residing in the boarding house at any one time shall not exceed X.

Access to Premises

Arrangements for initial access to the premises will be through the owner/manager.

Swipe Card Access to Entrance

New lodgers will only be permitted to have initial access to the boarding house between 9:00am and 6:00pm, Monday to Saturday through the owner/manager. Access to all rooms will be controlled by a swipe card provided to each lodger.

All accessible doors will have swipe card access. The swipe cards provide access to the rooms for the period the boarder has lodgings. Once the tenancy has expired the card is rendered useless.

House rules will be displayed at entrance of the property, behind each entry door of each room and in all indoor and outdoor common areas. House Rules as well as the Occupancy Agreement will be signed by each lodger on initial entry to the property. No signature, no entry policy applies.

No pets are allowed within the boarding house at ANY time.

The owner/manager will be available between the hours stated, on specified days, to deal with any complaints or incidents that occur on the premises.

Occupancy agreement - includes House Rules

The document provides the following:

• An agreement between Manager and Resident
• An allocated room/studio number
• Commencement date
• Term of agreement is stated
• Weekly occupancy fee/rent is to be paid fortnightly.

Terms:

CONDITION OF THE PREMISES

The Manager agrees to provide and maintain the premises so that they are in reasonable state of repair, are reasonably clean and reasonably secure.

HOUSE RULES

The resident agrees to comply with the House Rules of the property.

INSPECTIONS AND ACCESS

The Manager may inspect common areas at any reasonable time. Repairs, cleaning and maintenance of common areas can be carried out at reasonable times. The Manager will only enter the resident's room, at a reasonable time, with reasonable notice and on reasonable grounds. Agreed access and notice periods are set out below.

...

NOTICE OF FEE INCREASE

The resident is entitled to X weeks written notice of any increase in the occupancy fee.

SECURITY DEPOSIT

A security deposit is payable to the Manager.

The security deposit is payable on the day the agreement is signed or on the following day if agreed to by the Manager. The security deposit will be repaid to the resident (or the resident's authorised representative) within a set number of days after the end of this agreement, less any amount necessary to cover: a) the reasonable cost of repairs to the boarding house or goods within the boarding house, as a result of damage (other than fair wear or tear) caused by the resident or their resident; b) any occupancy fee or other charges owing and payable under this Agreement or the Boarding Houses Act; c) the reasonable cost of cleaning any part of the premises occupied by the resident and not left reasonably clean by the resident, having regard to the condition of that part of the premises at the commencement of the occupancy; and d) the reasonable cost of replacing locks or other security devices altered, removed or added by the resident without the consent of the Manager.

PAYMENTS BY THE RESIDENT

The resident must pay a card replacement fee for any lost keycard (which provides the resident with access to the property). Rent must be paid fortnightly and in one transaction to the Manager.

ROOM CONDITION

All residents must keep their studio in good condition, repair and cleanliness. Each resident must fill in a condition and inventory report when they move in, this will be supplied by the Manager at the point of signing this Agreement.

BEHAVIOUR, CLEANLINESS AND GOODWILL

At the end of the lease, all residents must leave the unit in the same cleaning conditions found at the commencement of the agreement. This includes bed-making with fresh linen. To guarantee cleaning standards, the Manager outsources professional cleaning services. It is recommended to use the same services to avoid paying unnecessary cleaning fees.

If the room isn't found in the same conditions the cleaning fees as referenced in the document will be taken from the security deposit.

TERMINATION

The resident is entitled to know why and how this Occupancy Agreement may be terminated, and how much notice will be given before termination. The resident may not be evicted without reasonable written notice from the Manager.

This Agreement can also be terminated by the resident by written notice given to the Manager. Agreed reasons for termination and notice periods are set out below. If the resident fails to terminate Agreement within the notice period, the resident is required to pay the Occupancy Fee in lieu of Agreement notice period.

Reason for Termination by the Manager Notice to be given under this Agreement, table with clauses provided in Agreement document.

HOUSE RULES

ABOUT YOUR AGREEMENT

•         On arrival, all residents are required to fill out a condition report and inventory checklist detailing the items in each room and if any have been subject to damage. If these are not completed within a specified number of working days, it is assumed that the room was in perfect condition when you moved in. All residents are provided with basic cutlery and dishes in their studios.

•         Residents' visitors must adhere to the Manager house rules and vacate the property by a specified time.

•         On your check out, you must vacate the unit by a specified time, late check outs will incur a fee of $x.

•         Each occupant of the house must only take the studio assigned to their actual agreement. It is not permitted to change your studio unless given authorization from the Manager. The resident agrees to always lock doors and gates behind them at the premises and is responsible for the security of their own studio.

•         Rent is due on a specified day. Residents must follow the rent arrears management procedures. Residents on arrears might be restricted to extend the existing agreement.

COMMUNAL AREAS AND BATHROOMS

•         The use of smoking products of any sort, including all cigarette products and all smoke-producing products (cigars, pipes, e-cigarettes, hookahs, vaporizers, etc.) is prohibited in the studio, in the common areas, or in hallways. Any tenant found smoking will be fined $x.

•         Kitchen and communal areas must be always clean and tidy. Residents found leaving the kitchen unclean and untidy will be searched via cameras to determine ownership or responsibility. Leaving the kitchen unclean and untidy will incurred a fee of $x.

•         Tenants using the communal kitchens must always monitor their cooking and are required to keep the kitchens clean and hygienic and to turn all appliances off when not in use. Dishes left unwashed in communal kitchen areas will be removed and disposed of.

•         We do not allow pets to stay at the property.

•         There should be no personal belongings left in the common areas as you are sharing your living space with other residents. Community Managers and House Managers have been given authority to discard any items they find laying around in the common areas.

BEDROOMS

•         Please be mindful of what you use to hang or stick things on the walls of your room. Should there be any damage to the walls or furniture, the cost of repairing this damage will be taken from the security deposit.

•         Residents are responsible to keep their rooms clean and tidy throughout the duration of the agreement.

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 Section 195-1

Reasons for decision

In this ruling,

• 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.
• all reference materials, published by the Australian Taxation Office (ATO), that are referred to are available on the ATO website ato.gov.au

Section 9-40 provides that an entity is liable for GST on any taxable supplies that it makes.

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

a) you make the supply for consideration

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

c) the supply is connected with the indirect tax zone (Australia), and

d) 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.

You will operate an accommodation enterprise from the Premises. You have appointed Entity B (the Manager) to manage the Premises. The administration, leasing and management of the Premises and arrangements with the occupants will be undertaken by you through the Manager.

You will satisfy paragraphs 9-5(a), (b), (c) and (d). Further the GST-free provisions are not applicable.

Subsection 40-35(1) states:

40-35 Residential rent

(1) A supply of premises that is by way of lease, hire or licence (including a renewal or extension of a lease, hire or licence) is input taxed if:

(a) 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

(b) the supply is of *commercial accommodation and Division 87 (which is about long-term accommodation in commercial premises) would apply to the supply but for a choice made by the supplier under section 87-25.

Residential premises is defined in section 195-1 as:

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 occupation).

'Residence' and 'residential accommodation' are not defined in the GST Act and each term takes its ordinary meaning in context.

The requirement in section 40-35 that premises be 'residential premises to be used predominantly for residential accommodation (regardless of the term of occupation)' is to be interpreted as a single test that looks to the physical characteristics of the property to determine the premises' suitability and capability for residential accommodation.

Paragraph 15 of Goods and Services Tax Ruling GSTR 2012/5 Goods and services tax: residential premises states that to satisfy the definition of residential premises, premises must provide shelter and basic living facilities. The premises must also be fit for human habitation in order to be suitable for, and capable of, being occupied as a residence or for residential accommodation.

The Premises, comprising the accommodation arrangements being considered, are residential premises as they are intended to be occupied, and are capable of being occupied, as a residence or for residential accommodation.

Therefore, your supply of accommodation in the Premises to occupants will be input taxed unless the Premises satisfy the definition of 'commercial residential premises'.

Commercial residential premises

Commercial residential premises are defined in section 195-1, in part, as:

             (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.

The definition of 'commercial residential premises' encompasses establishments similar to, or establishments that exhibit characteristics that place them on a similar footing to, hotels, motels, inns, hostels and boarding houses.

While paragraph (f) extends the scope of the definition, its operation is limited to premises that have some or all of the characteristics of both residential premises and one of the classes of premises listed in paragraphs (a) to (e) of the definition.

The Premises will consist of a single two-storey building comprising 19 self-contained rooms. When completed, the Premises will accommodate around 19 occupants.

The Premises include communal spaces, both indoors and outdoors. The amenities include a communal laundry, a communal kitchen and dining room and outdoor space.

In ECC Southbank Pty Ltd as Trustee for Nest Southbank Unit Trust v Commissioner of Taxation [2012] FCA 795 (ECC), Nicholas J was required to determine whether premises designed to provide low cost student accommodation were commercial residential premises. In determining this, Nicholas J relevantly considered:

50. The test to be applied for the purpose of determining whether the Urbanest premises are commercial residential premises involves asking whether the Urbanest premises is a hotel, motel, inn, hostel or boarding house or whether it is similar to - in the sense that it has a likeness or resemblance to - any of those types of establishment. The application of this test necessarily raises questions of fact involving matters of impression and degree.

Goods and Services Tax Ruling GSTR 2012/6 Goods and services tax: commercial residential premises (GSTR 2012/6) sets out the ATO view on how GST applies to supplies of commercial residential premises and accommodation in commercial residential premises.

The terms hotel, motel, inn, hostel or boarding house in paragraph (a) of the definition are not defined in the GST Act and take their ordinary meanings in context.

Paragraph 141 of GSTR 2012/6 states:

141.The following meanings sourced from the Macquarie Dictionary 5th Edition (Macquarie), the Oxford English Dictionary 2nd and 3rd editions (OED) and the Shorter Oxford English Dictionary 5th Edition (SOED) are relevant in interpreting paragraph (a) of the definition:

Hotel

•         building in which accommodation and food, and alcoholic drinks are available. (Macquarie)

•         building or establishment where travellers or tourists are provided with overnight accommodation, meals and other services. (OED)

•         an establishment, esp. of a comfortable or luxurious kind, where paying visitors are provided with accommodation, meals and other services. (SOED)

Motel

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

•         a hotel catering primarily for motorists; spec. on comprising self-contained accommodation with adjacent parking space. (OED)

Inn

•         a small hotel that provides lodging, food, etc., for travellers and others. (Macquarie)

•         a public house providing accommodation, refreshments, etc., for payment, esp. for travellers. Now also, a public house serving alcoholic liquor for consumption on the premises, whether providing accommodation or not. (SOED)

Hostel

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

•         a public house of lodging and entertainment for strangers and travellers; an inn, a hotel. (OED)

•         a house of residence for students at a university or on a course, esp. at a non-residential college, or for some other special class of people. (SOED)

Boarding House

•         a dwelling in which lodging is provided to paying residents who share common facilities such as a kitchen, laundry, living room, etc. (Macquarie)

•         a dwelling, usually a private house, in which board and lodging are provided for payment. (Macquarie)

•         a house offering board and lodging for paying guests. (SOED)

Paragraph 142 of GSTR 2012/6 states - objective factors that are relevant to characterising premises as falling within either paragraph (a) or (f) of the definition include the overall physical character of the premises and how the premises are operated. Where these objective factors do not give a clear characterisation, the following may also be considered:

•         contractual documentation that provides evidence of current use or future use, and

•         government zoning and planning approvals and permissions.

In considering the premises against the ordinary meanings set out in ECC for each of the types of establishment listed in paragraph (a):

•         The premises are not similar to a hotel or motel

1. Hotels and motels provide not only accommodation to their guests but also at least some meals in which guests may choose to partake. Consequently, a hotel or motel will usually include a kitchen where meals are prepared by the proprietor or the proprietor's employees or contractors for consumption by guests. The premises will usually include a restaurant or dining room for guests where such meals may be consumed.

In your case, although there is a communal kitchen for the use of occupants, food is not prepared and made available to occupants for consumption in a restaurant or dining room as is usually found in a hotel.

2. The guest rooms in a hotel and a motel are invariably furnished, and always include a bed and some living space (usually with one or more chairs and a table at which to eat or work) and have an adjoining separate bathroom or en-suite. Linen and towels are usually supplied. The rooms are usually cleaned and serviced by staff on a daily basis, with the costs of such services being included in the tariff.

In your case, occupants will need to maintain the cleanliness of their own rooms which are not serviced in the way one would usually expect in a hotel

3. Guests of hotels and motels primarily consist of travellers who ordinarily have their principal place of residence elsewhere and who need or desire accommodation while away for business or pleasure. Guests of hotels and motels do not usually enjoy any exclusive right to occupy any particular part of the premises in the same way as does a tenant to whom a house or apartment is let. Nor does a guest of a hotel or motel usually let a room for a term. Leaving aside cancellation fees, he or she is usually charged for a room in accordance with a daily rate multiplied by the number of days of occupancy.

In your case, each occupant will enter into an occupancy agreement, for a set term and for a specified room. One would not expect to see such an agreement between a proprietor of a hotel and a guest. In this case the accommodation is much more likely to be used by the occupant as their place of residence.

The occupancy agreement terms state that a room condition and inventory report must be returned within a stated period of occupying the Premises, and also provide for the payment of a security deposit. The premises are not similar to an inn or boarding house

An inn is an establishment at which board and lodging is provided to travellers. Similarly, a boarding house is a place at which board and lodging are provided to guests or residents.

In your case, meals will not be provided to the occupants.

As explained at paragraph 184 of GSTR 2012/6, the meaning of the term 'boarding house' in the context of commercial residential premises was considered in Re Karmel & Co Pty Ltd (as trustee for Urbanski Property Trust) v. FC of T [2004] AATA 481 (Karmel).

In Karmel, the Tribunal held that the premises were not a boarding house because the property owner was not required to provide meals to occupants.

The Tribunal cited the following passage from the judgment of Hope JA in Roberts v. Waverley Municipal Council (1988) 14 NSWLR (Roberts):

In ordinary parlance a boarding-house is a place where a business is carried on of providing food and lodging to the boarders, and the food comprises meals. It is a place where the boarders pay for their board and lodging, and the concept of a place where the boarders are not required to pay anything and do their own cooking is inconsistent with the natural meaning.

Inns can similarly be differentiated on this basis from the present facts.

Therefore, for the purposes of this private ruling, we are focussed upon whether the Premises primarily has characteristics similar to a hostel.

Hostels

In relation to hostels, we consider that the ordinary meaning of hostel is a supervised place of accommodation usually supplying board and lodging provided at comparatively low cost, including to students.

In terms of physical and design characteristics, hostels are designed to supply accommodation at a comparatively low cost to the occupants. They may include:

•         commercial kitchen where meals are prepared

•         communal area suitable for a dining area for occupants

•         communal laundry

•         accommodation in a dormitory or separate bedrooms.

In relation to operating characteristics, in addition to the common factors that apply to commercial residential premises, characteristics specific to hostels include:

•         they are typically centrally managed by an on-site manager who manages the accommodation and arranges or provides services - that is, it is a supervised place of accommodation - occupants can raise queries and concerns pertaining to the management of the premises with an on-site manager,

•         accommodation in the premises may be supplied as the occupant's principal place of residence,

•         provision of meals by the operator of the premises, however this is not an essential feature of a hostel.

•         Case law and the ordinary meaning of 'hostel'

•         Cases that have considered the ordinary meaning of 'hostel' identify several characteristics, with emphasis having been placed on the characteristics to varying degrees in each case:

•         Transient accommodation[1]

•         Shared facilities (in some cases there was a shared kitchen or catering facilities[2]; others have referred to the need for shared sleeping, toilet and ablution facilities for a hostel[3]; it seems, however, a private room with en-suite does not disqualify[4])

•         Low cost[5]

•         Restrictive resident rules indicate premises are more like a hostel than residential flats[6].

ECC is the leading case on the meaning of 'hostel' or similar premises in the Australian GST context. The Court addressed the question of whether the premises were a hostel or similar as follows:

66. In my view, the Urbanest premises bears a much closer resemblance to a hostel than a hotel. The accommodation available at the Urbanest premises is intended to be (at least in the case of the shared apartments) comparatively low in cost and is obviously configured with the needs of students seeking low cost accommodation in mind. The accommodation provided at the Urbanest premises is supervised in the sense that the reception desk is manned 24 hours a day. I infer that residents may lodge complaints with management through the reception desk about the behaviour of other residents or visitors including in relation to excessive noise, failures to maintain the cleanliness of shared apartments and like matters dealt with in the House Rules.

67. It is true that meals are not provided to residents or customers of the Urbanest premises as they might usually be in the case of a more traditional hostel. However, that does not mean that the Urbanest premises may not be fairly described as a hostel or, at least, as being similar to a hostel. In my opinion, if the Urbanest premises is not a hostel, it is very similar to a hostel.

68. In my view the Urbanest premises is not similar to an inn or a boarding house. An inn is an establishment at which board and lodging is provided to travellers. Similarly, a boarding house is a place at which board and lodging are provided to guests or residents.

It may be noted that in ECC the Court did not explicitly recognise the importance of transience. Factually though, the student accommodation was inherently likely to be transient, in the sense that student accommodation would only be for the duration of their course of study.

In any case, comments in RSPG[7] and Snowy Monaro[8] suggest that whether accommodation is transient is an important characteristic of a hostel in the GST context.

Features indicating premises are a hotel, motel, inn, hostel, boarding house or similar premises

Paragraph 12 of GSTR 2012/6 sets out some common characteristics of hotels, motels, inns, hostels, boarding houses or similar premises. These are:

•         commercial intention - properties are operated on a commercial basis or in a business-like manner even if they are operated by a non-profit body.

•         multiple occupancy - premises have capacity to provide accommodation to multiple, unrelated guests or residents at once in separate rooms, or in a dormitory.

•         holding out to the public - offer accommodation to the public or a segment of the public.

•         accommodation is the main purpose of the premises.

•         central management to accept reservations, allocate rooms, receive payments and perform or arrange services. This can be provided through facilities on-site or off-site.

•         management offers accommodation in its own right rather than as agent.

•         provision of, or arrangement for services and facilities.

•         occupants have status as guests - occupants do not usually enjoy an exclusive right to occupy any particular part of the premises in the same way as a tenant.

Features indicating premises are not a hotel, motel, inn, hostel, boarding house or similar premises

In addition to the factors outlined above that indicate premises are commercial residential premises under paragraphs (a) or (f) of the definition, paragraph 41 of GSTR 2012/6 identifies a number of factors that may indicate that premises are not a hotel, motel, inn, hostel, boarding house or similar premises. These include:

•         the operator and occupant agree for accommodation to be supplied for a periodic term (which may be for a period of months or years at a time), such as in a residential lease

•         the operator and occupant document the condition of the premises under a written contract before the accommodation is initially supplied and when the occupant ceases to occupy premises

•         the operator has the right to impose a cleaning fee on the occupant when the occupant ceases to occupy the premises

•         the occupant is permitted, subject to the terms of the lease or licence, to alter the part of the premises occupied by the occupant, such as by attaching hanging devices on a wall

•         the occupant is permitted, subject to the terms of the lease or licence, to keep pets in the premises

•         the occupant must separately arrange and pay for the connection of a telephone, electricity, or gas service

•         the occupant is responsible for the cleaning and minor maintenance of the premises, such as changing light bulbs in their room

•         the premises are unfurnished, and

•         the right to occupy the residential premises is supplied to the occupant in exchange for the occupant loaning an amount to the operator together with other fees.

The presence or absence of these features together or individually does not of itself determine the characterisation but are factors relevant to determining the overall impression of the arrangement.

Status of guests - distinction between leases and licences

Paragraph 12 of GSTR 2012/6 indicates that a relevant factor that indicates premises are commercial residential premises is that occupants have the status of guests. The decision in Wynnum shows that even where all other characteristics listed in GSTR 2012/6 are present apart from status of guests, then notwithstanding the comments in ECC about principal place of residence, the premises will not necessarily be commercial residential premises. Guests can be contrasted with boarders, lodgers, and tenants/lessees.

Application to your arrangement

Ordinary meaning of hostel and boarding house

The premises in this case is one where restrictions are placed on occupants under the House Rules. However, it does not have other characteristics of a hostel within the ordinary meaning as it is not a supervised place of accommodation and is not provided to lodgers.

Occupants will enter into an occupancy agreement. The terms of the occupancy agreement and the nature of the accommodation indicate that occupants obtain a right to exclusive occupation of their self-contained room in the same way as a tenant.

Occupants do not have the status of guests and the nature of the accommodation is more permanent than what is common in hotels, motels, inns, hostels and boarding houses.

We do not consider that the Premises satisfy the ordinary meaning of a hostel.

To determine whether the premises are sufficiently similar to residential premises described in paragraph (a) of the definition of 'commercial residential premises', we have also weighed-up the physical, design and intended operating characteristics.

Physical and design characteristics

In this case, in terms of the physical characteristics and other objective design characteristics of the premises:

•         The premises will comprise 19 rooms. It will consist of a double storey. When completed the premises will accommodate 19 occupants.

•         Rooms contain a bed, private bathroom, kitchenette (including cooking facilities), and in most cases a courtyard. Each room will be electronically keyed and fully furnished with a bed, fridge, dishwasher, and utensils. The occupants will rely on the use of the communal laundry (fees payable).

The Premises will also have communal spaces and amenities comprising communal laundry, communal kitchen and dining room and outdoor space

In terms of shared living spaces, these premises have a much lesser degree of shared living than the premises in ECC, which involved cluster-style apartments.

In ECC, the cluster-style apartments comprised a number of study/bedrooms. Each study/bedroom included a single bed (in the single occupancy rooms) or a bunk bed (in the double occupancy rooms). Each study/bedroom also included a private en-suite bathroom, study desk, air-conditioning and storage spaces. Each cluster of study/bedrooms shared kitchen and living facilities located within each shared apartment.

In addition to the facilities available within a resident's apartment, the premises in ECC also incorporated within its common areas:

(a) Coin operated laundry including washing machines and dryers;

(b) Games rooms;

(c) TV areas;

(d) External garden with barbeque areas;

(e) Group study rooms and individual study booths;

(f) Library;

(g) Meeting and presentation rooms;

(h) Bike storage room; and

(i) A cafeteria-style eating area.

In your case, the shared living facilities, such as the communal kitchen, common area and outdoor open space, involve a single space to be shared by all occupants of the premises. It appears that the common areas do not provide sufficient seating or space for all occupants of the premises to use the facilities simultaneously. As a matter of fact and degree, the premises are designed with a lesser degree of shared living than was present in ECC and a greater degree of self-contained living in each room. This is more like what is expected in residential apartment buildings.

Operating characteristics

In relation to the first seven operating characteristics of a commercial residential premises as outlined in paragraph 12 of GSTR 2012/6:

•         The premises will be operated on a commercial basis.

•         They will provide multiple occupancy.

•         They will be held out to the public generally.

•         Accommodation is the main purpose.

•         The premises will have central management.

•         Management will offer the accommodation in its own right, with the Manager being the entity that controls the premises.

•         Management will provide occupants with services and facilities to a certain degree. This will include: internet, electricity, water, and cleaning and maintenance of communal facilities.

However, the eighth characteristic in paragraph 12 of GSTR 2012/6 is not present - occupants will not have the status of guests. The Manager and occupants will enter into occupancy agreements. It will be for a minimum period of 3 months. Occupants will have exclusive possession of their self-contained room.

The fact that residents will occupy the Premises as their principal place of residence is not alone determinative of the classification. However, it is important that there is no inherent transience to the nature of the accommodation.

Additionally, the absence of on-site supervision means that the degree of supervision, and similarity to a hostel and other types of premises listed in paragraph (a) of the definition, is less than that which was present in ECC.

As part of the occupancy agreements, occupants must obey the Agreement Terms and House Rules. The Agreement Terms and House Rules are comprehensive and include the following:

• Room inspections are undertaken with notice and for specified reasons, such as to show the room to a prospective tenant and to carry out inspections.
• Smoking is not permitted in the Premises, and tenants found smoking will be fined $250.
• Pets are not allowed to stay at the Premises.

Although the arrangements have some features which may indicate that the property is commercial residential premises there are some features of the arrangement that are also consistent with the features in paragraph 41 of GSTR 2012/6 which indicate the premises are not commercial residential premises. The main features are that:

• The agreement is for a periodic term (e.g. a minimum of 3 months).
• The occupant must fill in a condition and inventory report when they move in.
• A security deposit is payable at the time of entering into the occupancy agreement.
• You have the right to impose a cleaning fee (deducted from the security deposit) if the room is not in the same condition as when occupied.
• The occupant is responsible for cleaning their own room for the duration of the occupancy term.

There are also a number of features on this list that may point towards the premises being commercial residential premises. These are:

• The premises will be fully furnished.
• Utilities such as internet, electricity and water are provided.
• No changes are permitted to be made to the room.

Conclusion

Whether the Premises are a hostel or sufficiently similar to residential premises described in paragraph (a) of the definition of 'commercial residential premises' is a question of fact involving matters of impression and degree.

While it is recognised that the Premises contain some of the characteristics of commercial residential premises, and restrictions placed on residents under the house rules will exceed restrictions common in other residential apartments, there are other important differences.

The nature of the accommodation is more permanent than what is common in hotels, motels, inns, hostels and boarding houses. There is no inherent transience to the nature of the accommodation as is usually present in a hostel.

Occupants do not have the status of guests. All occupants of the Premises will enter into an occupancy agreement. Occupants obtain a right to exclusive occupation of their self-contained room in the same way as a tenant.

As a consequence, the Premises are not a hotel, motel, inn, hostel or boarding house or similar to these types of premises. They are not commercial residential premises under paragraph (a) or (f) of the definition in section 195-1 and will be an input taxed supply of residential premises.

[1] Re RSPG and Commissioner of Taxation [2016] AATA 687 at [56] (RSPG); Snowy Monaro Regional Council v Chief Commissioner of State Revenue [2017] NSWCATAD 14 at [19] (Snowy Monaro); MacKenzie v Warringah Council [2002] NSWLEC 246 at [26]; Burwood Municipal Council v Aboriginal Hostels Ltd (1979) 39 LGRA 150; Innovia Cellophane Ltd & Anor, R (on the application of) v NNB Generation Company Ltd [2011] EWHC 2883 at [28]; VAT Case 17338: Acorn Management Services Limited [2001] BVC 4173 (Acorn Management Services); VAT Case 17613: Look Ahead Housing and Care Ltd v C & E Comrs.

[2] ECC.

[3] Noosa Shire Council v Staley [2002] QPEC 18 at [14]; in Wynnum Holdings No 1 Pty Ltd v Commissioner of Taxation [2012] AATA 616 (Wynnum)it was stated at [72]: 'Segregated sleeping areas (in the sense that residents have their own place to sleep, rather than in a dormitory) might be regarded as unusual in a hostel'.

[4] ECC; Snowy Monaro.

[5] In re Niyazi's Will Trusts [1978] 1 WLR 910 at 915; Snowy Monaro at [19].

[6] Acorn Management Services.

[7] [2016] AATA 687 at [56].

[8] [2017] NSWCATAD 14 at [19].

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