Edited version of private advice

Authorisation Number: 1052071704291

Date of advice: 16 December 2022

Ruling

Subject: GST and residential accommodation

Question

Is the company's supply of accommodation in properties through Airbnb and booking.com a taxable supply?

Answer

No.

This ruling applies for the following period:

1 July 20XX - 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

The Company is registered for GST.

The Company is currently renting XX properties comprised of houses and units.

The properties being rented are third-party properties.

The Company sub-leases those properties through accommodation providers.

The Company pays the monthly rent to the property owners and receives income from the accommodation providers.

No on-site management is used for any of the properties.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 (GST Act) Section 9-5

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

A New Tax System (Goods and Services Tax) Act 1999 (GST Act) Section 40-35

Reasons for decision

GST is payable on a taxable supply. 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 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.

In this case, the Company is carrying on an enterprise of leasing accommodation located in Australia for consideration, it is in the course or furtherance of an enterprise being carried on, and they are registered for GST. The Company satisfies all four elements.

There is nothing that would make the supply of these accommodation fall within the GST-free provisions contained in the GST Act. However, it still needs to be determined if the supply of accommodation by the Company by way of lease is input taxed.

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).

Subsection 40-35(2) states that the supply is input taxed only to the extent the premises are to be used predominately for residential accommodation (regardless of the term of occupation).

The term 'residential premises' is defined in section 195-1 to mean land or a building that:

(a)  is occupied as a residence or for residential accommodation; or

(b)  is intended to be occupied, and is capable of being occupied, as a residence or for residential accommodation;

(regardless of the term of occupation or intended occupation) and includes a floating home.

Guidance on whether premises are considered residential premises is provided in Goods and Services Tax Ruling 2012/5 Goods and Services Tax: residential premises (GSTR 2012/5).

Paragraphs 9, 10, and 15 of GSTR 2012/5 highlight a single test that looks to the physical characteristics of the property to determine the premises suitability and capability for residential accommodation.

Paragraph 15 of GSTR 2012/5 states:

To satisfy the definition of residential premises, premises must provide shelter and basic living facilities. Premises that do not have the physical characteristics to provide these are not residential premises to be used predominantly for residential accommodation.

Further to this, paragraph 77 of GSTR 2012/5 states:

The premises may be in any number of forms, including detached buildings, semi-detached buildings, strata title apartments, single rooms or suites of rooms within larger premises. Premises that lack the features of shelter and basic living facilities are not residential premises.

In this case, the Company is leasing properties in the form of houses and apartments which satisfy the definition of residential premises as they provide shelter and basic living facilities such as bedrooms, bathrooms, kitchen, living areas, and a laundry.

Next, it is necessary to determine whether the lease of the properties would be a supply of commercial residential premises and, therefore, be excluded from being input taxed under section 40-35 of the GST Act. Supplies of commercial residential premises by way of lease may be subject to GST.

Section 195-1 of the GST Act provides the following definition of "commercial residential premises":

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

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

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

(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;

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

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

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

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

The accommodation provided by the Company is not similar to a hotel, motel, inn, hostel, or boarding house and is not considered to be 'commercial residential accommodation'.

The leasing of houses and apartments by the Company through accommodation providers are the provision of residential accommodation and consequently input taxed. The Company's supply of accommodation will not be considered to be a taxable supply.