Edited version of private advice

Authorisation Number: 1052246439714

Date of advice: 2 May 2024

Ruling

Subject: GST and residential premises

Question 1

Will the supply by you of the dwellings by way of lease to a specialist disability provider (SDA), be a taxable supply under section 9-5 A New Tax System (Goods and Services) Act 1999 (GST Act)?

Answer

No. The supply of the units and the house at both locations will be an input taxed supply of residential premises.

Question 2

Will the acquisition of the goods and services by you for the building of the dwellings be a creditable acquisition for which you are entitled to claim an input tax credit?

Answer

No.

This ruling applies for the following period(s)

1 December 2023 - 30 December 2027

The scheme commences on

2 May 2024

Relevant facts and circumstances

You are not registered for GST.

You are not a registered National Disability Insurance Scheme (NDIS) provider.

You are building NDIS Specialist Disability Accommodation (SDA) dwellings on two different properties for the provision of SDA to residents. These dwellings have been designed to be provided to be leased to an SDA provider.

You have provided the plans for the properties as part of your private ruling application. Construction on the dwellings has commenced. The developments are in two locations.

The construction of the dwellings on both properties is with the express purpose of providing housing that will be leased to a specialist disability accommodation (SDA) provider who will then sub-lease the property to a NDIS participant.

The properties are described below:

The units property is a x unit complex, all units contain x bedrooms, x bathrooms, and each has a laundry, kitchen, living and dining area.

The house property is a house with x bedrooms, x bathrooms, a powder room, a laundry, kitchen, x living areas and a dining area (one of the living areas can be converted to an additional bedroom if required.

The properties have been constructed with the intent of providing high physical support, with live in carers providing 1 on 1 support. Also, a property manager who will visit to attend to property maintenance but will not live onsite.

Upon completion of the dwellings, you will enter into a lease with an entity, an SDA provider, who will then lease the premises to a NDIS participant.

You have provided a letter of interest from an entity which includes the following information:

•         The standard length of agreement is xx years

•         Setup fee

•         Placement fees

•         Management fees

•         You will not have the ability to terminate leases or change SDA providers whilst tenants are occupying the property.

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 9-30

A New Tax System (Goods and Services Tax) Act 1999 section 11-5

A New Tax System (Goods and Services Tax) Act 1999 section 11-15

A New Tax System (Goods and Services Tax) Act 1999 section 11-20

A New Tax System (Goods and Services Tax) Act 1999 section 38-38

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

Reasons for decision

Issue 1

Question 1

Section 9-5 of the GST Act provides that;

You make a taxable supply if:

•         you make the supply for consideration; and

•         the supply is made in the course or furtherance of an enterprise that you carry on; and

•         the supply is connected with the indirect tax zone; and

•         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.

Section 40-35 of the GST Act relates to residential rent:

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 taxedif:

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)    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.

(1A) A supply of a berth at a marina that is by way of lease, hire or licence (including a renewal or extension of a lease, hire or licence) is input taxedif:

a)  the berth is occupied, or is to be occupied, by a ship used as a residence; and

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.

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)    the supply is not input taxed under this section if the lease, hire or licence, or the renewal or extension of a lease, hire or licence, is a long-term lease.

The supply that will be made by lease to the SDA provider is input taxed as a supply of residential premises under section 40-35 of the GST Act.

Subsection 9-30(3) of the GST Act outlines that if supplies were to be both GST-free and input taxed; to the extent that a supply would, apart from this subsection, be both GST-free and input taxed:

a)  the supply is GST-free and not input taxed, unless the provision under which it is input taxed requires the supplier to have chosen for its supplies of that kind to be input taxed; or

b)  the supply is input taxed and not GST-free, if that provision requires the supplier to have so chosen.

Under section 38-38 of the GST Act, a supply to a NDIS participant is GST-free if all of the following requirements are met:

• the NDIS participant has a NDIS plan in effect
• the supply is of reasonable and necessary supports that are specified in the statement of supports in the participant's NDIS plan
• there is a written agreement between you and the NDIS participant (or another person)
• it is a supply covered by one of the tables in the A New Tax System (Goods and Services Tax) (GST free Supply-National Disability Insurance Scheme Supports) Determination 2021(NDIS Determination).

Goods and Services Tax Ruling, GSTR 2006/9: Supplies (GSTR 2006/9) provides the Commissioner's view regarding supplies. Relevantly, paragraph 155 of GSTR 2006/9 states;

155. Under the GST health provisions in Subdivision 38-B, subject to certain exceptions, the supply is only GST-free where an individual receiving that service or specific health treatment is the recipient of that supply. This outcome results from the specific wording in some health provisions, whilst in other provisions it is due to the nature of the services themselves. Where this requirement is imposed, a GST-free supply of a health service cannot be made to a business entity or a non-profit body.

In this case, the supply will not be made by you to a NDIS participant, rather you will enter into a lease with the SDA provider, who will then make a supply to the NDIS participant. On this basis, you will not satisfy the requirements of section 38-38 of the GST Act.

You will not be entitled to an input tax credit for any acquisition that you make relating to the supply of the lease, to the SDA provider. Our reasons are as follows;

Section 11-20 of the GST Act provides that you are entitled to an input taxed credit for any creditable acquisition that you make. Section 11-5 of the GST Act provides the meaning of a creditable acquisition, and the first requirement is that the acquisition is acquired solely or party for a creditable purpose. The term creditable purpose is defined in section 11-15 of the GST Act and states;

1)    You acquire a thing for a creditable purpose to the extent that you acquire it in *carrying on your *enterprise.

2)    However, you do not acquire the thing for a creditable purpose to the extent that:

(a) the acquisition relates to making supplies that would be *input taxed; or

(b) the acquisition is of a private or domestic nature.

Note an * refers to a term defined in section 195-1 of the GST Act.

In this case, you will construct the dwellings for the purpose of making supplies that will be input taxed. Consequently, you will not make the acquisitions for a creditable purpose and no entitlement to input tax credits will arise.