Edited version of private advice

Authorisation Number: 1051611124678

Date of advice: 19 November 2019

Ruling

Subject: Goods and Services Tax (GST) and the supply of accommodation

Question

Is your supply of accommodation, treated as a taxable supply of accommodation in commercial residential premises for the purposes of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No.

Relevant facts and circumstances

You are not registered for GST.

You have purchased a property, on xx.

You own one other property, your principal residence.

The Property consists of x dwellings in total.

They are advertised on online booking sites and on a website.

You intend to rent all dwellings on a short term basis

You will reside in your current home which is approximately xx kilometres from the Property.

Keys to the accommodations will be collected and returned via the on-site lock box.

Guests of the accommodation will have quiet enjoyment and exclusive possession of their accommodation.

Guests are provided with linen and towels. There is no provision of a "bed and breakfast" style of accommodation. There are no food services provided. You do not provide any welcome pack such as coffee, tea, milk etc.

There is no central dining facility/restaurant or any additional infrastructure such as a swimming pool or kids play area.

There is no daily cleaning service. Guests are expected to leave the accommodation clean and tidy. Cleaning is only provided between bookings.

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 section 40-35

A New Tax System (Goods and Services Tax) Act 1999 subsection 40-35(1)

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

Reasons for decision

In this ruling:

·        unless otherwise stated, all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)

·        all terms marked by an *asterisk are defined terms in the GST Act

·        all reference materials, published by the Australian Taxation Office (ATO), that are referred to are available on ato.gov.au

Section 9-40 provides that you must pay GST on any taxable supply that you make.

Under section 9-5, 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 the indirect tax zone, and

(d)     you are *registered, or *required to be registered

However, the supply is not a *taxable supply (emphasis added) to the extent that it is *GST-free or *input taxed (emphasis added).

The primary issue in this case is whether your supply of the short stay dwellings through leasing or letting out of the property to guests would be an input taxed supply. Input taxed means that GST is not payable on the supply and there is no entitlement to an input tax credit for anything acquired to make the supply.

Input taxed supplies and residential premises

Subsection 40-35(1) provides that a supply of premises by lease, hire or license is input taxed if the supply is of residential premises (other than a supply of commercial residential premises or accommodation in commercial residential premises provided to an individual by the entity that owns or controls the commercial residential premises).

'Residential premises' is defined in section 195-1 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 the occupation or intended occupation).

Goods and Services Tax Ruling GSTR 2012/5 Goods and services tax: residential premises (GSTR 2012/5) provides the Australian Tax Office's view of the factors to consider and the characteristics of residential premises. Paragraphs 9 and 15 of GSTR 2012/5explain that a single test looking at the physical characteristics of the property will determine the premises' suitability and capability for residential accommodation. To satisfy the definition of residential premises, the premises must provide shelter and basic living facilities.

Paragraph 7 of GSTR 2012/5 explains that the physical characteristics of the premises will determine whether the property is residential premises for the purposes of subsection 40-35(1). It states that the definition of residential premises 'refers to premises that are designed, built or modified so as to be suitable to be occupied, and capable of being occupied, as a residence or for residential accommodation. This is demonstrated through the physical characteristics of the premises'.

From the facts and information provided, your 3 short stay dwellings satisfy the definition of 'residential premises'.

Commercial residential premises

However, it is necessary to further consider whether the supply through leasing of your Property is a supply of commercial residential premises.

Commercial residential premises are defined in section 195-1 as:

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

(b) ...

...

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

(e).

...

Guidance on whether premises are characterised as residential premises or commercial residential premises is provided in Goods and Services Tax Ruling GSTR 2012/6 Goods and services tax: commercial residential premises (GSTR 2012/6).

Paragraph 10 of GSTR 2012/6 explains that the objective factors that are relevant to characterising premises under paragraph (a) or (f) of the definition of 'commercial residential premises' include the overall physical character of the premises and how the premises are operated.

Paragraph 11 of GSTR 2012/6 provides that the tests to be applied are whether the premises are a hotel, motel, inn, hostel or boarding house for the purposes of paragraph (a), or whether the premises are similar to these types of premises, in the sense that they have a sufficient likeness or resemblance to any of these types of establishments for the purposes of paragraph (f). These tests necessarily raise questions of fact involving matters of impression and degree.

Paragraph 95 to 98 of GSTR 2012/6 considers separately titled rooms, apartments, cottages or villas and explains that in order for premises to be commercial residential premises, the living accommodation areas must be accompanied by commercial infrastructure to support the commercial operation of the premises.

Paragraph 95 of GSTR 2012/6 outlines that commercial infrastructure includes (but is not limited to) reception areas, dining and bar areas, meeting/function areas, kitchens, laundry facilities, storage areas and car parks. This commercial infrastructure is used to provide services to occupants.

We are of the view that you are not making supplies of accommodation in commercial residential premises after considering:

·        all of the physical and operating characteristics of the lease of the 3 dwellings located at your Property; and

·        the lack of sufficient commercial infrastructure supplied.

You are making an input taxed supply of accommodation in residential premises when you let the 3 short stay dwellings to the occupants. Therefore, the leasing of your dwellings is not a taxable supply under section 9-5 because we consider that the leasing of the dwellings, is an input taxed supply.