Edited version of private ruling

Authorisation Number: 1011853406151

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Ruling

Subject: Sale of campground and conference centre

Question

Is the sale of the specified property subject to GST?

Answer

Yes, but only to the extent that the property is commercial residential premises. To the extent that the property is residential premises the sale will be input taxed and not subject to GST.

Relevant facts and circumstances

· You are registered for GST

· You report for GST on a quarterly basis and account on a non-cash basis

· You are selling the specified property. The property is zoned rural

· The property consists of two lots

· The property was used as a campground and conference centre and is being sold as one parcel. Persons hiring the campground had access to all of the areas on both lots except the caretaker residence and the area surrounding this residence.

· The property was hired to church groups, schools and other groups and also available for hire for events such as family reunions and training seminars.

· Lot A contains the following buildings:

· a meeting hall,

· dining hall,

· commercial kitchen,

· dormitories,

· amenities area/building,

· powered sites,

· a self contained one bedroom cottage; and

· large shed

· The self contained cottage was used as emergency accommodation for token rent (below market value) when needed. When it wasn't used, it was made available with the hiring of the facilities for functions.

· Lot B contains a 3 bedroom brick house, which was leased as a residence to the camp caretakers and was permanently occupied under this lease agreement. It is located 100 metres from the rest of buildings in a corner on the western side of lot B.

· You state that the council would have entertained a change of boundaries to split the 3 bedroom house section from the rest of the property if you had chosen to do this.

Reasons for decision

Under the GST Act you are liable for goods and services tax (GST) on any taxable supply that you make. Under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) 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 Australia; and

(d) you are registered, or required to be registered.

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

Based on the information you have provided you meet all the requirements of paragraphs (a)-(d) listed above so the sale of the property will be a taxable supply except to the extent that it is GST-free or input taxed.

In this case the supply of lot A and lot B in your factual situation is not a GST-free supply under any of the provisions set out in Division 38 and therefore the proposed sale of your property will not be a GST-free supply.

You have advised that you are supplying real property which has been used as a campground.

Under section 40-65 of the GST Act a sale of real property is input taxed but only to the extent that the property is residential premises to be used predominantly for residential accommodation (regardless of the term of the occupation). However, the sale is not input taxed to the extent that the residential premises are:

(a) commercial residential premises; or

(b) new residential premises other than those used for residential accommodation (regardless of the term of occupation) before 2 December 1998

Residential Premises

Section 195-1 of the GST Act defines residential premises as land or a building that is occupied as a residence or for residential accommodation or is intended to be occupied, and is capable of being occupied as a residence or for residential accommodation.

Goods and Services Tax Ruling GSTR 2000/20 Goods and Services Tax: commercial residential premises (GSTR 2000/20) provides guidance in determining whether premises are defined as 'residential premises. Paragraph 19 of GSTR 2000/20 provides that it is the physical characteristics that mark them out as a residence. Paragraphs 24-29 of GSTR 2000/20 lists characteristics common to residential premises that help determine whether premises are to be used for residential accommodation. In particular paragraphs 26 and 27 provide that:

26. The physical characteristics common to residential premises that provide accommodation are:

(i)  The premises provide the occupants with sleeping accommodation and at least some basic facilities for day to day living.

(ii)  The premises may be in any form, including detached buildings, semidetached buildings, strata-title apartments, single rooms or suites of rooms within larger premises.

27. In addition to the physical characteristics, there are other factors which may be of use in determining whether premises are to be used for residential accommodation or accommodation of another kind. These characteristics would usually be present in residential premises that have the physical characteristics given in paragraph 26. These often, but not always, include:

(i) The purpose or context of the premises' use is for personal accommodation, rather than another purpose, such as for a business.

(ii) The tasks of day to day living, such as, preparing food, cleaning and laundering, are performed by the occupant, or by others under private arrangements.

(iii) The status of the occupant is most commonly that of owner, tenant or lessee.^F10 Any boarders, lodgers or guests occupy the premises by private arrangement with the owner, tenant or lessee.

(iv) The premises will be in an area zoned by Council or Shire regulations as suitable for human habitation.

Based on the information you have provided us, an objective assessment of the caretaker's house, the self contained cottage and the camping facilities indicate that they possess the physical characteristics common to residential premises as outlined in GSTR 2000/20 in varying degrees.

1 The 3 bedroom residence has all the basic living facilities and is for personal accommodation of the caretaker and the caretaker has the status of tenant and therefore will be a supply of residential premises under section 40-65(1) of the GST Act unless it is characterised as commercial residential premises.

2 The nature of the camp facilities is such that although there are basic living facilities the purpose of the camping grounds is not for personal accommodation nor is the occupants' status that of tenant or lessee.

3 The self contained cottage clearly has a mixture of characteristics as it is co located with the camping ground. However, although not determinative, a consideration of the characteristics in paragraphs 27 (i) and 27 (iii) of GSTR 2000/20 indicates that these premises may be more a part of the camp grounds and therefore may be more correctly characterised as commercial residential premises.

Commercial Residential Premises

In section 195 of the GST Act commercial residential premises are defined to mean amongst other things a caravan park or a camping ground; or anything similar to a caravan park or camping ground.

Clearly part of your property meets the definition of a camping ground so it remains to decide whether the two residential premises that are located on the property form part of the camping ground for purposes of the GST Act.

You advised that the self contained cottage forms part of the accommodation offered to visitors therefore would be considered part of the supply of the commercial residential premises.

However you advised that the 3 bedroom house is supplied to the caretaker to live in. therefore it does not form part of the 'camping ground' and is therefore input taxed.

Contentions

In your application you raise the issue as to whether the actual intended use by the purchaser would affect whether a taxable supply is made or not.

The answer to this question is that the subjective intention of any party is not a relevant consideration based on the proper interpretation of section 40-65(1) of the GST Act. That is the question of the extent to which a sale of real property is a supply of residential premises to be used predominantly for residential accommodation and therefore is input taxed requires an objective assessment of the nature of the premises rather than a prediction of future use or consideration of the subjective intention of any party.

The decision of the Full Federal Court in Sunchen Pty Ltd v Federal Commissioner of Taxation 2010 ATC 20-229 confirms the ATO view on the interpretation of section 40-65 of the GST Act. In this case the court held that the phrase in subsection 40-65(1) of the GST Act 'to be used predominantly for residential accommodation' is only concerned with the property at the time it is supplied and to what use those attributes or characteristics are suited.

Conclusion

We therefore find you are making a supply of real property that is partly commercial residential premises and therefore taxable and partly a caretaker's cottage which is input taxed. This means that you are making a mixed supply and will be required to apportion the GST between the taxable and input taxed portions of your supply

Mixed Supplies

Even though you are selling the property as one parcel, you are making a supply which contains both a residential part which will be input taxed and a part which meets the definition of commercial residential premises.

Goods and Services Tax Ruling GSTR 2001/8 Goods and services tax: apportioning the consideration for a supply that includes taxable and non-taxable parts (GSTR 2001/8) gives guidance on whether a supply is a mixed supply which is defined as a supply that is a combination of separately identifiable taxable and non-taxable parts. In determining whether you are making a mixed supply you must consider all of the circumstances of the transaction. You also need to consider the effect the GST Act has on the supply or any of its individual parts. You must adopt a commonsense approach in making this decision.

Using a commonsense approach as required under GSTR 2001/8 it can be determined that the sale of the property will constitute a mixed supply. From the information you provided us it is clear that the residents of the caretakers' residence had exclusive rights to the 3 bedroom house and an area surrounding the house under the rental agreement. Further the house is physically separated by 100 metres from the rest of buildings in a corner on one side of lot B and you state that the council would have entertained a change of boundaries to split the house section from the rest of the property if you had chosen to do this. It is also clear that campers and guests of the campground had right of access and use to all of the facilities and grounds on the property except the caretakers residence and the area surrounding the residence. Although the self contained cottage was rented out at times as emergency accommodation, generally it was hired as part of the campground facilities and thus formed part of the campground.

It is clear that the sale will consist of separately identifiable taxable and non-taxable parts. These parts consist firstly of residential premises being the 3 bedroom caretaker's residence and secondly of commercial residential premises being the campground and the facilities (including the self contained cottage) which form part of the campground. As such, you will need to apportion the consideration for the supply and work out the GST payable on the taxable part of the supply.

Under GSTR 2001/8 you may use any reasonable method to apportion the consideration to the parts of a mixed supply. However the apportionment must be supportable by the facts in the particular circumstances. What is a reasonable method of apportioning the consideration for mixed supplies depends on the circumstances of each case.