Edited version of private advice

Authorisation Number: 1051902280181

Date of advice: 22 September 2021

Ruling

Subject: GST and residential premises

Question 1

Are you entitled to claim input tax credit for your purchase of the Property under section 11-20 of the A New Tax System (Goods and Services Tax) GST Act (GST Act)??

Answer

No. You are not entitled to claim input tax credit for your purchase of the Property under section 11-20 of the GST Act as your purchase is not a creditable acquisition under section 11-5 of the GST Act.

Question 2

Will you be liable to pay GST on your supply of accommodation in the Property through an online platform under section 9-40 of the GST Act??

Answer

No. You will not be liable to pay GST on your supply of accommodation in the Property through an online platform under section 9-40 of the GST Act as your supply of the accommodation will be an input taxed supply under 40-35 of the GST Act.

Question 3

Will you be entitled to claim input tax credits for ongoing costs, such as cleaning costs and other general business expenses, related to the Property under section 11-20 of the GST Act?

Answer

No. You will not be entitled to claim input tax credits for ongoing costs, such as cleaning costs and other general business expenses, related to the Property under section 11-20 of the GST Act as your purchases will not be for a creditable purpose under subsection 11-15(2) of the GST Act; and therefore will not be creditable acquisitions under section 11-5 of the GST Act..

Relevant facts and circumstances

You are registered for GST.

You purchased a property located in Australia (the Property) with the intention of running a business providing accommodation.

The Property is not new residential premises. The price of the Property did not include GST.

You will provide accommodation in the Property on short-term rental through an online platform.

The Property has 4 bedrooms, 3.5 bathrooms and common living areas.

The Property is not located in a precinct of other properties held by a property manager for lease through the online platform.

The Property does not have the capacity to provide accommodation to multiple unrelated guests or residents at once in separate rooms. The bedrooms have shared bathrooms and do not lock internally from the rest of the house. One bedroom has an ensuite but does not have a working locking mechanism to keep it separate from other guests.

The guests will have access to the entire house including kitchen, bathrooms, laundry and common living areas. Guests have parking on the Property.

You will not be present at the Property during the stay of the guests. Guests will check-in themselves.

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 11-5

A New Tax System (Goods and Services Tax) Act 1999 section 11-15

A New Tax System (Goods and Services Tax) Act 1999 section 40-65

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

Question 1

An entity is entitled to the input tax credit for any creditable acquisition that it makes under section 11-20 of the GST Act.

Section 11-5 of the GST Act states:

'You make a creditable acquisition if:

(a)         you acquire anything solely or partly for a *creditable purpose; and

(b)         the supply of the thing to you is a *taxable supply; and

(c)         you provide, or are liable to provide, *consideration for the supply; and

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

(*denotes a term defined in section 195-1 of the GST Act).

According to subsection 11-15(1) of the GST Act, an entity acquires a thing for a creditable purpose to the extent that the entity acquires it in carrying on the entity's enterprise. However, the entity does not acquire the thing for a creditable purpose under subsection 11-15(2) of the GST Act to the extent that:

(a)  the acquisition relates to making supplies that would be input taxed; or

(b)  the acquisition is of a private or domestic nature.

You purchased the Property for the purpose of running a business of providing accommodation on short term rental through an online platform.

Section 40-35 of the GST Act provides that a supply of premises that is by way of lease, hire or licence (including a renewal or extension of a lease, hire or licence) is input taxed if:

(a)  the supply is of residential premises (other than a supply of commercial residential premises or a supply of accommodation in commercial residential premises provided to an individual by the entity that owns or control the commercial residential premises); or

(b)  the supply is of commercial accommodation and Division 87 (which is about long-term accommodation in commercial premises) would apply to the supply but for the choice made by the supplier under section 87-25.

Commercial residential premises

Section 195-1 of the GST Act defines 'commercial residential premises' to include a hotel, motel, inn, hostel or boarding house; or anything similar.

Goods and Services Tax Ruling GSTR 2012/6 provides guidance in determining whether particular premises are commercial residential premises by describing the features of commercial residential premises such as a hotel, motel, inn, hostel or boarding house.

Based on the information that you provided, the Property does not display the features of commercial residential premises. As such, your supply of accommodation in the Property is not a supply of accommodation in commercial residential premises.

Commercial accommodation

Section 87-15 of the GST Act defines 'commercial accommodation' as the right to occupy the whole or any part of commercial residential premises.

As the Property is not a commercial residential premises, your supply is not a supply of commercial accommodation. Paragraph 40-35(b) of the GST Act does not apply.

Therefore, your supply of accommodation in the Property is a supply of residential premises by way of lease, hire or licence that would be input taxed under paragraph 40-35(a) of the GST Act

As you purchased the Property relates to making an input taxed supply, your acquisition of the Property is not for a creditable purpose under subsection 11-15(2) of the GST Act. Paragraph 11-5(a) of the GST Act is not satisfied.

Furthermore, you advised that the price of the Property did not include GST. This indicates that the supply of the Property to you was not a taxable supply. Paragraph 11-5(b) of the GST Act is also not satisfied.

Accordingly, you are not entitled to claim an input tax credit for your purchase of the Property under section 11-20 of the GST Act.

Question 2

An entity is liable to pay GST on any taxable supply that it makes under section 9-40 of the GST Act.

Section 9-5 of the (GST Act) provides that an entity makes a taxable supply if:

(a)  the supply is made for consideration; and

(b)  the supply is made in the course or furtherance of an enterprise that the entity carries on; and

(c)   the supply is connected with Australia; and

(d)  the entity is 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.

The requirements in paragraphs 9-5(a) to 9-5(d) of the GST Act will be satisfied because:

(a)  you will supply accommodation in the Property for consideration in the form of rental fee; and

(b)  you will make the supply in the course of your enterprise of providing accommodation in the Property; and

(c)   the supply will be connected with Australia as the Property is in Australia; and

(d)  you are registered for GST.

However, as discussed in our response to Question 1, your supply of accommodation in the Property would be input taxed under paragraph 40-35(a) of the GST Act. Therefore, the supply is not a taxable supply.

Accordingly, you will not be liable to pay GST on your supply of accommodation in the Property through the online platform under section 9-40 of the GST Act.

Question 3

As discussed in the response to question 1 above, an acquisition would not be for a creditable purpose under subsection 11-15(2) of the GST Act if it relates to making input taxed supply.

The ongoing costs, such as cleaning costs and other general business expenses, related to the Property will be for your supply of accommodation in the Property which will be input taxed. As such you will not incur the ongoing costs for a creditable purpose under subsection 11-15(2) of the GST Act. Therefore, you will not be entitled to claim input tax credits for those costs under section 11-20 of the GST Act as your ongoing costs will not be creditable acquisitions under section 11-5 of the GST Act.