Edited version of private advice

Authorisation Number: 1052312878094

Date of advice: 4 October 2024

Ruling

Subject: GST - supply of residential accommodation by sub-lease

Question

Are you, X Pty Ltd, required to be registered for GST under section 23-5 of the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act) in relation to your supply of rental accommodation in the apartments (the Apartments)?

Answer

No, you are not required to be registered for GST in relation to your supply of rental accommodation in the Apartments.

This is because the Commissioner considers your supplies of accommodation in the Apartments are supplies of residential premises to be used predominantly for residential accommodation. The Apartments are not commercial residential premises, and you are not providing accommodation in commercial residential premises that you own or control. Accordingly, we consider the requirements in paragraph 40-35(1)(a) of the GST Act are satisfied and your supplies of the accommodation in the Apartments are input taxed supplies. These input taxed supplies are excluded when working out your GST turnover and would result in your GST turnover not meeting the GST registration turnover threshold of $75,000. Therefore, you are not required to be registered for GST.

Relevant facts and circumstances

You, X Pty Ltd, are carrying on a leasing enterprise. You acquired a franchise to operate the leasing enterprise under the franchise name Y. You have a franchise agreement with Y.

Your turnover from this enterprise for the financial year 2022/2023 was $Z. You do not carry on any other enterprise.

You have an Australian business number (ABN).

You are not registered for GST.

You supply rental accommodation in the apartments (the Apartments).

You lease the Apartments from the owners and you then sublease the Apartments in your own right. Where your lease from the owner of an apartment expires, you continue with the lease either on a periodic month to month basis or renewal for another 6 or 12month tenancy.

You sublease the Apartments to corporate and government companies needing a 'home away from home'. Your clients use the Apartments as their residence for the duration of their project - anywhere between 7 nights to several months at a time. The average stay is 30 nights.

The Apartments comprise of 1 and 2bedroom units. They are fully furnished including bedroom(s), a kitchen, bathroom(s), toilet(s), and internal laundry.

Rates are charged on a nightly basis, and the nightly rates vary depending on the length of stay. If a tenant wants to extend their stay they are charged the nightly fee per original agreement.

Neither you nor Y lease or own other apartments at the two properties at which the Apartments are located ('the Properties').

Y does not advertise their name on the Properties.

Neither you nor Y have any agreements with the Body Corporates granting you exclusive right to carry on a leasing business from the Properties.

All other apartments within the Properties are either owner occupied or rented out either by the owner of the apartment or their agent.

You do not act as an agent for other apartment owners of the Properties in renting out their apartments.

The Body Corporate at each respective site undertakes all repairs and maintenance of common areas and the car parks. You and Y do not have any control or influence over what works are to be performed or who is engaged to perform the works.

You do not have authority or influence in the day to day activities carried on at the Properties.

Your directors are employed through the business. The directors deal directly with the tenants and perform the following:

•                     meeting tenants on arrival,

•                     handing over keys,

•                     showing them how everything works,

•                     answering any questions they have;

•                     attending to tenants' requests, for example if tenant makes any additional requests such as providing a porta cot or foldaway bed, your directors organise this,

•                     arranging access for maintenance and if there is any maintenance to be performed, your directors will organise access with the tenant, but does not organise or authorise the work to be performed,

•                     key return.

You employ subcontractors - a professional housekeeping company that cleans the Apartments on a weekly basis and provides full linen change.

You can only enter an Apartment if allowed to by the sub-lessee.

Sub-lessees can request a weekly cleaning service if required.

All cleaning is performed by subcontractors.

A compulsory departure clean is completed at the end of each rental period. The cost of the clean is included in the rental charge.

No other services are provided.

Sub-lessees are responsible for their own laundry and cooking.

Utilities are connected and the costs associated with the utilities are incorporated in the rent.

There are smart televisions in the Apartments which allow tenants to access their own accounts if they wish to watch Foxtel/Netflix. You do not supply these or any similar services.

Relevant legislative provisions

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 188-10

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

A New Tax System (Goods and Services Tax) Regulations 2019 Regulation 23.15.01