Edited version of private advice

Authorisation Number: 1052154096685

Date of advice: 9 August 2023

Ruling

Subject: GST and employee accommodation

Question 1

Can XXXX (You) claim the GST on the construction of this new accommodation facility?

Answer 1

No, you are not entitled to input tax credits on the GST included in costs relating to the construction of the new accommodation facility.

Question 2

Can You claim the GST on ongoing costs on this accommodation facility once its built and ready for use?

Answer 2

No, you are not entitled to input tax credits on the GST included in the ongoing costs relating to the maintenance of the accommodation facility once it is built and ready to use.

This ruling applies for the following period:

1 July 2023 to 30 June 2024

The scheme commenced on:

1 July 2023

Relevant facts and circumstances

•                     XXXX (You) has plans to construct new premises.

•                     The major part of this building would be commercial in nature. At the rear of the commercial premises, some accommodation will also be built. The costs of which are clearly distinguishable.

•                     This new accommodation is designed to house staff for stays of between 1-3 days when they travel to XXXX for work-related purposes.

•                     The accommodation will not provide access to cooking facilities or laundry facilities in the room. The accommodation will have a bed and ensuite. There will also be a shared kitchen area.

•                     No meals are provided to staff whilst they reside in the accommodation. They would have to make their own food arrangements just like if they were to stay in a hotel.

•                     It's envisaged that if staff need to stay at this accommodation, they will call or email a central point at the commercial premises to reserve a room.

•                     Staff are not required to pay to stay in the accommodation, therefore there is no consideration received by you for the staff to stay here.

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 11-20

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

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

A New Tax System (Goods and Services Tax) Act 1999 Division 87

Reasons for decision

Under section 11-20 of the GST Act, an entity is entitled to claim input tax credits for creditable acquisitions that it makes.

Section 11-5 of the GST Act provides that an acquisition is creditable where all of the following conditions are met:

•                     the acquisition is made solely for a creditable purpose

•                     the supply of the thing to the recipient was a taxable supply

•                     the recipient provides or is liable to provide consideration for the supply, and

•                     the recipient is registered or required to be registered for GST.

Section 11-15 of the GST Act provides that you acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise. However, you do not acquire a thing for a creditable purpose to the extent that the acquisition relates to making supplies that would be input taxed or the acquisition is of a private or domestic nature.

Under section 9-5 of the 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. The supply of employee accommodation may be considered input taxed under section 40-35 of the GST Act.

Residential accommodation

Subsection 40-35(1) of the GST Act states:

(1) 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 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 a choice made by the supplier under section 87-25.

(defined terms in section 195-1 of the GST Act).

The effect of subsection 40-35(1) of the GST Act is that if the provision of accommodation to an employee by you is a supply of residential premises, the supply will be input taxed. unless it is a supply of commercial residential premises.

Paragraphs 37 to 39 of Goods and Services Tax Ruling GSTR 2000/20: commercial residential premises (GSTR 2000/20) states:

Employee accommodation

37. If accommodation is provided by an employer, in premises controlled by them or their associate, the premises are usually residential premises. This includes premises such as houses, apartments or residential barracks or quarters provided by an employer.

38. Employee accommodation that is provided by employers in hotels, hostels or the like, that are not controlled by them or their associate, may be commercial residential premises. This will depend on the character of the premises in question. The supplier of the accommodation is responsible for any GST implications of the supply.

39. Accommodation provided by an employer on a short-term basis, to employees whose occupation carries conditions related to their terms of employment, including: the requirement to vacate the premises at the end of a period of duty or set quota of work; the sharing of accommodation as directed; and limitations on personal possessions, is not normally accommodation in residential premises, nor, by extension, is the accommodation provided in commercial residential premises. Accommodation provided in remote mining or prospecting sites on a 'fly-in-fly out' basis, similar arrangements for accommodating workers on oil rigs, or for itinerant workers on rural properties, for example, fruit pickers or shearers may be of this kind. Supplies of such accommodation are subject to the basic rules.

Paragraphs 11 and 12 of Goods and Services Tax Ruling GSTR 2012/6: commercial residential premises (GSTR 2012/6) states:

Characteristics of operating hotels, motels, inns, hostels, boarding houses or similar premises

11. 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.

12. Common characteristics of operating hotels, motels, inns, hostels and boarding houses that are relevant, though not necessarily determinative, to characterising premises as commercial residential premises are:

Commercial intention

The premises are operated on a commercial basis or in a business-like manner even if they are operated by a non-profit body.

Multiple occupancy

The premises have the capacity to provide accommodation to multiple, unrelated guests or residents at once in separate rooms, or in a dormitory.

Holding out to the public

The premises offer accommodation to the public or a segment of the public.

Accommodation is the main purpose

Providing accommodation is the main purpose of the premises.

Central management

The premises have central management to accept reservations, allocate rooms, receive payments and perform or arrange services. This can be provided through facilities on-site or off-site.

Management offers accommodation in its own right.

The entity operating the premises supplies accommodation in its own right rather than as an agent.

Provision of, or arrangement for, services

Management provides guests and residents with some services and facilities, or arranges for third parties to provide them.

Occupants have status as guests

Predominantly, the occupants are travellers who have their principal place of residence elsewhere. The occupants do not usually enjoy an exclusive right to occupy any particular part of the premises in the same way as a tenant.

For premises to be considered commercial residential premises all 8 of the above characteristics must be met to some degree. Commercial intention is not always present, for example, the accommodation is provided to an employee as part of their terms of employment. There are no services provided that could equate to those similar to a hotel or inn, and the staff has the status and privacy of a resident in their own home when staying in the accommodation provided.

The accommodation will also not be offered out to the public as a provider of accommodation. The provision of accommodation is the primary purpose of the staff quarters. You manage the staff quarters and have control of the premises as a whole. The accommodation is being supplied to the staff because of their employment by you and it will generally be part of your enterprise to supply that accommodation whether or not you require payment for supplying that accommodation. Your supply of the accommodation is therefore not a supply of commercial residential premises.It will be an input taxed supply of residential premises. You have no entitlement to claim input tax credits for any acquisitions made in constructing or in running of this premises.