Edited version of private advice

Authorisation Number: 1051898826019

Date of advice: 14 September 2021

Ruling

Subject: GST and holiday rental accommodation

Question 1

Are you liable for GST on the income received from holiday rental accommodation?

Answer

No.

Question 2

Can you lawfully claim a refund of collected GST on income from your previous letting agent?

Answer

This is not a question that the Commissioner of Taxation can answer.

Relevant facts and circumstances

You privately own a holiday rental unit.

You had been charged GST on holiday rental income from the time of purchase, until you left the letting agency, by the resort manager and letting agent for the apartments.

The total of 'GST on Accommodation' debited as an expense.

You engaged a new letting Agency who do not deduct GST on holiday rental income.

You have sought the advice of both our accountant and the ATO previously on this matter. Both recommended we seek a Private Ruling.

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 40-35

Reasons for decision

Question 1

Under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (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 the indirect tax zone, 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.

Subsection 40-35(1) of the GST Act 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).

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.

Relevant to your circumstances is Example 12:

Example 12 - individual holiday apartments

82. Gus owns an apartment in a block of strata titled holiday apartments. Gus's apartment is let out for short-term stays during the year through an on-site manager (who acts as Gus's agent). The on-site manager, who acts as agent in respect to several apartments, provides keys to guests, and cleans the rooms between stays, refreshing items such as linen, towels and the tea and coffee making facilities. The body corporate maintains common areas but does not otherwise involve itself with occupants.

83. The premises are being operated so as to provide accommodation on a commercial basis to travellers (guests) who are temporarily away from their usual homes. The premises are managed by the on-site manager who also provides some services to guests. The manager does not supply the accommodation in their own right, but as agent for Gus.

84. While the accommodation provided through Gus's apartment does display some characteristics of commercial residential premises, the supply of the accommodation through the single apartment is not sufficiently similar to a hotel, motel, inn, hostel or boarding house to be characterised as accommodation provided in commercial residential premises. The fact that the manager acts as agent in respect to several apartments in the block and offers accommodation in that capacity to several parties at once is not sufficient to characterise the supply Gus makes to the guests through the manager as accommodation provided in commercial residential premises.

85. Gus's supply of his apartment by lease, hire or licence is an input taxed supply of residential premises to be used predominantly for residential accommodation under paragraph 40-35(1)(a).

Therefore, your supply is an input taxed supply of residential premises.

Question 2

In a standard scenario, the letting agent would be paid a fee for the services they perform and you would receive the net rent. If you had been making a taxable supply, you would have been the entity liable for the GST on that supply. Therefore, you would have been responsible for reporting those supplies on an activity statement.

The Commissioner cannot provide legal advice to you in relation to pursuing the amounts withheld by your former letting agent. You will need to undertake that action yourself.