Edited version of private advice

Authorisation Number: 1052252961490

Date of advice: 26 July 2024

Ruling

Subject: GST and commercial residential premises

Question 1

Is the residential park situated at <address> (the Property) which you own, commercial residential premises within the meaning of section 195-1 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes.

Question 2

If the answer to Question 1 is yes, are the supplies you make at the Property under Arrangement A and Arrangement B, supplies of commercial accommodation within the meaning of section 87-15 of the GST Act?

Answer

Yes.

Question 3

Are the supplies you make at the Property under Arrangement A and Arrangement B, input taxed under section 40-35 of the GST Act?

Answer

No. However all supplies of commercial accommodation under Arrangement A and Arrangement B will be input taxed for the period if and when you make a choice under section 87-25 of the GST Act not to apply Division 87 to your supplies of commercial accommodation, and before that choice is subsequently revoked.

This ruling applies for the following period

<Date> - <Date>

The scheme commenced in:

<Year>

Relevant facts and circumstances

You are registered for GST effective from <date>.

In <year> you acquired a property situated at <address> (the Property) which was operating as, and with approvals to operate as, a mixed caravan/tourism/home park. You continue to operate under the same approvals (as renewed from time to time).

Over time you have replaced most of the caravans with manufactured or movable homes.

All of the dwellings on the Property are structures designed to be used as a residence that can be relocated from site to site or between sites.

Tourism accommodation is no longer offered on the Property.

The Property contains approximately <number> sites on which manufactured/movable dwellings are situated. Manufactured homes contain bedroom, bathroom, kitchen, laundry and living facilities.

The Property also contains on-site facilities including:

•         community centre

•         <number> swimming pools

•         <number> laundry facilities

•         mail boxes.

There is a manager operating from an on-site office responsible for the day-to-day management of the Property. The manager is available during working hours and night patrols operate at night.

You operate the Property under two models:

1.    Arrangement A;

2.    Arrangement B.

The Property is not a retirement village.

Residents, under either Arrangement A or Arrangement B, are not required to pay any form of exit fee or deferred management fee on ceasing residency on the Property.

Arrangement A

Arrangement A involve tenants purchasing a manufactured home and entering into a Site Agreement leasing the land on which the manufactured home is situated on a long-term basis. Tenants do not acquire title to this land.

Tenants can re-sell their homes to new tenants, and such resale offerings are listed on third party websites.

Arrangement A Site Agreements

Arrangement A Site Agreements (Site Agreements) incorporate the statutory obligations of park owners and home owners required under relevant State legislation. Two examples of Site Agreements (Example Site Agreements) have been provided which are typical of all Site Agreements which also provide the following:

• details of the Park Owner (you), Park Manager and the Home Owner
• You grant the Home Owner the right to:
  • occupy a site as specified in the relevant Site Agreement
  • position a manufactured home on the site; and
  • non-exclusive use of the Property's common areas and communal facilities
• the Home Owner is required to pay a site rent to occupy the site
• certain utilities and services are included in the cost of the site rent (such as water and sewerage)
• provision of utilities and services not included in the site rental must be separately arranged by the home owner
• you retain the right to reposition the manufactured home to a comparable site within the park if necessary.

Arrangement B

Under Arrangement B, you own the manufactured home and lease both the manufactured home and the site to a tenant. These arrangements are governed by relevant State legislation.

You offer fully self-contained one and two-bedroom cabins and relocatable homes available for short term or long term rent.

The manufactured homes rented under the Arrangement B model contain bedroom, bathroom, kitchen and living facilities. Residents are able to access communal laundry facilities.

You offer some rental accommodation in caravans but have been replacing the caravans with manufactured homes.

The caravan sites are being used in the Arrangement B model.

Tenants may stay for a minimum of a week but there are currently no such tenants at the Property. Whilst you no longer advertise for tourism, people may stay for short periods such as a week or few weeks for emergency accommodation or if they need to rent between moving homes.

Most people stay, at least initially, under a 3-month lease that can be extended to 6 months and then 12 months going forward.

Relevant legislative provisions

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

Section 9-75

Section 40-35

Paragraph 40-35(1)(b)

Division 87

Section 87-15

Section 87-25

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 the residential park situated at <address> (the Property) which you own, commercial residential premises within the meaning of section 195-1 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Given the facts of this case, relevantly, section 195-1 defines the term 'commercial residential premises' as including a caravan park or camping ground, or, anything similar to a caravan park or camping ground.

The Commissioner's view on the meaning and scope of 'commercial residential premises' is contained in Goods and Services Tax Ruling GSTR 2012/6; Goods and services tax: commercial residential premises (GSTR 2012/6).

Specifically in respect of the terms 'caravan park' and 'camping ground', paragraphs 109 to 110A of GSTR 2012/6 state (footnote omitted):

109. The terms 'caravan park' and 'camping ground' are not defined in the GST Act and take their ordinary meanings in context.

110. Occupants of a caravan park or camping ground may stay in a caravan, a moveable home, a permanent cabin or villa, or a tent provided by the operator on site. Alternatively, guests may park their own caravan, motor home, camper trailer or the like on a site or pitch their own tent on a site. Sites may be powered or un-powered. Accommodation in a caravan park or camping ground is held out to the public as accommodation for travellers although long-term accommodation may also be provided to occupants. Caravan parks and camping grounds are operated on a commercial basis or in a business-like manner.

110A. 'Home parks' in which sites for moveable homes are rented and the homes themselves either rented or occupied by their owners are commercial residential premises under paragraph (f) of the definition, as they are similar to caravan parks.

For the purposes of GSTR 2012/6, the term 'moveable home' means a structure designed to be used as a residence that can be relocated from site to site.

Further discussion is contained at paragraphs 212 to 214A with paragraph 214A stating (footnote omitted):

214A. 'Home parks' in which sites for moveable homes are rented and the homes themselves either rented or occupied by their owners are commercial residential premises under paragraph (f), as they are similar to caravan parks. Similarities include the leasing of sites to residents separately to any building located on the site, and the provision of communal facilities to residents. Supplies of long-term accommodation in a home park may be taxed at a concessionary rate or input taxed.

In this case, the Property consists of approximately <number> sites, a community centre, <number> swimming pools, communal laundry facilities and mail boxes for use by occupants of the Property.

The Property has an on-site manager who is responsible for the day-to-day management of the Property. The manager is available during working hours and night patrols operate at night.

The occupants of the Property either:

•         purchase and own a manufactured/movable home and rent/lease a site on the Property on which the manufactured home is situated on a long-term basis (Arrangement A); or

•         rent/lease as a package, a manufactured/movable home and site on which the home is situated and is used by the occupant as their residence under a <number> month lease initially which can be extended to <number> months and then <number> months going forward (Arrangement B).

Given the above, and consistent with the Commissioner's view as expressed in paragraphs 110A and 214A of GSTR 2012/6, we consider the Property as a whole to be a 'home park' and therefore fall within the scope of the definition of 'commercial residential premises' for GST purposes being premises similar to a caravan park.

Question 2

If the answer to Question 1 is yes, are the supplies you make at the Property under the Arrangement A model and the Arrangement B model, supplies of commercial accommodation within the meaning of section 87-15 of the GST Act?

As discussed above, the Property as a whole is considered to be 'commercial residential premises' as defined for GST purposes in section 195-1.

The concept of 'commercial accommodation' is relevant within the provisions contained in Division 87 which, if applicable, modify the value of a taxable supply (as otherwise determined under the general rule in section 9-75) of commercial accommodation that is provided to an individual as long-term accommodation.

The Commissioner's view on the application of Division 87 is contained in Goods and Services Tax Ruling GSTR 2012/7; Goods and services tax: long-term accommodation in commercial residential premises (GSTR 2012/7).

Section 87-15 contains the meaning of 'commercial accommodation' as being the right to occupy the whole or any part of commercial residential premises, including, if it is provided as part of the right so to occupy, the supply of:

(a)  cleaning and maintenance; or

(b)  electricity, gas, air-conditioning or heating; or

(c)   telephone, television, radio or any other similar thing

Paragraphs 7 and 8 of GSTR 2012/7 elaborate on the term 'commercial accommodation' stating:

7. For an entity to provide commercial accommodation to an individual, the individual must be provided with a right to occupy the whole or any part of the commercial residential premises for living accommodation (that is, in the sense of a right to stay). Living accommodation does not require any degree of permanence of occupation. It includes lodging, sleeping or overnight accommodation.

8. This right to occupy must be conferred at the time of the supply and must extend for the full duration of the relevant supply.

In the context of caravan parks and camping grounds, paragraph 36 of GSTR 2012/7 states:

36. In the case of caravan parks and camping grounds, the 'premises' are the grounds themselves, rather than any specific accommodation in buildings. Thus, an owner who places their caravan on a site for a fee is occupying the premises. Whether they are physically occupying their caravan is, in this particular case, immaterial.

The terms of the agreements as entered into with occupants under Arrangement A and Arrangement B convey a right to occupy a site (Arrangement A) or a specified manufactured home and site (Arrangement B) on the Property.

As such, we consider your supplies of accommodation to residents under both the Arrangement A model and Arrangement B model are supplies of 'commercial accommodation' as defined in section 87-15.

Question 3

Are the supplies you make at the Property under the Arrangement A model and the Arrangement B model, input taxed under section 40-35 of the GST Act?

Section 87-25 provides a supplier with choice not to apply Division 87. If a supplier does choose not to apply Division 87 to its supplies of long-term accommodation in commercial residential premises, the supplies will be input taxed under paragraph 40-35(1)(b).

Paragraph 40-35(1)(b) provides that the supply of premises by way of lease, hire or licence is input taxed if the supply is of commercial accommodation and Division 87 would apply but for a choice made by the supplier under section 87-25.

In the absence of a choice made by you not to apply Division 87 pursuant to section 87-25, the supplies of commercial accommodation, under either the Arrangement A model or the Arrangement B model, will not be input taxed under section 40-35.