Edited version of private advice

Authorisation Number: 1052170097617

Date of advice: 19 September 2023

Ruling

Subject: GST - short term accommodation

Question

Is your supply of short-term accommodation in multiple Premises through various digital platforms a taxable supply under section 9-5 of A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No

This ruling applies for the following periods:

DD MM YYYY to DD MM YYYY

The scheme commenced on:

DD MM YYYY

Relevant facts and circumstances

As a sole trader, You, operate an Airbnb Property Management Business trading as XXX. You employ XXX individuals who assist you to manage multiple properties owned by different people. The properties you manage are advertised for short-term accommodation on various platforms including your own website.

You registered for GST from DD MM YYYY and report your GST obligations on a quarterly and cash basis.

You charge GST on the management fees and commission received from your property management services.

As recommended by your tax agent, you are in the process of re-structuring your business and will shortly operate the business under a company structure. However, the restructure has not yet taken place.

As a property owner (solely or jointly) you also lease a number of residential properties through your Airbnb Property Management Business.

You provided a table listing these properties.

You resided at and renovated some of these properties prior to leasing them. You resided at XXX from MM YYYY to MM YYYY and again from MM YYYY to MM YYYY.

You also you lease a number properties from third parties and sub-lease them through your Airbnb Property Management Business.

You provided a table listing these properties.

You lived in one of these properties for a period of time.

You lease Property XXX for $X per week and Property XXX for $X per week from the property owners.

Collectively the above listed properties, that you either own or lease, will be referred to as the Premises.

The expressions 'You/you (or your)' and 'XXX' refer to the same entity and are used interchangeably throughout this ruling.

All Premises are:

•                     Self-contained and fully furnished.

•                     Managed via XXX

•                     Advertised via the following websites:

-        XXX Website

-        Booking.com

-        Stayz

-        Airbnb

•                     offered as a whole to guests; rooms are not offered/allocated separately.

•                    

The following applies to accommodation supplied in all of the above listed Premises:

Payments of tariffs/fees

•                     Guest pay for their accommodation via one of the booking platforms.

•                     A 50% deposit is processed at the time of booking with the remaining balance due one week prior to check in. Airbnb does not release funds to the owner until after the stay, however the guest pays them prior to the stay.

•                     A bond is not payable, however a credit card is provided and is managed by the third-party booking platform (eg Stayz, booking.com, Airbnb etc).

•                     Tariff charged depends on the time of the year. A minimum tariff of $X and maximum tariff of $X applies to each Property.

•                     Length of stay varies from one day to one month depending on the individual booking. A minimum stay of one night applies.

•                     Tariffs are determined by XXX in consultation with property owners (You).

•                     Funds are released by XXX the following month directly to owners after costs and fees are deducted.

•                     GST is not shown on invoices provided to guests with the exception of invoices issued to guest who book their stay at XXX via Booking.com. You advise this anomaly is due to a setting on the Booking.com platform that was selected when the properties were originally setup. The amounts payable are otherwise shown on the invoices as an inclusive amount and does not list any GST components.

Access and use of the Premises

•                     There is no common reception area, guests access the Premises via a key which is placed in a key box located at the properties. Check in is after 2:00 pm and check out is prior to 10:00am.

•                     Any early check in or late check out requests must be approved by XXX prior to arrival or departure. A fee for early check in or late check outs will be charged to the card provided at the time of booking

•                     Guests have full use of the houses/apartment and linen.

•                     Premises are expected to be left clean and in the same physical state as when the properties were rented to the guest.

•                     Cleaning of the Premises occurs at the end of each stay.

•                     Cleaning and maintenance of the Premises is organised by XXX XXX engage and remunerate third parties to undertake cleaning and maintenance.

•                     Guests are charged for cleaning and linen as part of the rental fee.

•                     Additional cleaning during the stay is not usually offered to guests, however if agreed to by XXX, an additional fee is charged.

•                     Room service is not provided.

•                     There is no common dining area for guests (other than the kitchen facilities within each house/apartment).

Loss/Property damage

•                     Upon booking with XXX, the guest is acknowledging and accepting that any extra cleaning, breakages, loss or damages to the Premises or its surrounds will be deducted from the card provided at time of booking. Repairs and maintenance will be completed within business hours Monday - Friday, unless deemed an emergency.

•                     If the guest misplaces the key to access the Premises or locks themselves out after business hours or on a weekend, the guest will be liable to pay for replacement of the key as well as liable to pay for the callout.

Complaints

•                     The guest must notify XXX within 24 hours of any complaint or problem with the Premises and allow the team a reasonable amount of time to rectify the problem or find alternative accommodation if the problem is unable to be resolved in a timely manner.

Cancellations

•                     The guest can cancel free of charge 24 hours prior to check in, a full refund will be issued. The guest will not be eligible for a refund if cancelled within the 24 hours prior to check in.

•                     Forfeited deposits, where not refunded to the guest, are paid to the property owners.

You pay commission to the various accommodation platforms as follows:

-        XXX rate

-        Booking.com rate

-        Stayz rate

-        Airbnb rate

GST/BAS reporting

Whilst invoices issued to guests via XXX do not specify that GST is included in the charges (with the exception of invoices issued to guests, staying at specific properties, who book via Booking.com as mentioned above) you have remitted GST to the ATO in relation to all income received from leasing the above listed Premises. Additionally, where applicable, you have claimed input tax credits associated with costs incurred in providing accommodation/leasing of the above listed Premises.

Assumption

You are carrying on an enterprise in supplying residential accommodation from the Premises pursuant to paragraph 9-20(1)(c) of the GST Act.

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 9-20

A New Tax System (Goods and Services Tax) Act 1999 section 9-40

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

Reasons for decision

In this ruling,

•                     unless otherwise stated, all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)

•                     all legislative terms of the GST Act marked with an asterisk are defined in section 195-1 of the GST Act.

•                     all reference materials, published by the Australian Taxation Office (ATO), that are referred to are available on the ATO website ato.gov.au

Question 1

Is your supply of short-term accommodation in multiple Premises through various digital platforms a taxable supply under section 9-5 of A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Detailed reasoning

Section 9-40 provides that you are liable for GST on any taxable supplies that you make.

You make a taxable supply where you satisfy the requirements of section 9-5, which provides:

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.

Division 38 and 40 provide for certain supplies to be GST-free and input taxed respectively.

We consider Division 38 has no application to the supply of your Premises.

The issue in this case is whether your supply of the Premises is input taxed under division 40.

Input taxed means that GST is not payable on the supply and there is no entitlement to an input tax credit for anything acquired to make the supply.

Division 40 provides for input taxed supplies and section 40-35 (which deals with residential rent) relevantly states as follows:

(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 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); or

(b)          ...

(1A) ...

(2)          However:

(a)          The supply is input taxed only to the extent that the premises are to be used predominantly for residential

accommodation (regardless of the term of occupation); and

(b)          ...

It is therefore necessary to determine whether or not you are supplying residential premises, and if so, whether you are supplying commercial residential premises or accommodation in commercial residential premises, to an individual where you either own or control the commercial residential premises.

If you are supplying residential premises to be used predominantly for residential accommodation, which are not commercial residential premises, then your supplies will be input taxed. However, a supply by way of lease, hire or licence of commercial residential premises would generally be a taxable supply.

For completeness, it is noted that you are not supplying long-term accommodation as your guests only stay for short-term stays.

Residential premises

Section 195-1 states that 'residential premises' means 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 the occupation or intended occupation) and includes a floating home.

Goods and Services Tax Ruling 2012/5 Goods and services tax: residential premises (GSTR 2012/5), relevantly explains what is meant by 'residential premises' in the following paragraphs:

6. Premises, comprising land or a building, are residential premises under paragraph (a) of the definition of residential premises in section 195-1 where the premises are occupied as a residence or for residential accommodation, regardless of the term of occupation. The actual use of the premises as a residence or for residential accommodation is relevant to satisfying this limb of the definition.

7. Premises, comprising land or a building, are also residential premises under paragraph (b) of the definition of residential premises if the premises are intended to be occupied, and are capable of being occupied, as a residence or for residential accommodation, regardless of the term of the intended occupation. This limb of the definition refers to premises that are designed, built or modified so as to be suitable to be occupied, and capable of being occupied, as a residence or for residential accommodation. This is demonstrated through the physical characteristics of the premises.

....

Living accommodation provided by shelter and basic living facilities

14. 'Residential premises' are not limited to premises suited to extended or permanent occupation. Residential premises provide 'living accommodation', which does not require any degree of permanence. It includes lodging, sleeping or overnight accommodation.

15. 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, paragraph 9 of GSTR 2012/5 provides that the requirement in section 40-35 that premises be 'residential premises to be used predominantly for residential accommodation (regardless of the term of occupation)' is to be interpreted as a single test that looks to the physical characteristics of the property to determine the premises' suitability and capability for residential accommodation.

Commercial residential premises

Section 195-1 also contains the definition of 'commercial residential premises'. That term is relevantly defined to mean a hotel, motel, inn, hostel or boarding house (in paragraph (a) of the definition), or anything similar to a hotel, motel, inn, hostel or boarding house (in paragraph (f) of the definition).

While paragraph (f) of the definition of commercial residential premises extends the scope of the definition, its operation is limited to premises that have some or all of the characteristics of both residential premises and one of the classes of premises listed in paragraphs (a) to (e) of the definition (refer to paragraph 143 of Goods and Services Tax Ruling 2012/6 Goods and services tax: commercial residential premises (GSTR 2012/6)).

The ATO's view on the meaning of commercial residential premises is set out in GSTR 2012/6.

Paragraphs 9 and 140 of GSTR 2012/6 relevantly provide that the terms in paragraph (a) of the definition of commercial residential premises are not defined within the GST Act and therefore take their ordinary meanings in context. The ordinary meanings of these terms can be found in paragraph 141 of GSTR 2012/6, which provides as follows:

141. The following meanings sourced from the Macquarie Dictionary 5th Edition (Macquarie), the Oxford English Dictionary 2nd and 3rd editions (OED) and the Shorter Oxford English Dictionary 5th Edition (SOED) are relevant in interpreting paragraph (a) of the definition:

Hotel

•                     a building in which accommodation and food, and alcoholic drinks are available.

•                     building or establishment where travellers or tourists are provided with overnight accommodation, meals and other services.

•                     an establishment, esp. of a comfortable or luxurious kind, where paying visitors are provided with accommodation, meals and other services.

Motel

•                     a roadside hotel which provides accommodation for travellers in self-contained, serviced units, with parking for their vehicles.

•                     a hotel catering primarily for motorists; spec. on comprising self-contained accommodation with adjacent parking space.

Inn

•                     a small hotel that provides lodging, food etc., for travellers and others.

•                     a public house providing accommodation, refreshments, etc., for payment, esp. for travellers.

•                     now also, a public house serving alcoholic liquor for consumption on the premises, whether providing accommodation or not.

Hostel

•                     a supervised place of accommodation, usually supplying board and lodging provided at a comparatively low cost, as one for students, nurses, etc.

•                     a public house of lodging and entertainment for strangers and travellers; an inn, a hotel.

•                     a house of residence for students at a university or on a course, esp. at a non-residential college, or for some other special class of people.

Boarding house

•                     a dwelling in which lodging is provided to paying residents who share common facilities such as a kitchen, laundry, living room, etc.

•                     a dwelling, usually a private house, in which board and lodging are provided for payment.

•                     a house offering board and lodging for paying guests.

In their ordinary meanings, these terms share the common attribute of providing accommodation to guests. Paragraph (f) of the definition of commercial residential premises extends the scope of the definition to premises that are 'similar' to the class of establishments described in paragraphs (a) to (e).

Premises that are 'similar' to establishments that are commercial residential premises must have sufficient characteristics in common with the class of premises described above.

Paragraphs 10 and 11 of GSTR 2012/6 provide that the tests to be applied in determining whether premises fall within either paragraph (a) or (f) of the definition of 'commercial residential premises' necessarily raise questions of fact involving matters of impression and degree which include consideration of the overall physical character of the premises together with how the premises are operated.

Paragraph 12 of GSTR 2012/6 lists the following 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:

•                     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 the status of 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.

Paragraphs 13 to 24 of GSTR 2012/6 discuss the features of hotels, motels and inns. Some of the comments made in these paragraphs include the following:

Features of hotels, motels and inns

13. A motel is a particular type of hotel that primarily caters to the needs of motorists seeking roadside accommodation. An inn is a small hotel at which board (meals) and lodging are provided to travellers. Subject to those qualifications, the following features of hotels are equally relevant to motels and inns.

14. Hotels provide accommodation for a commercial purpose. Non-profit entities can also operate commercial residential premises. For example, various non-profit organisations operate hotels in a business-like manner.

15. Hotels have the capacity to supply accommodation for multiple occupancies.

16. Hotels usually offer meals to guests and they usually have a kitchen where meals are prepared for guests. The premises usually include a restaurant or dining room for guests. A motel does not necessarily have a dining room, but guests of the motel may still be provided meals.

17. The guest rooms in a hotel are invariably furnished, and always include a bed, and some living area, and usually an adjoining bathroom. In some cases, hotel rooms may also have a kitchenette for self-catering.

18. Linen and towels are usually supplied. The rooms are usually cleaned and serviced by staff on a daily basis, with the costs of these services being included in the tariff.

19. Predominantly, the guests of hotels are travellers who ordinarily have their principal place of residence elsewhere, and who need or desire accommodation while away for business or pleasure. However, this feature may not be evident in hotels, sometimes referred to as residential or private hotels, that provide accommodation to long-term residents for whom the premises are a permanent place of residence.

20. Guests of hotels do not usually enjoy an exclusive right to occupy any particular part of the premises in the same way as a tenant to whom a house or apartment is let. Nor does a guest of a hotel usually let a room for a term. The guest is usually charged at a daily rate multiplied by the number of days of occupancy. However, it is not essential that all guests in a hotel stay for a short period. This feature may not be evident in hotels that provide accommodation to long-term residents.

21. Hotels usually have a reception desk to handle the requirements of both management and guests, particularly when guests check in or check out of the establishment. Hotels may also offer concierge services either at the reception desk or at a separate concierge's desk.

22. Hotels do not normally provide shared accommodation to guests in the sense of having a number of unrelated guests sharing a kitchen and living facilities.

23. A hotel is centrally managed by the operator, typically having at least one person present, or offsite but readily accessible, to manage the accommodation and arrange or provide services.

24. Accommodation in a hotel is supplied by the operator of the hotel in its own right and not in the capacity of agent for a third party. The arrangement between the parties will reveal whether there is an agent-principal relationship.

The features of hostels and boarding houses are discussed in paragraphs 26 to 35 and 36 to 40 of GSTR 2012/6 respectively.

Essentially, the term 'hostel' includes premises that can be described as a hostel, a hotel or inn. The features of hotels and inns identified earlier are also relevant to hostels. Hostels also include supervised places of accommodation usually supplying board and lodging at a comparatively low cost. Hostel accommodation may be provided either in a dormitory environment or in separate bedrooms.

Physical characteristics of hostels may include a commercial kitchen where meals are prepared, a communal area suitable for a dining area for occupants, and a communal laundry; however, the provision of meals is not an essential feature of a hostel. The feature that a hostel, or premises similar to a hostel, be a supervised place of accommodation can be evident where occupants can raise queries and concerns pertaining to the management of the premises with an on-site manager.

A 'boarding house' is a dwelling at which board and lodging are provided to guests or residents. While the term indicates that the premises ordinarily consist of a single dwelling, premises are not precluded from being a boarding house where the premises consists of a building with an additional stand-alone structure in which board (meals), or lodging, or both, is provided.

Paragraph 41 of GSTR 2012/6 provides that ultimately, whether premises are commercial residential premises, is a matter of overall impression involving the weighing up of all relevant factors.

A hotel, motel or inn is a building or establishment from which accommodation and other services or facilities are supplied. Broadly, accommodation falling into this category would have multiple occupancies such as a block of apartments, central management of the properties, commercial infrastructure such as reception area and provision of services to the guests beyond the accommodation such as breakfast or room servicing.

Paragraph 25 of GSTR 2012/6 states that when determining whether premises are, or are similar to, a hotel, motel or inn, it is necessary to consider the premises in its entirety. It is not sufficient to only consider the features of part of the premises, such as an individual room, in which accommodation is provided.

This position is supported by the following observation made by Emmett J in the Full Federal Court decision of South Steyne Hotel Pty Ltd v. Federal Commissioner of Taxation FCAFC 155:

A hotel, motel, inn, hostel or boarding house consists of more than the rooms or apartments that are occupied by guests. It must also of necessity include common areas such as reception areas, dining areas, car parks and the like, such as were the subject of the management lot. The supply that consisted only of the rooms or apartments or accommodation units in a hotel complex is not, without those other areas, the supply of commercial residential premises.

Paragraphs 95, 96 and 98 of GSTR 2012/6, which discuss separately titled rooms, apartments, cottages or villas, relevantly provide as follows:

Separately titled rooms, apartments, cottages or villas

95. In addition to living accommodation areas, premises that are commercial residential premises include commercial infrastructure to support the commercial operation of the premises. This infrastructure may include (but is not limited to) reception areas, dining and bar areas, meeting/function areas, kitchens, laundry facilities, storage areas and car parks. This infrastructure is used to provide services to occupants. Premises described in paragraph (a) and similar premises under paragraph (f) of the definition contain some or all of these areas to some degree.

96. Separately titled rooms, apartments, or adjacent cottages or villas located on adjoining or abutting land can be combined with sufficient commercial infrastructure (as discussed in paragraph 95 of this Ruling) so that, as a whole, it can be operated similarly to a hotel, motel, inn, or hostel. Supplies of accommodation in premises operated in this way are supplies of accommodation in commercial residential premises.

98. A supply by sale or lease of real property consisting of part of a building cannot be characterised by reference to another supply. For example, a hotel may be strata titled so that each hotel room and the commercial infrastructure are separate strata units. Where the strata units are individually supplied under multiple sale contracts or leases, each individual supply of a strata unit must be characterised without reference to other supplies of strata units. A supply by sale or lease of strata titled rooms, apartments, cottages or villas without sufficient commercial infrastructure referred to at paragraph 95 of this Ruling is an input taxed supply of residential premises to be used predominantly for residential accommodation regardless of whether the building complex, or any part of it, is being, or will be, operated as commercial residential premises. ...

Regarding separately titled rooms, apartments, cottages or villas, the above paragraphs emphasize that in addition to living accommodation areas, premises that are commercial residential premises include commercial infrastructure to support the commercial operation of the premises. Such infrastructure is used to provide services to the occupants (guests) and may include (but is not limited to) reception areas, dining and bar areas, meeting/function areas, kitchens, laundry facilities, storage areas and car parks.

An owner of a single apartment or even two apartments in a building complex or multiple houses located on the same street will not be able to supply accommodation in commercial residential premises if it does not also control and supply the commercial infrastructure.

Where residential accommodation is rented without sufficient commercial infrastructure, such supplies would be input taxed supplies of residential premises to be used predominantly for residential accommodation rather than taxable supplies of commercial residential premises.

Application to this case

Based on information supplied, your Premises, consisting of multiple homes or apartments, satisfy the definition of residential premises as all provide shelter and basic living facilities: including a bathroom, toilet, laundry, bedroom/s, living area and kitchen.

It remains to be determined whether your Premises also meet the definition of commercial residential premises.

The following physical characteristics and manner in which your Premises are operated have the following in common with hotels, motels, inns, hostels and boarding houses:

•                     The Premises are operated in a commercial/business-like manner with the intention of making a profit

•                     The accommodation is advertised to the general public

•                     Occupants have the status of guests - that is travellers who have their principal place of residence elsewhere

•                     The Premises are centrally managed by XXX - an Airbnb Property Management Business that you operate as a sole trader.

•                     Your Premises are fully furnished, and management provides some services to guests such as linen and cleaning on departure of guest. These services are included in the tariff.

However, the accommodation supplied in your Premises do not have the following characteristics in common with hotels, motels, inns, hostels and boarding houses:

•                     There is no clear evidence of sufficient commercial infrastructure which is usually found in commercial residential premises such as reception areas, commercial kitchen, communal dining and laundry, bar/restaurant areas, meeting/function areas, gym/pool/spas to support its commercial operation and provide services to guests.

•                     You do not provide room service, food, alcoholic drinks and other services. You only provide accommodation.

•                     You don't provide daily cleaning services. Guests are expected to leave the premises clean and in the same physical state as when the property was rented. Cleaning is only provided on departure of guests.

•                     Whilst you supply accommodation in multiple premises, each premise itself is not set up/capable of providing accommodation to multiple, unrelated guests at once in separate rooms.

•                     You do not provide a supervised place of accommodation and/or board and lodging.

As stated above, determining whether premises are commercial residential premises is a matter of overall impression and degree involving weighing up all relevant factors.

Taking all of the above into consideration, we have concluded that the accommodation that you provide when renting the Premises is not the supply of commercial residential premises. Such supplies are thus input taxed supplies of residential premises and not taxable supplies.

Conclusion

Your supply of accommodation in the above listed Premises are input taxed supplies of residential premises pursuant to subsection 40-35(1). Consequently, your supply of short-term accommodation, in the above listed Premises through the various digital platforms, is not a taxable supply under section 9-5 of the GST Act. You are not required to pay GST on your supply of accommodation, and you are not entitled to an input tax credit for anything acquired or imported to make the supply of accommodation.