Edited version of private advice

Authorisation Number: 1052205206580

Date of advice: 19 December 2023

Ruling

Subject: GST - residential premises

Question 1

Is your supply of <address> a taxable supply pursuant to section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999?

Answer

No.

Question 2

If your supply is not a taxable supply, are you entitled to a refund from the Commissioner?

Answer

No.

This ruling applies for the following period(s)

<date> - <date>

The scheme commences on

<date>

Relevant facts and circumstances

You own an apartment known as <address> (the Unit).

You have owned the Unit since approximately <date>.

The Unit is a residential unit containing bedrooms, kitchen, dining, bathroom and other living facilities.

The Unit is situated in complex currently known as <name> (ABC) containing <number> similar type units.

The day-to-day operations of ABC has been managed or operated by different managers since you acquired the Unit.

When you acquired the Unit, you entered into a 'letting agreement' with the manager at the time. You are unable to provide a copy of the letting agreement.

Other unit owners within ABC have entered similar agreements.

The manager provided you with an annual statement/tax invoice containing details of income and expenses for the financial year.

Relevant legislative provisions

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

Section 9-5

Section 9-40

Section 40-35

Subsection 40-35(2)(a)

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

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

Section 9-5 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 for GST.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

The primary issue in this case is whether your supply of the Unit is an input taxed supply.

Subsection 40-35(1) provides that a supply of residential premises by way of lease, hire or licence (other than a supply of commercial residential premises or a supply of accommodation in commercial residential premises provided to an individual by an entity that owns or controls the commercial residential premises) is input taxed. Paragraph 40-35(2)(a) further clarifies that the supply will only be input taxed to the extent the premises are to be used predominately for residential accommodation (regardless of the term of occupation).

The definition of residential premises in section 195-1 refers to land or a building that is occupied as a residence, or for residential accommodation, or is intended and capable of being occupied as a residence or for residential accommodation (regardless of the term of occupation).

Goods and Services Tax Ruling GSTR 2012/5 Goods and services tax: residential premises provides the ATO view of the characteristics of residential premises (GSTR 2012/5).

Paragraph 9 of GSTR 2012/5 explains that the requirement that the residential premises are to be used predominately for residential accommodation in section 40-35 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. Paragraph 15 of GSTR 2012/5 continues by stating that to satisfy the definition of residential premises, premises must provide shelter and basic living facilities.

In this case the Unit will satisfy the definition of 'residential premises' as the premises provide shelter and basic living facilities.

The next issue to consider is whether your supply of the Unit falls within the exclusions of subsection 40-35(1). That is, whether your supply of the Unit is either a supply of commercial residential premises or a supply of accommodation in commercial residential premises that you own or control.

Relevant discussions in regard to commercial residential premises are contained in Goods and Services Tax Ruling GSTR 2012/6; Goods and services tax: commercial residential premises (GSTR 2012/6).

Commercial residential premises

The term 'commercial residential premises' is defined for GST purposes and includes a hotel, motel, inn, hostel or boarding house. The term also includes any premises that are 'similar' to these types of premises.

One of the fundamental characteristics of commercial residential premises is that the premises have the capacity to supply accommodation for multiple occupancies. Paragraphs 156 to 158 of GSTR 2012/6 are relevant.

In summary, the terms hotel, motel, inn, hostel or boarding house are terms that are not used where only one apartment, room or other space is provided[1] nor are they used, as a matter of ordinary English, where a single apartment, room or other space is supplied[2].

Given the above, we do not consider your supply of the Unit to be a supply of 'commercial residential premises'.

Accommodation in commercial residential premises that you own or control

In this case, we do not have sufficient information to determine whether the ABC complex as a whole falls within the definition of 'commercial residential premises' as defined for GST purposes. That is, whether ABC, as a whole, is a hotel, motel, inn, hostel, boarding house or anything similar, with similar characteristics to these classes of establishments.

Regardless of whether the ABC complex could be considered 'commercial residential premises' you are neither the owner of ABC, nor would we consider that as an owner of a single unit (in a complex containing <number> units) you would 'control' the complex.

Therefore, we also consider that you are not making a supply of accommodation in commercial residential premises that you own or control.

Conclusion

Your supply of the Unit is a supply of residential premises to be used predominately for residential accommodation. Furthermore, your supply is neither:

•         a supply of commercial residential premises; nor

•         a supply of accommodation in commercial residential premises that you own or control

Therefore, your supply of the Unit is an input taxed supply. Your supply is not a taxable supply as defined in section 9-5 and GST is not applicable to your supply.

Other relevant comments

Paragraph 229 of GSTR 2012/6 states:

229. Strata titled hotel rooms are designed to provide residential accommodation as they provide shelter and basic living facilities. They are, therefore, residential premises, but may form part of commercial residential premises.

Paragraph 233 of GSTR 2012/6 states:

233. A common arrangement for on-site agents or managers is for an entity to purchase the management rights from the developer and then enter into individual agreements with room or unit owners who want to let their properties. An agency relationship exists for the supply of accommodation in premises where the rights conferred under these arrangements are not sufficient to enable the on-site agent to let the rooms as principal in its own right. Under these arrangements, the agent may supply the accommodation in the premises on the owner's behalf.

In this instance we have insufficient information (such as the relevant letting agreement) for us to comment on the entirety of the arrangement, including whether in providing the accommodation in the Unit, the accommodation is being provided by the operator:

•         on your behalf in the capacity as your agent; or

•         in the capacity as a principal in its own right

Paragraphs 234 to 237 of GSTR 2012/6 discuss these two alternatives. Whilst paragraph 236 of GSTR 2012/6 refers to a 'lease' being supplied from an owner to an operator, the principle will also apply where, in the absence of a formal lease, the terms of an agreement (letting agreement) between the owner and the operator confer sufficient rights in favour of the operator that it is considered the operator is supplying the accommodation to a guest in its own right.

In either case, your supply of the Unit will be input taxed and GST will not be applicable whether your supply is made to a guest or to the operator (and the operator on-supplies to the guest).

Where an operator is considered to make the supply to a guest in its own right, and the operator is considered to own or control the commercial residential premises (typically through authority given in agreements between the operator and the owners corporation of the complex), the supply from the operator to the guest may be a taxable supply with the operator liable for GST.

Example 12 at paragraphs 82 to 85 of GSTR 2012/6 illustrates the scenario in which a supply of a single apartment is made to a guest by the apartment owner through a manager acting as an agent of the owner.

Alternatively, Example 16 at paragraphs 102 to 107 illustrate the scenario whereby an operator has leased units from the owner of the units and subsequently on-supplies those units to a guest in its own right and not as an agent of the unit owner.

Question 2

As discussed above, your supply of the Unit is not a taxable supply.

The Commissioner can only give refunds of GST where the relevant legislation provides for refunds to be paid. Any refund in relation to an overpayment of GST can only be made to the GST registered entity that paid the relevant GST to the Commissioner and only in certain circumstances.

Our records show you are not registered for GST, have not lodged business activity statements, the Commissioner has not assessed you to any GST net amounts and you have not paid any GST to the Commissioner. Therefore, there is no provision in the law that would allow the Commissioner to refund you amounts related to GST.

Other relevant comments

Whether you have any claim to a refund from your current or former property managers is a contractual matter between you and those property managers. The Commissioner cannot provide advice on this subject.

[1] South Steyne Hotel Pty Ltd v. Federal Commissioner of Taxation [2009] FCA 13.

[2] South Steyne Hotel Pty Ltd v. Federal Commissioner of Taxation [2009] FCAFC 155.