Edited version of private advice

Authorisation Number: 1052255018996

Date of advice: 31 May 2024

Ruling

Subject: GST and residential premises

Question 1

Will your supply of a Dwelling located in the indirect tax zone by way of lease to a specialist disability provider (SDA), be a taxable supply under section 9-5 of the A New Tax System (Goods and Services) Act 1999 (GST Act)?

Answer

No. The supply of the house will be an input taxed supply of residential premises.

Question 2

Will your acquisition of the goods and services for the purchase of the land and the building of the Dwelling be a creditable acquisition for which you are entitled to claim input tax credits?

Answer

No.

This ruling applies for the following period(s)

1 December 20XX - 30 December 20XX

The scheme commences on

The date of commencement of construction or the 'Commencement date'

Relevant facts and circumstances

You are registered for GST.

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

You constructed a Specialist Disability Accommodation (SDA) dwelling in the indirect tax zone (the Dwelling) for the provision of SDA to residents. The dwelling was designed to meet NDIS requirements.

You have provided the plans for the Dwelling as part of your private ruling application. The construction of the Dwelling on the property was with the express purpose of providing housing that will be leased to an SDA provider who will then sub-lease the property to a NDIS participant.

The Dwelling is described as a house with x bedrooms, x ensuite bathrooms, a powder room, a laundry, kitchen, living and dining area.

Specialist modifications to the Dwelling include:

•         Structural design to cater for lift hoists in all NDIS participant bedrooms

•         Fittings such as handrails and toilet backs

•         Height adjustable kitchen bench tops

•         Hallway and doorway widths adjusted to NDIS specifications.

•         Backup power systems to ensure power supply for essential equipment

•         Technology system to enable NDIS participants to communicate with carers and to maintain security

•         Security code access to bedrooms - with logging and monitoring

•         Doors and windows blinds have automation capability.

The Dwelling was constructed to provide 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.

You executed an agreement another entity. This agreement is for provision of consultation on the finalisation of the Dwelling for rental to NDIS participants. You have provided a copy of this agreement as part of your private ruling application.

You have entered into a lease agreement on a specified date, with a lessee. The lease agreement was provided as part of the ruling application, it contains the following clauses:

• The term of the agreement is xx years
• Further term option of two further terms of x years
• Rent is $x per annum (plus GST)

• Rent Commencement date is the Commencement Date

• Permitted use is specialist disability accommodation and/or community residence

• Compliance fee of x% plus GST of the gross property income
• Property management fee of 8% plus GST of the gross property income
• The lessor irrevocably grants the Lessee authority to enrol the premises as specialist disability accommodation under the NDIS and then manage, change or otherwise deal with such enrolment
• The Lessor is the registered proprietor of the land
• The Lessee is not an SDA provider, the initial SDA provider is specified in the agreement
• The lessor acknowledges that the lessee will pursuant to the terms of the lease, proceed to sub-lease the premises of part(s) thereof, to one or more,

1)    participants in the NDIS scheme; or

2)    parties (whether or not participants of the NDIS requiring additional support and/or care.

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

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 www.ato.gov.au.

Question 1

Section 9-5 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 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 is being made by lease of the Dwelling is an input taxed as a supply of residential premises under section 40-35.

Subsection 9-30(3) 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, 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 is not being made by you to a NDIS participant, rather you have entered into a lease with a SDA provider. On this basis, you will not satisfy the requirements of section 38-38 of the GST Act.

Question 2

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 lessee. Our reasons are as follows:

Section 11-20 provides that you are entitled to an input taxed credit for any creditable acquisition that you make. Section 11-5 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 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 construct the Dwelling 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.