Edited version of private ruling

Authorisation Number: 1011655478973

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Ruling

Subject: GST and caravan park fees

Questions

1. Is goods and services tax (GST) payable on the guest accommodation rental fees (rental fees) you collect on behalf of a leaseholder?

2. Is GST payable on your annual fee that you collect from a leaseholder?

3. Is GST payable on your fees that you deduct from the rental fees?

Answers

1. Please refer to reasons for decisions as it depends on whether the leaseholder's supply is taxable or input taxed.

2. Yes.

3. Yes.

Relevant facts and circumstances

You are registered for GST.

You granted to an associated company the individual lease rights of each site on the site plan of a caravan park for a substantial period of time with an option for a further period.

An investor can purchase from your associated company a leasehold interest in a site which will be registered on title with the Registrar of Titles.

You are responsible for renting the sites to 3^rd parties and providing various services such as site maintenance.

You are also responsible for the collection of the rental fees on behalf of the investors and your associated company (herein all known as the leaseholders).

You own all the common areas of the caravan park.

There is no written agreement between you and the leaseholders that you will rent out their sites but there is a general understanding that you will do so.

A site can be either vacant land or land with a cabin.

The leaseholders pay the following fees to you for managing their sites:

· an annual fee to meet your expenses which include, wages, rates and taxes, insurance, gas, bank fees and security.

· management, cleaning, linen and similar fees (deducted from each leaseholder's rental fee).

The leaseholder is typically an individual investor that is not registered (or required to be registered) for GST.

A check on the Australian business register shows that your associated entity is registered for GST.

Reasons for decision

Summary

GST is payable on a leaseholder's rental fees where their supply of commercial residential premises is taxable (their supply, or part of their supply, may be treated as input taxed in certain circumstances which is not taxable).

GST is payable on the fees you collect from leaseholders as you are making a taxable supply of services to them.

Detailed reasoning

Is GST payable on the rental fees you collect on behalf of a leaseholder?

The supply of accommodation or a camping ground in a caravan park is a supply of commercial residential premises for the purposes of GST as per section 195-1 of A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

The Australian Tax Office view on commercial residential premises is provided by goods and services tax ruling GSTR 2000/20. Paragraphs 56 to 60 of the ruling confirm that in this case it is the leaseholders that supply the commercial residential premises with you acting as their agent as a caravan park operator (operator).

Therefore, the supply of commercial residential premises would be taxable (hence GST payable on the rental fee) provided the following requirements of section 9-5 of the GST Act are met.

· the leaseholder makes the supply for consideration

· the supply is made in the course or furtherance of the leaseholder's enterprise

· the supply is connected with Australia, and

· the leaseholder is registered, or required to be registered for GST.

However, please note that the supply is not taxable to the extent that it is GST-free or input taxed.

With respect to section 9-5 of the GST Act, a leaseholder is supplying commercial residential premises to their tenants as part of their enterprise for which they receive rental fees. The supply of the commercial residential premises is also connected with Australia as it is supplied in Australia. Hence, we now need to consider whether the leaseholder is registered (or required to be registered) for GST to determine further if their supply is taxable.

Leaseholder not registered for GST

Where a leaseholder is not registered (or not required to be registered) for GST, their supply of commercial residential premises would not be taxable (and hence no GST payable on their rental fee) given they do not meet all the requirements of section 9-5 of the GST Act.

Leaseholder is registered for GST

Although the last dot point of section 9-5 of the GST Act is met, in certain circumstances, a leaseholder supplying long-term (28 days or more) or predominantly long-term commercial residential premises in a caravan park may treat their supply as input taxed (not taxable under section 9-5 of the GST Act) or conversely apply a concession under Division 87 of the GST Act that allows the rate of GST to be reduced. Goods and services tax bulletin GSTB 2001/2 (copy provided to rulee) which provides the Australian Tax Office (ATO) view on accommodation in a caravan park provides further information in relation to this.

Hence, it does depend on the type of commercial residential premises the leaseholder supplies (short-term, long-term or predominantly long-term) and how they decide to treat their supply as to whether their supply is taxable.

Given this, it is possible a leaseholder is supplying a mixture of taxable and input taxed commercial residential premises. There are no provisions in the GST Act or any other Act that would allow the leaseholder's supply to be GST-free.

Either way, GSTB 2001/2 does provide that the supply of all short-term commercial residential premises (27 days or less) would be taxable at the full GST rate (making GST payable on the rental fee).

Is GST payable on the annual fee (paid quarterly) that you collect from a leaseholder?

You are supplying services to the leaseholders such as fee collection and maintenance in the course of your enterprise as an operator. Therefore, there is a nexus between the supply of your services and this annual fee. Your supply of the services is also connected with Australia as they are supplied in Australia and you are registered for GST.

There are no provisions in the GST Act or any other Act that would allow your supply to be GST-free or input taxed. Consequently, all the requirements of section 9-5 for making a taxable supply are met, making your supply taxable and hence GST payable on the annual fee.

Some of your expenses paid by this fee (such as rates and taxes) may be GST-free when paid direct to the Government Authority levying the tax, fee or charge. However, it is the view of the ATO that when a supplier on-charges a tax, fee or charge such as rates, it loses its character as a tax, fee or charge and becomes part of the consideration to meet the business costs incurred in carrying on the supplier's enterprise.

Therefore, when you on-charge expenses like rates that may be GST-free when paid to the Government Authority, your leaseholder is no longer paying this fee but rather they are paying for one of your costs in carrying on your enterprise. As such, the payment by the leaseholder for such expenses amounts to consideration under paragraph 9-15(1)(a) of the GST Act and is therefore taxable.

Is GST payable on your fees that you deduct from the rental fees?

For the same reasons provided in question 2, GST is payable on these fees.