Edited version of your private ruling

Authorisation Number: 1012444269272

Ruling

Subject: GST - residential accommodation

Question 1

Is the supply of accommodation by you a supply of residential premises under section 40-35 of A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes

This ruling applies for the following periods:

The scheme commences on:

Relevant facts and circumstances

· You own premises;

· You are registered for GST;

· The building consists of a specified number of separate apartments which are not strata titled;

· There are:

· a specified number of self contained apartments with single bedrooms;

· a specified number of apartments with a kitchenette, sharing a common bathroom.

· The apartments are advertised to the public for short or long term occupancy and all:

· are partly furnished;

· have utilities included.

· Potential occupants are interviewed by you and if accepted as an occupant:

· enter into a verbal agreement to occupy a specific apartment within the building;

· pay a deposit of 2 weeks rent on provision of accommodation;

· occupancy is on a week to week basis, but is typically for longer periods (some exceeding 6 months, with the majority of apartments having the same occupant for over 12 months);

· are entitled to a weeks notice prior to eviction.

· The occupant:

· has a right to;

·occupy the assigned apartment as long as they meet their enduring obligations (i.e. payment of rent);

·install personal and household effects (including furnishings and white goods e.g. washing machine);

·hang decorative items (subject to rectification of any damage on completion of occupancy).

· is responsible for:

·minor maintenance within their own apartment;

·any loss of or damage to supplied furnishings;

·cleaning own apartments and carrying out other typical domestic tasks.

· Each unit is:

·not serviced;

·provided without linen, towels and other common household consumables.

· An on site caretaker:

·cleans common areas (entry foyer and stairs) and the common bathroom;

·arranges maintenance (including maintenance of the fixtures and fittings belonging to the property owners that are within residences;

·is available during normal business hours.

· There are few common areas with no:

·common kitchen or dining room for use by occupants;

·common relaxation/gathering areas;

·reception desk or reception area.

· You allocate the accommodation;

· Meals are not provided;

· There is no central collection facility for mail with each apartment having its own letterbox located in the foyer;

· There is no general supervision of occupants or their occupancy of apartments;

· Leases and bonds are not usually required;

· There is no provision of or arrangement for services and facilities;

· There are common laundry facilities but occupants may have washing machines in their own apartment.

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 9-40

A New Tax System (Goods and Services Tax) Act 1999 Subdivision 40-B

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

Reasons for decision

Detailed reasoning.

Under section 9-40 of the GST Act, you must pay the GST payable on any taxable supply that you make.

Under section 9-5 of the GST Act,

You make a taxable supply if:

(a) you make the supply for *consideration; and

(b) the supply is made in the course or furtherance of an *enterprise that you *carry on; and

(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.

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

From the facts you have provided you meet the requirements in paragraphs (a) (b), (c) and (d). However, it remains to be determined if the supply is GST-free or input taxed.

Residential Premises

Sub-section 40-35(1) of the GST Act provides that a supply of premises by 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); or

(b) the supply is of commercial accommodation and Division 87 would apply but for a choice made by the supplier under section 87-25 of the GST Act.

'Residential premises' is defined in section 195-1 of the GST Act to mean land or a building that:

(a) is occupied as a residence or for residential accommodation; or

(b) is intended to be occupied, and is capable of being occupied, as a residence or for residential accommodation.

(regardless of the term of the occupation or intended occupation) and includes a *floating home.

Guidance on whether premises are considered residential premises is provided in Goods and Services Tax Ruling GSTR 2012/5: residential premises. (Note: All reference material referred to is available on the ATO website at www.ato.gov.au)

Paragraphs 9, 10 and 15 of GSTR 2012/5 highlight a single test that looks to the physical characteristics of the property to determine the premises suitability and capability for residential accommodation. Premises need to have the physical characteristics to provide shelter and basic living facilities to be residential premises used predominantly for residential accommodation. Given the physical characteristics of your premises it is considered that they exhibit the characteristics of 'residential premises'.

Commercial Residential Premises

However, it is necessary to further consider whether they have characteristics that align with commercial residential premises and therefore whether you are making a supply of commercial residential premises or a supply of accommodation in commercial residential premises provided to an individual. These supplies are excluded from sub-section 40-35(1) of the GST Act and are taxable supplies, where all the requirements of section 9-5 are met.

For your premises to be considered commercial residential premises, they would need to fall within the definition contained in section 195-1 of the GST Act. This includes a hotel, motel, inn, hostel or boarding house or anything similar to a hotel, motel, inn, hostel or boarding house.

Guidance on whether premises are commercial residential premises is provided in Goods and Services Tax Ruling GSTR 2012/6: commercial residential premises. The terms hotel, motel, inn, hostel, boarding house or anything similar are not further defined in the GST Act and therefore take their ordinary meaning in context.

Hotels, motels and inns

Paragraphs 13 to 25 of GSTR 2012/6 outline the common features of hotels, motels and inns. Motels generally provide roadside accommodation to motorists, while inns provide board and lodging to travellers. In addition hotels, motels and inns may share the following features:

· Provide accommodation for commercial purposes;

· Capacity to supply accommodation for multiple occupancies;

· Preparation and offering of meals to guests often in a dining room or restaurant;

· Rooms are generally furnished;

· Linen and towels are generally supplied with rooms cleaned and serviced by staff on a daily basis;

· Guests do not usually have exclusive right to occupy any particular part of the premises in the same way as a tenant;

· The presence of a reception desk or concierge facilities;

· Provision of, or arrangement for, services;

· Occupants have status as guests (usually having a principal place of residence elsewhere).

Although the accommodation you provide is for commercial purposes and available to the public at large we do not consider it to be a hotel, motel or inn for the following reasons:

· No meals are available for or provided to occupants;

· There are no common areas for dining, preparing or serving meals;

· The period of accommodation is variable but generally long term;

· Once a verbal agreement is reached the occupant has the exclusive right to occupy the assigned apartment as long as they meet their payment obligations;

· Occupants may supply own white goods and furnishings and are able to decorate the apartments as they wish (subject to restitution when they depart);

· Linen, towels and other common household items are not provided;

· Although common areas (eg stairwells and common bathroom) are cleaned by the caretaker, apartments are not serviced. Occupants are responsible for their own cleaning;

· Although a caretaker provides services over normal business hours there is no reception or reception area;

· Occupants have their own mailboxes in the foyer;

· Occupants do not generally have another place of residence.

Hostels and Boarding Houses

However, it is further necessary to consider whether the premises are a hostel or boarding house. The features of hotels and inns are relevant in considering further whether the premises are a hostel, in addition to the features outlined in paragraphs 26-35 of GSTR 2012/6 as follows:

· Accommodation is supervised usually supplying board and lodging at a comparatively low cost;

· Physical characteristics may include a:

·commercial kitchen where meals are prepared;

·communal;

·dining area;

·laundry.

· Management by an on-site manager who manages the accommodation and arranges or provides for services;

· Capacity to accommodate multiple occupancies and may be in a dormitory environment or in separate bedrooms;

· May be the occupants principal place of residence;

· Occupants may be provided meals (but this is not essential)

Features of boarding houses are outlined in GSTR 2012/6 paragraphs 36 - 40. In addition to the capacity to supply accommodation for multiple occupancies either for guests or residents, a prominent feature of a boarding house is the provision of board (meals) and lodging.

In discussing the interpretation of the term boarding house GSTR 2012/6 paragraph 184 refers to the following passage from the judgment of Hope JA in Roberts v. Waverley Municipal Council:

"In ordinary parlance a boarding-house is a place where a business is carried on of providing food and lodging to the boarders, and the food comprises meals. It is a place where the boarders pay for their board and lodging, and the concept of a place whether the boarders are not required to pay anything and do their own cooking is inconsistent with the natural meaning.

Ultimately, whether premises are commercial residential premises is a matter of overall impression involving the weighing up of all relevant factors. The accommodation provided by you:

· is not inclusive of meals;

· is not centrally managed by an on-site manager who manages the accommodation or provides services;

· has limited common areas, with no common recreational or meal preparation areas;

· is self contained in the majority.

In weighing up the characteristics of 'commercial residential premises' and on objective assessment of the characteristics of the premises being supplied by you we consider that the premises are not a hostel, boarding house or something similar.

As the premises are not a hotel, motel, inn, hostel, boarding house or anything similar they are not therefore commercial residential premises.

Accordingly, the supply by you of accommodation a supply of residential premises under paragraph 40-35(1)(a) of the GST Act and is an input taxed supply.