Edited version of private advice

Authorisation Number: 1052277918731

Date of advice: 18 July 2024

Ruling

Subject: GST - registration requirements

Question

Is the Trust (you) required to register for GST in accordance with section 23-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when you supply residential accommodation to a local government entity?

Answer

No. While your activities constitute an enterprise, the supply of residential accommodation is an input taxed supply and is not included in calculating GST turnover under the GST Act. Therefore, you do not meet the turnover requirements required for GST registration.

This ruling applies for the following period:

1 July 20YY to 30 June 20YY

The scheme commenced on:

24 February 20YY

Relevant facts and circumstances

The Trust (you) has an Australian Business Number (ABN) and is not registered for GST.

You own a complete unit complex of X units.

These X units are fully self-contained.

The units are wholly owned by you and managed by the beneficiary of the trust.

There is no on-site management and no on-site office.

The units are supplied furnished and include internet, water and electricity.

There is no food provided to the short-term guests.

There are no communal dining facilities for residents.

Cleaning is not provided each day by way of refreshing rooms.

One unit is leased under a standard residential tenancy agreement with the local government entity.

The remaining X units are leased to the local government entity by verbal agreement.

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 23-5

A New Tax System (Goods and Services tax) Act 1999 section 23-15

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

A New Tax System (Goods and Services tax) Act 1999 section 40-65

A New Tax System (Goods and Services tax) Act 1999 section 40-70

A New Tax System (Goods and Services tax) Act 1999 section 72-5

A New Tax System (Goods and Services tax) Act 1999 section 188-10

A New Tax System (Goods and Services tax) Act 1999 section 188-15

A New Tax System (Goods and Services tax) Act 1999 section 188-20

A New Tax System (Goods and Services tax) Act 1999 section 195-1

Reasons for decision

Under section 9-5 of the GST Act, an entity makes a taxable supply where the supply:

(i)            is made for consideration; and

(ii)            is made in the furtherance of an enterprise being carried on; and

(iii)            is connected with the indirect tax zone; and

(iv)         ;   is made by a supplier who is 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.

In your case, the supplies being made are the provision of residential accommodation, are for consideration and are connected with Australia. You are carrying on a leasing enterprise.

There are no provisions in the GST Act which operate to make the supply of residential accommodation GST-free. Therefore, we need to determine whether your supply of residential accommodation is an input taxed supply of residential premises.

Residential premises

Subsection 40-35(1) of the GST Act provides that a supply of premises by lease, hire or license is input taxed if the supply is of residential premises (other than a supply of commercial residential premises or accommodation in commercial residential premises provided to an individual by the entity that owns or controls the commercial residential premises).

Subsection 40-35(2) provides that the supply is input taxed only to the extent the premises are to be used predominately for residential accommodation (regardless of the term of occupation).

'Residential premises' for GST purposes is defined in section 195-1 as 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).

Goods and Services Tax Ruling 2012/5 Goods and services tax: residential premises (GSTR 2012/5), at paragraphs 6, 7, and 9 of GSTR 2012/5 states:

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.

9. The requirement in sections 40-35, 40-65 and 40-70 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.

In your case, the X unit complex you are leasing to the local government entity satisfies the definition of residential premises as they provide shelter and basic living facilities such as bedrooms, bathrooms, kitchen and toilet facilities. As you are providing residential accommodation, you are providing input tax supplies under subsection 40-70(1) of the GST Act.

GST registration

Section 23-5 provides that you are required to be registered under the GST Act if:

•         you are carrying on an enterprise, and

•         your GST turnover meets the registration turnover threshold.

Subsection 23-15(1) of the GST Act provides that your registration turnover threshold is $75,000.

Subsection 188-10(1) of the GST Act provides that you have a GST turnover that meets a particular turnover threshold if:

•         your current GST turnover is at or above the turnover threshold, and the Commissioner is not satisfied that your projected GST turnover is below the turnover threshold; or

•         your projected GST turnover is at or above the turnover threshold.

Subsection 188-15(1) and subsection 188-20(1) of the GST Act provides that your current GST turnover is the value of all the supplies made by you during the current month and previous eleven months and your projected GST turnover is the value of all the supplies made or likely to be made by you in the current month and the next eleven months, other than:

a)            supplies that are input taxed; or

b)            supplies that are not for consideration (and are not taxable supplies under section 72-5); or

c)            supplies that are not made in connection with an enterprise that you carry on.

The turnover from your leasing enterprise consists solely of rental income from input taxed supplies of residential accommodation which represents 100% of the total supplies you make within this business activity. As a result of making input taxed supplies, your GST turnover does not meet the registration turnover threshold and, therefore, you are not required to be registered for GST.