| Disclaimer You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of private advice
Authorisation Number: 1051932580832
Date of advice: 14 December 2021
Ruling
Subject: GST on the sale of a rooming house
Question
Is the sale of the property at x a taxable supply under section 9-5 of the A New Tax System (Goods and Services tax) Act 1999 (GST Act)?
Answer
No, the sale is not a taxable supply under section 9-5 the GST Act.
The scheme commences on:
XX Month 20XX
Relevant facts and circumstances
X own the property located at X.
X is not registered for GST.
The property was purchased in X as a residential house with X bedrooms, X bathrooms, X toilets, a kitchen, a dining area and a living area.
After renovation the property has X bedrooms, X bathrooms and X toilets with a common kitchen and dining area.
Since the date it was renovated, the property has been rented out as a rooming house.
X has a permit to operate the premises as a rooming house and the same tenancy rules apply to all the tenants as in Residential Tenancies Amendment Act.
The tenants are required to keep their own rooms/the house clean, wash their own clothes and cooking utensils and put out the rubbish bins.
The tenants are not allowed to keep pets in the premises.
The management is located off-site and there is no on-site manager.
X are the rooming house operator and operate the rooming house with assistance from an estate agent.
X holds the Rooming House Operator's Licence and the Certificate of Registration of the rooming house.
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
A New Tax System (Goods and Services Tax) Act 1999 Subdivision 40-B
A New Tax System (Goods and Services Tax) Act 1999 Subdivision 40-C
Reasons for decision
Section 9-40 provides that you must pay GST on any taxable supply that you make.
Section 9-5 of the GST Act provides that 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 (Australia); 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.
All of the requirements in section 9-5(a)-(d) of the GST Act are satisfied. There is no provision in the GST Act under which the sale of the rooming house would be GST-free.
A supply of premises that is by way of lease, hire or licence (including renewal or extension of a lease, hire or licence) is input taxed under paragraph 40-35(1)(a) of the GST Act, if 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 controls the commercial residential premises).
To satisfy the definition of residential premises, premises must provide shelter and basic living facilities. Your property contains a kitchen, bathrooms and bedrooms. Therefore, it has the elements of shelter and basic living facilities required to be residential premises.
However, we also need to consider whether the supply of the premises is a supply by way of lease or license of accommodation in commercial residential premises as this would exclude the supply from the input taxed treatment provided by paragraph 40-35(1)(a). 'Commercial residential premises' is defined in section 195-1 of the GST Act to include a hotel, motel, inn, hostel or boarding house, or anything similar.
It is considered that your premises do not meet the description of hotel, motel or inn.
We will consider the characteristics of your premises and compare it to the features of hostels and boarding houses. In this case, there are a number of similarities between your property and the description of boarding houses and hostels. However, there is no on-site supervision nor the provision of meals.
On the balance, we consider it is not possible to characterise the premises as being a hostel/boarding house or something similar to a hostel/boarding house. Thus, it does not satisfy the definition of commercial residential premises.
Therefore, the sale of the rooming house is an input taxed supply and not a taxable supply in accordance with section 40-35 and section 9 of the GST Act respectively.