Edited version of private advice

Authorisation Number: 1051587790551

Date of advice: 27 September 2019

Ruling

Subject: Commercial accommodation

Question

Will your supply of accommodation to residents in the Premises be a supply of commercial accommodation for the purposes of section 87-15 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes. Your supply of accommodation to residents in the Premises will be a supply of commercial accommodation for the purposes of section 87-15 of the GST Act.

This ruling applies for the following period:

27 September 20XX - 27 September 20XX

Relevant facts and circumstances

You are registered for GST.

The Premises will be designed to comply with local Boarding House legislation and requirements set out in the State Environmental Planning Policy (Affordable Rental Housing) 2009 (Boarding House SEPP).

To the extent a development may not strictly comply with SEPP requirements, consent will be sought for any deviations/exceptions as required.

The reduced accommodation area produces significant costs savings, whilst also allowing the level of shared amenities to be increased. Residents in the Premises will have access to the facilities within a hostel that is to be co-located on the same site. The facilities will include:

·         co-working space

·         gym

·         pool, sauna, spa

·         small movie theatre or games room

·         bars, restaurants, cafes

·         private/corporate events spaces

·         communal laundry

·         parcel delivery storage

Residents of the Premises and the hostel will also have access to a concierge service at a staffed reception desk to attend to things such as checking in and out, managing home services, deliveries management, dry cleaning and laundry.

The Premises will be centrally managed. A manager will reside on-site.

The Premises will be fully furnished. This will allow residents to simply move in at their convenience. This will also accommodate both long and short term stays.

Residents will not be permitted to make any changes to the Premises, other than hanging a wall picture upon request.

Pets will not be permitted.

Residents will be required to enter into an Occupancy Agreement. They will not enter into a residential lease. They will also be required to comply with Boarding House Rules.

The Occupancy Fee (or other accommodation charge) will be an all-inclusive figure that will include:

·         accommodation

·         services (electricity, water, gas and internet)

·         furnishings

·         access to amenities (either onsite or via the co-located hostel)

·         room tidy/clean

Residents will also have access to additional services for a further cost. This may include:

·         additional room cleaning services

·         linen replacement

·         dry cleaning/laundry

·         meals from onsite food and beverage outlets

·         vending machines (food and beverages)

·         car parking

·         curated social activities

The Premises will be a General Boarding House and will be registered as such on the Boarding Houses Register.

The minimum stay in the Premises will be 90 days for at least 80% of the residents. It is possible some people may stay for shorter periods. However, it is more likely that shorter stays will be accommodated in the co-located hostel.

The Premises will be operated on a commercial basis and in a business-like manner. Its main purpose is to provide accommodation with other services as ancillary or optional.

You will directly own the Premises and supply the accommodation.

The Premises will be constructed and held on one real property title; or in the event that the Premises are strata titled, the Premises and related commercial areas will be owned by one entity.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 87-15

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

Reasons for decision

According to section 87-15 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), 'commercial accommodation'means the right to occupy the whole or any part of commercial residential premises, including, if it is provided as part of the right to occupy, the supply of:

(a)  cleaning and maintenance; or

(b)  electricity, gas, air-conditioning or heating; or

(c)  telephone, television, radio or any other similar thing.

'Commercial residential premises' is defined in section 195-1 of the GST Act to mean:

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

(b)  premises used to provide accommodation in connection with a school; or

(c)  a ship that is mainly let out on hire in the ordinary course of a business of letting ships out on hire; or

(d)  a ship that is mainly used for entertainment or transport in the ordinary course of a business of providing ships for entertainment or transport; or

(da) a marina at which one or more of the berths are occupied, or are to be occupied, by ships used as residences; or

(e)  a caravan park or a camping ground; or

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

'Commercial residential premises' does not include premises to the extent that that they are used to provide accommodation to students in connection with an education institution that is not a school.

The tests to be applied are whether the premises are a hotel, motel, inn, hostel or boarding house for the purpose of paragraph (a), or whether the premises are similar to these types of premises, in the sense that they a sufficient likeness or resemblance to any of these types of establishments for the purpose of paragraph (f). These tests necessarily raise questions of fact involving matters of impression and degree.

Paragraph 12 of Goods and Services Tax Ruling GSTR 2012/6 provides the common characteristics of operating hotels, motels, inns, hostels and boarding houses that are relevant, though not necessarily determinative, to characterising premises as commercial residential premises. These characteristics include:

·         Commercial intention

The premises are operated on a commercial basis or in a business-like manner even if they are operated by a non-profit body.

·         Multiple occupancy

The premises have the capacity to provide accommodation to multiple, unrelated guest or residents at once in separate rooms, or in a dormitory.

·         Holding out to the public

The premises offer accommodation to the public or a segment of the public.

·         Accommodation is the main purpose

Providing accommodation is the main purpose of the premises

·         Central management

The premises have central management to accept reservations, allocate rooms, receive payments and perform or arrange services.

·         Management offers accommodation in its own right

The entity operating the premises supplies accommodation in its own right rather than as an agent.

·         Provision of, or arrangement for, services

Management provides guests and residents with some services and facilities, or arranges for third parties to provide them.

·         Occupants have status of guests

Predominantly, the occupants are travellers who have their principal place of residence elsewhere. The occupants do not usually enjoy an exclusive right to occupy any particular part of the premises in the same way as a tenant.

On the other hand, the following features indicate that the premises are not commercial residential premises:

·         The operator and occupant agree for accommodation to be supplied for periodic term (which may be for a period of months or years at a time), such as in a residential lease;

·         the operator and occupant document the condition of the premises under a written contract before the accommodation is initially supplied and when the occupant ceases to occupy premises;

·         the operator has the right to impose a cleaning fee on the occupant when the occupant ceases to occupy the premises;

·         the occupant is permitted, subject to the terms of the lease or licence, to alter the part of the premises occupied by the occupant, such as by attaching hanging devices on a wall;

·         the occupant is permitted, subject to the terms of the lease or licence, to keep pets in the premises;

·         the occupant must separately arrange and pay for the connection of a telephone, electricity, or gas service;

·         the occupant is responsible for the cleaning and minor maintenance of the premises, such as changing light bulbs in their room;

·         the premises are unfurnished; and

·         the right to occupy the residential premises is supplied to the occupant in exchange for the occupant loaning an amount to the operator together with other fees

You submitted that the Premises would be commercial residential premises on the basis that it will be a boarding house.

Paragraphs 36-40 of GSTR 2012/6 discuss the features of a boarding house as follows.

·         A boarding house is a dwelling at which board (meals) and lodging are provided to guests or residents.

·         A boarding house provides accommodation for a commercial purpose.

·         A boarding house has the capacity to supply accommodation for multiple occupancies.

·         A boarding house may consist of a building with an additional standalone structure in which board or lodging or both are provided.

·         A boarding house may provide accommodation to occupants as the occupants' principal place of residence.

You designed the Premises to comply with the requirements set out in Boarding House SEPP. You will register the Premises in the Boarding Houses Register. Residents will be required to enter into an Occupancy Agreement and abide by the House Rules.

The Premises will have communal living spaces and shared facilities. There will be an onsite manager who will reside on the Premises.

The Premises will be furnished. Residents cannot make changes to the Premises, other than hanging pictures on the wall upon request. Pets will not be allowed.

The Premises will be operated on a commercial basis and in a business-like manner. The main purpose of the Premises is to provide accommodation to numerous residents who will be granted a right to occupy a particular part of the Premises. As the Premises will be registered in the Boarding Houses Register, it will be held out to public particularly those who are seeking affordable accommodation.

The Premises will be centrally managed. A manager will reside onsite who will provide some services to residents, or alternatively will arrange for third parties to do so.

Based on the information provided, we take the view that on balance, the Premises exhibits the features of commercial residential premises similar to a boarding house.

The Occupancy Fee payable by the tenant includes accommodation, services such as electricity, water, gas and internet, furnishings, access to amenities, and room cleaning. As such, the supply of accommodation in the Premises will be a supply of commercial accommodation.