Disclaimer
This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of your private ruling

Authorisation Number: 1012086795380

This edited version of your ruling will be published in the public register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.

Ruling

Subject: GST and going concerns, guest accommodation premises and holiday accommodation

Questions

1. Is your supply of accommodation in the guest accommodation premises an input taxed supply of residential premises?

2. Will your transfer of the farm business assets, together with a lease of the farm property to an associate be a supply of a going-concern that is GST-free (provided that the parties also agree in writing that the supply is of a going concern)?

3. Will your lease of the farm property to an associate be GST-free as part of the supply of the going-concern referred to in question 2?

4. Will your transfer of the assets of the guest accommodation enterprise to an associate be a supply of a going concern that is GST-free, provided that the parties have an agreement stating that the supply is of a going concern?

5. Will your lease of the guest accommodation premises to an associate be an input taxed supply of residential premises?

Answers

1. Yes, your supply of accommodation in the guest accommodation premises is an input taxed supply of accommodation in residential premises.

2. Yes, your transfer of the farm assets (including the operating structure), together with a lease of the farm property to an associate will be a supply of a going-concern that is GST-free. This is provided that the parties also have an agreement in writing that the supply is of a going concern.

3. Yes. As your supply of the farm property to an associate is a supply under the arrangement for the farming enterprise to be supplied as a going-concern that is GST-free, the supply of the farm property under that arrangement will also be GST-free. However, the ongoing lease of the farmland to an associate is a separate supply and will be subject to GST where all the requirements of a taxable supply are met.

4. Yes. Your supply of the guest accommodation enterprise to an associate together with a lease of the guest accommodation premises will be a supply of a going concern that is GST-free. This is provided that the parties also have an agreement stating that the supply is of a going concern. However, the recipient would have an increasing adjustment under Division 135 where they intend to continue to make input taxed supplies through the accommodation enterprise.

5. Yes. Your lease of the guest accommodation premises to an associate will be an input taxed supply of residential premises.

Relevant facts and circumstances

· You, Individual A and Individual B, in partnership are not currently registered for GST.

· You have operated a guest accommodation enterprise in Australia for a number of years from premises leased from Individual C, who passed away on a specified date.

· Immediately prior to their death, Individual C had operated farming and leasing enterprises from properties that they owned, and was registered for GST in relation to these enterprises.

· The trustee for the Estate of Individual C intends to distribute the assets of the Estate to the beneficiaries, namely Individual A and Individual B (in their individual capacities). Individual B is a relative of Individual C.

· The properties will be distributed to you (Individual A and Individual B) individually as tenants in common in equal shares. The assets include:

    o farmland situated at separate locations in Australia and the assets of those farming businesses;

    o commercial properties in Australia comprising shop/restaurant buildings and vacant land used as a car park and the business assets associated with the leasing of those premises;

    o a private residence situated on the farmland X property- Individual C had resided in the private residence together with you (Individual A and Individual B), under a private arrangement until a change in personal circumstances. There was no lease of the private residence by Individual C to you. Following Individual C's death, the private residence is still being occupied by you and it is your intention to continue to do so. It has been your home for the number of years and is the only private residence on the farm properties.

    o the guest accommodation premises and associated facilities which are situated on the farmland X property- an annual rental amount for the lease of the guest accommodation premises was payable by you to Individual C.

    The private residence and the guest accommodation premises are part of the same complex. Individual C had lived in the self contained apartment within the guest accommodation premises. Following a change in personal circumstances, the apartment became available as guest accommodation. It was renovated in a specified year at which time an en-suite was added to the upstairs area.

· Individual B held an enduring power of attorney over their relative's affairs and continued to operate the enterprises on behalf of Individual C (following their change in personal circumstances).

· You (Individual A and Individual B) continue to live in the private residence and to lease the guest accommodation premises from the trustee of the Estate for the purpose of operating your bed & breakfast business (in partnership). Following the distribution of the Estate assets by the trustee to the beneficiaries, the property will be owned by you (Individual A and Individual B) as tenants in common in equal shares and will be held as a partnership asset.

· The guest accommodation premises is rated as a X star bed & breakfast- self catering. Originally, accommodation was provided in two suites, but that was expanded to two suites plus one apartment at a later date.

    Each of the accommodation units is self contained and the property also provides private beach access. The guest accommodation premises has the following physical layout, characteristics and facilities:

Two suites with limited self catering facilities suitable for short stays, including:

    · Premium queen size bed

    · Private balcony with ocean views

    · Deep bath for two

    · Flat screen TV, DVD and CD

    · Kitchenette- including a toaster, frypan, microwave, bar fridge, sink, crockery & cutlery. No cook top, oven or dishwasher is provided

    · Fresh flowers

    · Individually furnished

An apartment suitable for self catering and longer stays

    · fully self -contained kitchen

    · two separate living areas

    · rural and ocean views

    · two flat screen TVs, DVD and CD

    · mezzanine QA bedroom, ensuite and private balcony

    · downstairs second bathroom, deep bath for two

    · downstairs second QS bedroom - this was converted from a garage in a specified year when the deluxe apartment was renovated. It is your family's spare bedroom which is used by family and their friends when they come to visit. It is available on direct request for use by guests in very limited circumstances.

    · spiral staircase

    · Airconditioning

    · private separate entrance

    · fresh flowers

Initial continental breakfasts (for guest self catering) are supplied in the room on arrival as part of the room cost. One litre of long life milk, one litre of long life juice, slices of bread, fruit, jam, butter, tea, coffee and sugar are provided. No meals are provided for guests (i.e. no cooked breakfast or any other meals). All other 'extras' listed in the accommodation website are provided by other local businesses.

The Spa Retreat is a separate bathroom next to the toilet in the pool/spa area. Underground mineral water is used in the 2 person spa which is prepared for guests who book for a 1 hour private spa at a specified cost.

· While you are not currently registered for GST, you will be registered for GST at the time that the assets of the Estate are distributed.

· Following the distribution of the Estate assets, you will:

      o Continue to operate the commercial leasing enterprises carried on in relation to the commercial properties;

      o transfer the business assets of the guest accommodation business (excluding the property itself) to an associate. You will lease out the guest accommodation property to the associate. The associate will carry on the accommodation business from the leased premises in their own right;

      o transfer the farm business assets (excluding the property) to an associate. You will lease the farm property to the associate. The associate will carry on the farm enterprise from the leased premises in their own right. The farming enterprise will be carried on by you until the day it is to be supplied to the associate.

· The associate will be registered for GST purposes with effect on and from the date that the farm and the guest accommodation business assets are supplied by you to your associate.

· The leases in respect of the farm property and the guest accommodation premises from you to the associate will commence with effect from and on the date the other assets are supplied to the associate.

· For present purposes, it should be assumed that there will be consideration provided by the associate for the transfer of the farm and the guest accommodation enterprises.

· The transfer of the Estate assets by the trustee of the Estate to you (Individual A and Individual B) will not be contemporaneous with the transfer of the business assets (excluding land) by you to your associate. As the terms of the arrangement (in relation to the entity structure for the associate) are still being determined, you will continue to carry on the leasing and farming enterprises.

· You will continue to carry on and will operate the farming and leasing enterprises until the day of the supply of the farming and guest accommodation enterprises to the family trust.

· Individual C received a previous decision from the Australian Taxation Office (ATO) in which it was held that the lease of the guest accommodation suites and the spa retreat by Individual C to you was an input taxed supply of residential premises.

Relevant legislative provisions

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

A New Tax System (Goods and Services Tax) Act 1999 Subsection 40-35(1)

A New Tax System (Goods and Services Tax) Act 1999 Subsection 40-35(2)

A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-325(1)

A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-325(2)

A New Tax System (Goods and Services Tax) Act 1999 Paragraph 9-10(2)(d)

A New Tax System (Goods and Services Tax) Act 1999 Section 135-5

Reasons for decision

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

Supply of accommodation in the guest accommodation premises by you to guests

The relevant issue to be determined is whether the supply of the accommodation is an input taxed supply of residential premises or a taxable supply of commercial residential premises.

Subsection 40-35(1) provides that 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:

    · 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

    · 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.

Subsection 40-35(2) states:

    However:

    · the supply is input taxed only to the extent that the premises are to be used predominantly for residential accommodation (regardless of the term of occupation); and

    · the supply is not input taxed under the is section if the lease, hire or licence, or the renewal or extension of a lease, hire or licence, is a *long-term lease.

    [note: the terms marked with an * are defined in section 195-1]

The definition of residential premises in section 195-1 refers to land or a building that is occupied for a residence or for residential accommodation or is intended and capable of being occupied as a residence or for residential accommodation. The definition requires that land must have a building affixed to it and that the building must have the physical characteristics that enable it to be occupied or be capable of occupation as a residence or for residential accommodation.

Premises are suitable for occupation as a residence or for residential premises if they possess features necessary for residential accommodation, and are able to be occupied as residential premises. It is the physical characteristics that mark premises out as a residence. In turn, these characteristics determine when the use or proposed use is for residential accommodation. By contrast, supplies of accommodation in commercial residential premises are generally subject to GST as they have a particular character that removes them from the class of residential premises.

'Commercial residential premises' is defined in section 195-1 to include (amongst other things):

    (b) a hotel, motel, inn, hostel or boarding house; or…..

    (f) anything similar to residential premises described in paragraphs (a) to (e)….

The terms 'hotel', 'motel', 'inn', 'hostel' and boarding house' are not defined in the GST Act and therefore take their ordinary or common meanings, subject to the context with which those terms are included in the GST Act.

For some premises, it is clear from their overall physical character that they are commercial residential premises, even when they are not being operated as such. For example premises designed and built as a hotel. However, paragraph (f) broadens the definition to include things that are similar to a hotel, motel, inn, hostel, boarding house. The purpose of paragraph (f) is to include residential premises that may not of themselves be covered by paragraph (a) but exhibit characteristics that place them on a similar footing to such establishments.

Goods and Services Tax Ruling GSTR 2000/20 (which explains the meaning of 'commercial residential premises' and provides guidance on the meaning of 'residential premises') refers to eight characteristics that are common to premises that are commercial residential premises or similar to such establishments, namely:

· commercial intention;

· multiple occupancy

· holding out to the public

· accommodation is the main purpose

· central management

· management offers accommodation in its own right

· services offered

· status of guests.

It is a question of degree as to whether premises exhibit these characteristics to a sufficient degree. This is an objective test that requires weighing up of each of the characteristics (together with any other relevant factors) to determine whether on balance the premises have sufficient characteristics with the kind of establishments described in paragraph (a).

The guest accommodation premises were not built as a hotel, motel, inn, hostel or boarding house and do not have the level of infrastructure or other features that are typical of such establishments. That is, it was not built or designed as a hotel, motel etc., and therefore does not fall within paragraph (a) of the definition of 'commercial residential premises'. Nor does it have the overall characteristics of premises that are similar to such establishments. It remains to be determined whether the way in which the premises are operated, is sufficient to bring it within the scope of paragraph (f).

GSTR 2000/20 confirms at paragraph 126:

    126 Domestic bed and breakfast and farm-stay premises may fall into the category of commercial residential premises, if the activities are on a large enough scale and run in a manner that satisfies the defining characteristics to a sufficient degree.

Draft Goods and Services Tax Ruling GSTR 2012/D1 which provides the Commissioner's preliminary view about the way in which a relevant taxation provision applies, or would apply to entities generally or to a class of entities in relation to a particular scheme or a class of schemes also examines the meaning of 'residential premises' and 'commercial residential premises'.

Paragraphs 55 to 56 of GSTR 2012/D1 provide an example to illustrate a situation where supplies of accommodation in a bed and breakfast may constitute commercial residential premises. Example 15 of GSTR 2011/D2 states:

    55. Bob operates a bed and breakfast accommodation business from his premises. The premises contain three bedrooms, communal dining and lounge areas and sealed car parking spaces for guests. The premises contain a room used as an office/reception as well as a kitchen that is suitable to prepare meals for guests. Bob lives on-site. He advertises the accommodation in a tourist magazine. The rooms are not self contained and are cleaned daily during stays and after each stay. The daily cleaning includes replacing towels and making beds. Breakfast is provided in the dining room.

    56. Bob operates the premises aimed at providing accommodation of a transient nature on a commercial basis to guests who are temporarily away from their usual homes. The premises provided accommodation on a multiple occupancy basis. The guests do not have overall control over their rooms. Bob provides central management, and services. The accommodation is supplied by Bob in his own right. Bob's bed and breakfast accommodation has the characteristics of commercial residential premises. Bob's supply of accommodation is a taxable supply of accommodation in commercial residential premises.

In the above example, the physical characteristics of the premises are consistent with residential premises to be used predominantly for residential accommodation. It is the operation that makes the premises 'similar' to commercial residential premises.

In this case, it is acknowledged that the operation of guest accommodation premises exhibits some of the characteristics typical of commercial residential services. However, the extent of the operation and the overall characteristics of guest accommodation premises does not bring the premises within the class of premises that are 'commercial residential premises'. We consider that in weighing up the characteristics of commercial residential premises and applying the principles in GSTR 2000/20, the factual circumstances of this case can be distinguished from the situation outlined in Example 9 of GSTR 2012/D1 for the following reasons.

The guest accommodation premises are self contained and do not provide the level of services typical of establishments that are 'similar to' hotels, motels, inns, hostels, or boarding houses. While guests are provided with initial breakfast supplies they are not provided with, nor is there any provision for them to be provided with any meals. i.e. There is no dining room or kitchen available for guests to be provided with meals (or provision for those meals to be prepared and made available to guests). The rooms are not cleaned on a daily basis - there is no daily changing of towels or making of beds as outlined in Example 9 (Bob's bed and breakfast) and there is no telephone access within the suites.

While the operators of the guest accommodation reside on the premises and are available to take bookings and issue and collect keys, there is no 24 hour reception available for guests. Nor is the management available to provide the level of services that are typical of establishments that are similar to commercial residential premises.

On the basis of the facts provided, we consider that the supply of accommodation in the guest accommodation premises falls under section 40-35 and as a consequence, the supply of accommodation is input taxed. This means that the supply is not subject to GST and to the extent that acquisitions relate to making this input taxed supply, there will be no entitlement to input tax credits. [This is because to this extent the acquisitions will not be for a creditable purpose and as a consequence will not be creditable acquisitions.]

Will the supply of the farm business assets together with the lease of the farm property by you to an associate be a supply of a going-concern that is GST-free?

Following the distribution of the farming business assets and the farmland by the trustee for the Estate of Individual C, the ownership of the farming properties will transfer to you, Individual A and Individual B as tenants in common, who in partnership, will continue the farming enterprise for a period of time.

You intend to retain ownership of the land and transfer the farming business assets to your associate. You will grant a lease of the farmland to the associate. You submit that the supply of the farming business together with the lease of the farmland will satisfy the requirement in paragraph 38-325(2)(a) that the supplier supplies all things necessary for the continued operation of the farming enterprise.

Goods and Services Tax Ruling GSTR 2002/5 explains what is a 'supply of a going-concern' and also when the supply of a going-concern is GST-free for the purposes of Subdivision 38-J of the GST Act. The principles contained in GSTR 2002/5 are relevant to this private ruling.

Subsection 38-325(1) provides that the supply of a going concern is GST-free if:

    · the supply is for consideration; and

    · the recipient is registered or required to be registered; and

    · the supplier and the recipient have agreed in writing that the supply is of a going concern.

The term 'supply of a going concern' is defined in subsection 38-325(2):

    A supply of a going concern is a supply under an arrangement under which:

    (a) the supplier supplies to the recipient all of the things that are necessary for the continued operation of an enterprise; and

    (b) the supplier carries on, or will carry on, the enterprise until the day of the supply (whether or not as a part of a larger enterprise carried on by the supplier).

The starting point is to identify the relevant enterprise that is being supplied, which in this case, is the farming enterprise operated by you, the partnership comprising Individual A and Individual B.

GSTR 2002/5 explains that the term 'supply under an arrangement' includes a supply under a single contract or supplies under multiple contracts which comprise a single arrangement. The supplier and the recipient may identify the arrangement and the supplies under the arrangement, which in aggregate may comprise the 'supply of a going concern'. The elements of paragraph 38-325(2)(a) must be satisfied from the perspective of the supplier.

Paragraph 75 of GSTR 2002/5 explains:

    1. Two elements are necessary for the continued operation of the enterprise, including where appropriate, premises, plant and equipment, stock in trade and intangible assets such as goodwill, contracts, licences and quotas; and

    2. The operating structure and process of the enterprise consisting of the commercial or economic activity relevant to the type of enterprise being conducted, for example, ongoing advertising and promotion.

You advise that with the exception of title to the properties, the farm business assets and everything that is necessary for the continued operation of the farming business will be supplied to your associate. This includes the necessary assets and the operating structure. However, in relation to a farming enterprise, premises are one of the things necessary for the continued operation of that enterprise. Consequently, the premises must also be supplied.

Paragraph 100 of GSTR 2002/5 recognises that it is not uncommon for a supplier to retain ownership of premises from which an enterprise is conducted, and to supply the business structure and possession of the premises by way of lease. Example 16 at paragraph 101 to 102 illustrates that where the lease is entered into on the day of the supply and is effective on that date, then the premises will have been 'supplied' (by way of lease) as part of the arrangement, under which the enterprise will be supplied as a going concern. The lease provides the recipient with the required control (licence) of the premises to be able to continue to operate the enterprise.

On the understanding that every attribute necessary for the continued operation of the farming enterprise (including the assets, premises by way of lease and operating structure) will be supplied, then the requirements of paragraph 38-325(2)(a) will be met.

However, to meet the statutory definition of a 'going concern the enterprise must also be carried on by the supplier until the day of the supply. In order for this requirement to be met, the enterprise must be active and operating (and not merely just being 'carried on') by the supplier.

You advised that following the distribution of the Estate assets to you, you will operate the enterprise and will not merely be on-selling the farming enterprise to your associate. Further, you will continue to operate this enterprise until the day of the supply to the family trust. Therefore, paragraph 38-325(2)(b) will also be met. It follows that the supply of the farming enterprise meets the statutory definition of a 'going concern' under subsection 38-325(2).

To determine whether the supply is GST-free, we will now consider whether the requirements of subsection 38-325(1) are met.

The supply will be made 'for consideration', the recipient (your associate) will be registered for GST with effect on and from the day of the supply and the parties will enter into a written agreement that the supply of the farming enterprise will be a supply of a going concern.

With respect to the written agreement, the supplier and the recipient must have made a mutual declaration that clearly evidences that they agree that the supply, being the supply under an arrangement of everything necessary for the continued operation of an enterprise, is a supply of a going concern. This agreement must be in place on or before the day of the supply.

In relation to the requirement in paragraph 38-325(1)(b), we note that the terms of the entity structure for your associate are still being finalised. You advise that the associate will be registered for GST on and from the day of the supply. On the understanding that the effective date of the registration of the recipient will be on or before the day of the supply then this requirement will be met.

As all of the requirements of subsection 38-325(1) and 38-325(2) will be met the supply of the farming enterprise will be a supply of a going concern that is GST-free.

Will the lease of the farm property to your associate be GST-free as part of the supply of the going-concern referred to in question 2?

For the purposes of section 38-325 of the GST Act, the relevant transaction is the supply of the farming enterprise under the 'arrangement' for that enterprise to be supplied as a going concern. As we have determined that the supply is GST-free under section 38-325, it follows that the things supplied under that arrangement would form part of that GST-free supply.

However, the lease of the farm property itself is a separate transaction and therefore the GST consequences for the ongoing lease of the farmland needs to be considered separately.

The lease of the farm property is a supply in the form of a 'grant, assignment or surrender of real property' under paragraph 9-10(2)(d) of the definition of 'supply'.

To the extent that the supply relates to the farmland the supply will be taxable as:

    o The supply will be made for consideration (the applicant advised that consideration will be provided)

    o The supply will be made in the course or furtherance of the farming enterprise that the partnership carries on

    o The supply is connected with Australia as the property is in Australia; and

    o The partnership will be registered for GST.

Further, the supply of the premises by way of the ongoing lease, of itself, is not GST-free as it is a separate transaction from the supply of the farming enterprise as a going concern and the supply of the farmland (excluding the private residence and the guest accommodation premises) is not input taxed. [i.e. The farmland portion of the property does not have the characteristics of residential premises.]

As a consequence, while the supply of the farm property under the arrangement for the supply of the farming enterprise as a going concern is GST-free, the ongoing lease of the farmland will be taxable where all the requirements of a taxable supply are met.

Will the transfer of the assets of the guest accommodation enterprise to your associate be a supply of a going concern that is GST-free, provided that the parties have an agreement stating that the supply is of a going concern?

The requirements of section 38-325 and the relevant GST principles have already been outlined in relation to the supply of the farmland are also applicable to the supply of the guest accommodation enterprise.

Applying those principles, we consider that the supply of the guest accommodation enterprise will also be GST-free for the following reasons:

· In relation to subsection 38-325(2) the supply is a supply under an arrangement under which:

    o You partnership will supply to the recipient (your associate) all of the things necessary for the continued operation of the enterprise. This will include everything that is essential for the continued operation of the enterprise. Where the lease of the premises by you to the associate is created with effect on and from the day of the supply then we accept that the 'premises' will have been supplied to the recipient.

    o You will be operating the enterprise until the day of the supply of the enterprise;

· In relation to subsection 38-325(1) the supply will be GST-free as:

    o It is a supply of a going concern

    o The recipient will be registered for GST -this registration will be effective on and from the day of the supply;

    o The parties will enter into a written agreement that the supply is of a going concern. (This agreement will be in place on or before the day of the supply).

Will the lease of the guest accommodation premises to your associate be an input taxed supply of residential premises?

As the lease of the guest accommodation property is a separate transaction from the supply of the guest accommodation enterprise, we need to determine the proper characterisation of the supply of the physical premises by way of 'lease' by you to your associate.

The lease of the guest accommodation premises is a supply in the form of a 'grant, assignment or surrender of real property' under paragraph 9-10(2)(d) of the definition of 'supply'. In determining whether the supply is taxable, it is necessary to consider the physical characteristics of the premises, in particular whether those characteristics align with the class of premises that are residential premises that are to be used predominantly for residential accommodation.

We have established that the guest accommodation premises were not built as a hotel, motel inn, hostel or boarding house and therefore do not fall within the scope of paragraph (a) of the definition of commercial residential premises. We explained that premises that are commercial residential premises will often include infrastructure or other features to support the operation of the premises in a way that provides some level of service to the guests. The guest accommodation premises do not have facilities to provide for meals to be prepared for guests, shared dining rooms, commercial laundry or such facilities to make it 'similar' to commercial residential premises.

On the basis of the available facts, we consider that the premises have the physical characteristics of residential premises to be used predominantly for residential accommodation. The fact that the operation of the guest accommodation premises is not sufficient to be 'similar' to establishments that are commercial residential premises, lends further support to the conclusion that the physical characteristics of the premises are not consistent with that of commercial residential premises.

As a consequence, the lease of the guest accommodation premises to your associate will be input taxed. This means that you will not be liable for GST on the supply of the Lonsdale Views premises to your associate. You will not be entitled to claim input tax credits for acquisitions made in relation to making this supply - the acquisitions will not be made for a creditable purpose and therefore will not be creditable acquisitions.

Further issues for you to consider

Guest accommodation enterprise- Division 135

Division 135 provides that an entity has an increasing adjustment where:

    o the entity is the recipient of a going concern, or a supply that is GST-free under section 38-480; and

    o the entity intends that some or all of the supplies made through the enterprise to which the supply relates will be supplies that are neither taxable supplies nor GST-free supplies.

Where the guest accommodation enterprise is supplied as a going concern that is GST-free, the recipient will be required to make an increasing adjustment.