Edited version of your written advice

Authorisation Number: 4140043374519

Date of advice: 27 April 2018

Ruling

Subject: Goods and Services Tax (GST) and the GST registration thresholds.

Question 1

What is the GST registration turnover threshold for the strata company (you) for the purposes of section 23-15 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer 1

The GST registration turnover threshold that applies to you is $150 000 for the purposes of section 23-15 of the GST Act.

Question 2

Is the supply of accommodation to your employee a taxable supply of accommodation in commercial residential premises for the purposes of section 9-5 of the GST Act?

Answer 2

No, your supply is not a taxable supply of accommodation in commercial residential premises for the purposes of section 9-5 of the GST Act. It is an input taxed supply of residential premises and therefore is not subject to GST.

Question 3

Is the interest charged by you to the owner occupiers for overdue levy payments, a taxable supply for the purposes of section 9-5 of the GST Act?

Answer 3

No, the interest charged by you to the owner occupiers for overdue levy payments is not a taxable supply for the purposes of section 9-5 of the GST Act. The interest charges for late payments are input-taxed financial supplies and therefore is not subject to GST.

Relevant facts and circumstances

You are a non-profit body corporate entity and have been registered for GST since year XXXX.

You administer and manage the costs and expenses incurred on behalf of the owners and occupiers of a property. You collect strata levies from the owners and it is due to the large number of separately titled and owned lots at the property that pushes the overall levy contributions, collected by you to pay bills on behalf of the residents, over the GST threshold of $150 000 for a non-profit entity.

The majority of residents are elderly owner/occupiers residing at the property.

The common facilities/common areas available are:

● Pool

● Recreation Hall (basic facilities)

Each owner pays $X per quarter in strata levies.

The components of expense amounts reported on the BAS are per below:

Items that are included in this amount are:

● water (consumption for communal areas, excess water)

● electricity for communal areas

● Speedbumps on driveways

● Maintenance of the pool area plus chemicals

● General repairs including repair of burst pipes

● Reticulation

● Fertilizer

● Bins

● Shire Rates for the common areas.

You have one employee (a gardener) who lives onsite. The Resort invoices the employee for rent on their accommodation at commercial rates. The Resort does not collect any other rental income as all other lots are owner occupied (or rented privately by owners).

Strata levies are collected by you from the owners and, if the levies are not paid by the due date (beginning of each quarter), the owner occupiers are charged interest on the outstanding amount from the due date.

The total interest charged each year is less than $X.

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 9-10

A New Tax System (Goods and Services Tax) Act 1999 section 9-20

A New Tax System (Goods and Services Tax) Act 1999 section 23-5

A New Tax System (Goods and Services Tax) Act 1999 section 23-10

A New Tax System (Goods and Services Tax) Act 1999 section 23-15

A New Tax System (Goods and Services Tax) Act 1999 subsection 40-5(1)

A New Tax System (Goods and Services Tax) Act 1999 subsection 40-5(2)

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 subsection 40-35(2)

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

Regulation 23-15.01 of the A New Tax System (Goods and Services Tax) Regulations 1999

Reasons for decision

All legislative references are to A New Tax System (Goods and Services Tax) Act 1999 (GST Act) unless otherwise stated.

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.

Supply

The word supply is defined in section 9-10 to mean any form of supply whatsoever and includes a supply of services. The supply a body corporate makes to its members is the entry into an obligation to maintain and manage the property. This comes within the definition of supply contained in the GST Act.

The definition of ‘consideration' in the GST Act included any payment ‘in connection with’ a supply of anything. In this case the contributions of the lot-owners were clearly made in connection with the services.

Registration and GST registration threshold

The strata levies paid by the owner occupier residents at the property are consideration for taxable supplies that you make.

To be required to be registered for GST, section 23-5 requires that the body corporate strata company (that is you) has a GST turnover that meets the registration turnover threshold.

Regulation 23-15.01 of the A New Tax System (Goods and Services Tax) Regulations 1999 provides that the registration turnover threshold is $75 000, unless the entity is a non-profit body (in which case the registration turnover threshold is $150 000 (refer to regulation 23.15.02)).

Sections 23-5 and 23-15 as applied requires that an entity that is conducting an enterprise is required to be registered if its turnover meets or exceeds the registration turnover thresholds of $75 000, or $150 000 for non-profit bodies. A non-profit body is not required to register for GST until the GST turnover of taxable supplies and GST-free supplies meets or exceeds $150 000. However, a non-profit entity carrying on an enterprise can choose to be GST registered if the turnover is less than $150 000.

Input taxed treatment

Under paragraph 40-35(1)(a), 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.

Under subsection 40-35(2) of the GST Act, the supply will only be input taxed to the extent that the premises are to be used predominately for residential accommodation (regardless of the term of occupation).

It is accepted that you supply accommodation and that accommodation is in premises that satisfy the definition of residential premises. The issue to be determined is whether those premises are commercial residential premises.

Commercial residential premises and accommodation

‘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 provides the Australian Tax Office (ATO) view of the characteristics 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. Paragraphs 140-141 of GSTR 2012/6 list the ordinary meanings of the terms and referred to the Macquarie Dictionary which 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.

You have one employee who lives onsite and you charge and invoice the employee rent at commercial rental rates.

In your case, we consider that you are not making a supply of accommodation in commercial residential premises provided to an individual by an entity that owns or controls the commercial residential premises. Consequently your supply is an input taxed supply of residential premises when you lease the property to your employee pursuant to section 40-35.Therefore, the leasing of your properties (in this case residential apartments) is not a taxable supply under section 9-5.

The owner occupiers pay strata levies to you. If these levies are not paid within X days after invoicing, the owner occupiers are charged Interest after the X days. Interest charged is minimal totalling less than $X.

A financial supply is input taxed under subsection 40-5(1) of the GST Act. Subsection 40-5(2) states that a 'financial supply' (refer to Item 3 for debt securities which includes interest) has the meaning given by the A New Tax System (Goods and Service Tax) Regulations 1999 (GST Regulations).

The interest charged by you to the owner occupiers for over-due levy payments is not a taxable supply for the purposes of section 9-5. The interest charges for a late payment are an input-taxed financial supply, which means no GST is applicable.

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