Edited version of your private ruling

Authorisation Number: 1012441759062

Ruling

Subject: GST registration

Question 1

Are you required to be registered for GST?

Answer

No. You are not required to be registered for GST.

Relevant facts and circumstances

· You are not currently registered for GST.

· You carry on an enterprise of supplying residential accommodation.

· You offer residential accommodation through strata titled apartments, situated within large apartment complexes at various locations:

· You do not carry on any other enterprises other than providing this residential accommodation.

· You do not own the apartments.

· You have entered into lease agreements with the owners of the apartments through letting agents.

· You are responsible for sourcing occupants/guests for the apartments and enter into agreements with the guests.

· You do not enter into sub-leasing agreements with the occupants/guests

· You are liable to pay the owners of the apartments their agreed rental amount regardless of whether or not the apartments are rented.

· You provide medium to long term rental for clients requiring accommodation.

· The apartments are fully furnished with a fully equipped kitchen.

· You employ part-time staff who, work from home.

· Your staff attends the premises to provide keys to tenants and co-ordinate the fixing of any maintenance issues.

· Occupants can request a weekly cleaning service in exchange for a fee if desired.

· A compulsory departure clean is completed at the end of each rental period. The cost of the departure clean is included in the rental charge.

· Cleaning is performed by a sub-contractor.

· No other services such as restaurant, room service etc are provided.

· Tenants are responsible for their own cooking and laundry.

· Utilities such as electricity and gas are connected and incorporated in the rent paid to you by your guests.

· Guests are responsible for telephone connection if required.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999

Section 23-5

Section 40-35

Section 188-10

Section 195-1

Reasons for decision

Section 23-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that, you are required to be registered under this Act if:

(a)   you are carrying on an enterprise, and

(b)   your GST turnover meets the registration turnover threshold.

You advised that you are carrying on an enterprise of supplying residential accommodation. Therefore, you meet the requirement in paragraph 23-5(a) of the GST Act.

What we need to determine is whether your annual turnover meets the registration turnover threshold. The registration turnover threshold for an entity (other than a non-profit entity) is $75,000.

Subsection 188-10(1) of the GST Act provides that your annual turnover will meet the registration turnover threshold if:

(a) your current annual turnover is $75,000 or more, and the Commissioner is not satisfied that your projected annual turnover is below $75,000, or

(b) your projected annual turnover is $75,000 or more.

Your current annual turnover at a time during a particular month is the sum of the values of all the supplies that you have made, or are likely to make, during the 12 months ending at the end of that month.

Your projected annual turnover at a time during a particular month is the sum of the values of all the supplies that you have made, or are likely to make, during that month and the next 11 months.

When calculating your current and projected annual turnover, supplies that are input taxed are excluded from the calculation of current and projected annual turnovers.

In this case, we need to determine whether your supply of apartments for residential accommodation is a supply of residential premises which is input taxed and therefore excluded from the calculation of your current and projected annual turnover.

Paragraph 40-35(1)(a) of the GST Act states:

(1) 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:

(a) 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).

Paragraph 40-35(2)(a) of the GST Act qualifies the above stating that the supply will be input taxed only to the extent that the premises are to be used predominantly for residential accommodation (regardless of the term of occupation).

The term 'residential premises' is defined in section 195-1 of the GST Act 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;

(regardless of the term of occupation or intended occupation).

Goods and Services Tax Ruling GSTR 2012/5 Goods and services tax: residential premises (GSTR 2012/5) provides guidance in regards to premises that are considered to be residential premises.

Paragraph 9 of GSTR 2012/5 explains that 'residential premises to be used predominantly for residential accommodation (regardless of the term of occupation)' is to be interpreted as a single test that looks to the physical characteristics of the property to determine the premises' suitability and capability for residential accommodation.

To satisfy the definition of residential premises, premises must provide shelter and basic living facilities. This will usually be provided by a bedroom and bathroom.

In this case, the premises are fully furnished apartments containing a fully equipped kitchen and satisfy the definition of 'residential premises'.

The next issue we need to consider is whether the premises fall within the scope of 'commercial residential premises' or whether you are making a supply of accommodation in commercial residential premises that you own or control.

Goods and Services Tax Ruling 2012/6 'Goods and services tax: commercial residential premises' provides the Commissioner's considered view about how Subdivision 40-B, 40-C and section 9-5 apply to supplies of commercial residential premises and accommodation in commercial residential premises. The principles outlined in GSTR 2012/6 have been applied in addressing the issues raised.

'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.

The terms hotel, motel, inn, hostel and boarding house are not defined in the GST Act and take their ordinary meaning. The Macquarie Dictionary (Macquarie) 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.

In their ordinary meanings, these terms share the common attribute of providing accommodation to guests. Paragraph (f) of the definition of commercial residential premises extends the scope of the definition to premises that are 'similar' to the class of establishments described in paragraphs (a) to (e).

Premises that are 'similar' to establishments that are commercial residential premises must have sufficient characteristics in common with the class of premises described.

Paragraph 95 of GSTR 2012/6 explains that in addition to living accommodation areas, premises that are commercial residential premises include commercial infrastructure to support the commercial operation of the premises. This infrastructure may include (but is not limited to) reception areas, dining and bar areas, meeting/function areas, kitchens, laundry facilities, storage areas and car parks. This infrastructure is used to provide services to occupants.

This position is supported by the following observation made by Emmett J in the Full Federal Court decision of South Steyne Hotel Pty Ltd v. Federal Commissioner of Taxation [2009] FCAFC 155:

A hotel, motel, inn, hostel or boarding house consists of more than the rooms or apartments that are occupied by guests. It must also of necessity include common areas such as reception areas, dining areas, car parks and the like, such as were the subject of the management lot. The supply that consisted only of the rooms or apartments or accommodation units in a hotel complex is not, without those other areas, the supply of commercial residential premises…

A single supply by sale or lease of premises consisting of rooms, apartments, cottages or villas as well as commercial infrastructure, regardless of whether they are separately titled, is a supply of commercial residential premises.

In contrast, paragraph 98 of GSTR 2012/6 provides that a supply by sale or lease of strata titled rooms, apartments, cottages or villas without sufficient commercial infrastructure referred to above is an input taxed supply of residential premises to be used predominantly for residential accommodation regardless of whether the building complex, or any part of it, is being, or will be, operated as commercial residential premises.

Paragraph 201 of GSTR 2012/6 expands on the above stating in part:

A supply by sale or lease of real property consisting of part of a building cannot be characterised by reference to another supply. For example, a hotel may be strata titled so that each hotel room and the commercial infrastructure are separate strata units. Where the strata units are individually supplied under multiple sale contracts or leases, each individual supply of a strata unit must be characterised without reference to other supplies of strata units…

Paragraph 230 of GSTR 2012/6 continues stating:

A single strata titled hotel room cannot, by itself, exhibit the characteristics of commercial residential premises. A supply by way of sale or lease of a number of hotel rooms, without the commercial infrastructure to support the operation of the premises as commercial residential premises, is an input taxed supply of residential premises.

In this case you are supplying single strata titled apartments within a larger complex of apartments. You do not provide services such as restaurant, room service etc. The tenants are responsible for their own cooking and laundry however you do arrange sub-contractors to clean the apartments if and when requested for an additional fee. Given the facts provided, although you run an enterprise of supplying accommodation, it is apparent that you do not have control of, or operate the commercial infrastructure required to support an operation of commercial residential premises.

Given the above, it is considered you are making an input taxed supply of residential premises, the supply of which is neither a supply of commercial residential premises nor of accommodation in commercial residential premises that you own or control.

For these reasons, your supplies of residential premises are input taxed and excluded from the calculation of your current and projected annual turnover. You do not carry on any other enterprises. As such, your GST turnover does not meet the registration turnover threshold. For this reason, you are not required to be registered for GST.