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Ruling

Subject: GST and supplies of long-term accommodation

Question 1

How do you, for GST purposes, treat your supplies of long-term accommodation in commercial residential premises?

Answer

You are required to either:

1. apply Division 87 of the A New Tax System (Goods and Services Tax) Act 1999 and reduce the amount of GST payable, or

2. treat all these supplies as input taxed.

Whatever choice you make, the same treatment must apply to all provisions of long-term accommodation. You cannot revoke your choice for at least 12 months.

Question 2

Do you apply the normal GST rate of 10% for your supplies of short-term commercial accommodation in the same premises?

Answer

Yes, you apply the normal GST rate of 10% for your supplies of short-term commercial accommodation.

Relevant facts and circumstances

You operate a accommodation facility located in Australia.

The majority of guests are overseas travellers on working holiday visas. As such there are a large proportion of people that stay long-term.

For the period 1 July 2010 to 30 June 2011 a large proportion of guests stayed 28 days or longer based on actual figures.

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 40-35

A New Tax System (Goods and Services Tax) Act 1999 Section 87-5

A New Tax System (Goods and Services Tax) Act 1999 Section 87-20

A New Tax System (Goods and Services Tax) Act 1999 Section 87-25

Reasons for decision

Question 1

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) the supply is 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 for GST.

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

Your supplies of accommodation meet the criteria of paragraphs (a) to (d). There are no provisions in the GST Act which would make your supplies of your hostel accommodation GST-free.

Supplies of accommodation

Under section 40-35 of the GST Act supplies of premises by way of lease, hire or licence are input taxed if the supply is of residential premises unless the supplies of accommodation are in commercial residential premises. In your case your premises meet the definition of residential premises. However, we will consider whether the supply is of accommodation in commercial residential premises.

Commercial residential premises include:

· hotel, motels, inns

· hostels, boarding houses

· caravan parks, camping grounds

· establishments that provide residential premises that are similar to hotels, motels, inns, hostels and boarding houses.

Goods and Services Tax Ruling GSTR 2000/20: Goods and Services Tax: Commercial residential premises provides the ATO view on what are commercial residential premises amongst other things. It provides at paragraph 76 that the Macquarie Dictionary definition of hostel is:

1. A supervised place of accommodation, usually supplying board and lodging provided at a comparatively low cost, as one for students, nurses, or the like. 2. [cross reference] Youth hostel: a simple lodging place for young travellers.

In your case, your premises is a specific accommodation facility and you are therefore supplying accommodation in commercial residential premises.

Division 87 of the GST Act deals with long term accommodation in commercial residential premises.

Commercial accommodation

Commercial accommodation is accommodation that is provided in commercial residential premises. Supplies of commercial residential premises may be for either short-term accommodation or long-term accommodation.

Under subsection 87-20(3) of the GST Act commercial residential premises are 'predominantly for long-term accommodation' if at least 70% of the individuals who are provided with commercial accommodation in the premises are provided with it as long-term accommodation.

Long-term accommodation

Section 87-20 of the GST Act provides that long-term accommodation is provided to an individual if commercial accommodation is provided, for a continuous period of 28 days or more, in the same premises:

· to that individual alone, or

· to that individual, together with one or more other individuals who:

o are also provided with that commercial accommodation, and

o are not provided with it at their own expense (whether incurred directly or indirectly).

In your case, you are supplying commercial accommodation in premises where more than 70% of your guests stay 28 or more days. You are therefore considered to be providing predominantly long-term accommodation.

As you are providing predominantly long-term accommodation you are therefore eligible to adopt one of the options outlined below.

Section 87-5 of the GST Act provides that where commercial residential premises are used predominantly for long-term accommodation the value of a taxable supply of commercial accommodation that:

(a) is provided in commercial residential premises that are predominantly for long-term accommodation; and

(b) is provided to an individual as long-term accommodation;

(c) is 50%, or such other percentage as is specified in the regulations, of what would be the price of the supply if this Division did not apply.

Accordingly, if you decide to apply this provision, you only calculate GST on half the normal GST-inclusive price of the long-term accommodation, from the beginning of an occupant's stay.

Alternatively, under section 87-25 of the GST if you choose not to apply the reduced value to your supplies of commercial accommodation (section 87-5 of the GST Act), these supplies of long-term stays must be input taxed.

Whichever choice you make, you must apply it to all supplies of long-term accommodation and you cannot revoke the choice within 12 months after the day on which you make a choice.

Furthermore, you must remit GST of one-eleventh of the price you charge for your supplies of commercial accommodation to guests that stay less than 28 continuous days.

Question 2

GST is payable on taxable supplies. In your case as set out above your supplies of accommodation are not input taxed or GST free and your premises is a hostel. You are therefore supplying accommodation in commercial residential premises. In addition Division 87 of the GST Act deals only with long term accommodation in commercial residential premises and is not applicable to your supplies of short term accommodation.

Therefore all supplies of commercial accommodation in which guests stay for less than 28 days are taxable supplies and are subject to GST at the normal rate of 10% regardless of whether the premises are predominantly for long-term accommodation or not.