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Edited version of your written advice
Authorisation Number: 1012885393842
Date of advice: 29 September 2015
Ruling
Subject: GST and residential accommodation
Question
Is the supply of the accommodation, advertised as a BnB, taxable?
Answer
No. It is an input taxed supply.
Relevant facts and circumstances
You are registered for GST as a partnership. You have under your registration two businesses - a mechanic, listed from a particular date, and a BnB listed from a particular date. You stated that it was when the activities for the BnB came into operation.
The BnB is a room in your family home that caters for X people for the price of $X per night. The BnB room has its own entrance and garden area of which your provide linen, breakfast and cleaning. Furthermore you advertise your BnB accommodation on the internet.
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 195-1, and
A New Tax System (Goods and Services Tax) Act 1999 Paragraph 40-35(1)(a).
Reasons for decision
Summary
The supply of accommodation, as it is not considered to be commercial residential premises, is an input tax supply of residential accommodation.
Detailed reasoning
A supply is taxable where the requirements under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) are satisfied. However, the supply is not a taxable to the extent it is GST-free or input taxed.
In your circumstances, you make a taxable supply where:
• You make a supply of accommodation for payment,
• The supply of the accommodation is made in the course of your enterprise that you carry on,
• The supply of the accommodation is connected with the indirect tax zone as it is in Australia, and
• You are registered for GST.
However, as previously mentioned a taxable supply is not a taxable to the extent it is GST-free or input taxed. There is no provision that would result in the supply of accommodation being GST-free but consideration needs to be given to whether it is an input taxed supply of residential accommodation pursuant to paragraph 40-35(1)(a) of the GST Act.
An input taxed supply is one where you do not include GST in the price and you cannot claim GST credits on purchases you make in providing the input taxed supply of accommodation.
Paragraph 40-35(1)(a) of the GST Act provides that a supply of leased or licenced residential accommodation is input taxed if it is residential premises (other than a supply of commercial residential premises). Commercial residential premises are defined under section 195-1 of the GST Act to include a hotel, motel, inn, hostel or boarding house and can include anything similar.
The ATO view on how the relevant provision applies is in an ATO Public Ruling titled, 'Goods and Services Tax Ruling - commercial residential premises' (GSTR 2012/6).
This Public Ruling considers the characteristics of operating a hotel, motel, inn, hostel or boarding house and anything similar in characterising premises as commercial residential premise. As such, the common characteristics are commercial intention, multiple occupancy, holding out to the public, accommodation being the main purpose, central management, management offers accommodation in its own right, provision of or arrangement for, services, and occupants have the status of guests.
From the information provided the residential accommodation does not display sufficient features of a hotel, motel, inn, hostel or boarding house and anything similar to be characterised as accommodation in commercial residential premises as you do not have the capacity to provide accommodation to multiple unrelated guests and neither is the premises other, than the room made available, the main purpose of the premises due to it being used as your family home.
Therefore, your activities are not of a sufficiently commercial nature when considered in the context of supplying accommodation in one room within a family home to be characterised as being similar to a hotel, motel, inn, hostel or boarding house. Your supply of accommodation in your home is an input taxed supply of residential premises to be used predominantly for residential accommodation under paragraph 40-35(1) (a) of the GST Act.