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Edited version of your written advice
Authorisation Number: 1012747190523
Ruling
Subject: GST and the supply of accommodation
Question 1
Is the supply of accommodation by you subject to GST?
Answer
No. We consider that on balance, the physical characteristics and operation of your apartment is not consistent with the class of establishments that are commercial residential premises or premises that are similar to such establishments. Accordingly, for GST purposes, the supply of the apartment accommodation by you is a supply of residential premises and as such, the apartment satisfies the requirements of subsection 40-35(1) of the GST Act to be an input taxed supply of residential premises.
You are therefore not liable for GST on the gross rent received when the apartment is let by your agent to guests. Nor are you entitled to any GST credits on the acquisitions associated with the lease of this apartment including the fees charged to you by the management company.
Relevant facts and circumstances
You are a discretionary trust.
You are registered for GST in the Non-residential property operation industry and conduct all activities in Australia.
You purchased an apartment in an apartment complex in Australia. You purchased the apartment for residential use as stated in the contract of sale which you have provided.
The apartment is a 3 bedroom residence containing all the usual facilities of a residence such as bathrooms, kitchen and living areas.
After purchasing the property you engaged an unrelated management company to lease the apartment to travellers and visitors for short-stays on your behalf. You supplied a copy of the contract appointing the company as your real estate agent. Item 19 in the definitions section of the contract sets out that
Letting services means to act as an agent of the owner to secure letting of the Property and to collect Apartment revenue and includes:
(a) Taking bookings
(b) Agreeing on letting terms (within any limits imposed by any Owner)
(c) Collecting rents and bonds; and
(d) Taking reasonable steps to ensure compliance by Occupants with all terms of any letting;
(e) Taking reasonable steps to ensure compliance by occupants with the scheme by-laws.
You only make available the apartment and no other facilities are provided by you to occupants of the apartment.
The other apartments in the complex are each owned by different entities.
You receive a payment of rent which has been netted of against the deductions of commission, room service fees etc by the management company.
As the owner of the apartment you pay the strata levies, council rates and water rates from your own account.
The rental income from the apartment is variable depending on the market and seasonal factors. The management company has the discretion to adjust the rate based on these factors and does not guarantee a minimum level of occupancy of the apartment or any level of rental return.
Your beneficiaries use the apartment for up to 1 month every year during their holidays in the area. Your agreement with the management company (copy supplied) stipulates that you or your nominated guests may occupy the apartment for a maximum of 42 nights per year without paying letting fees. A maximum of 10 of these nights may be during peak periods.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act (1999) section 40-35
A New Tax System (Goods and Services Tax) Act (1999) section 195-1