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Edited version of private advice
Authorisation Number: 1052340871601
Date of advice: 23 December 2024
Ruling
Subject: GST and commercial residential premises
Question 1
Will your supplies of student accommodation at the proposed property be taxable supplies of 'commercial accommodation provided in commercial residential premises' for the purposes of sections 9-5 and 87-15 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer 1
Yes, your supplies of the student accommodation at the proposed property will be taxable supplies of 'commercial accommodation provided in commercial residential premises' for the purposes of sections 9-5 and 87-15 of the GST Act
Question 2
If you are considered to be making taxable supplies of commercial accommodation in commercial residential premises, will the value of the taxable supplies be 50% of the price of the supplies pursuant to section 87-5 of the GST Act?
Answer 2
Yes, as you will be making taxable supplies of commercial accommodation in commercial residential premises, the value of the taxable supplies will be X% of the price of the supplies pursuant to section 87-5 of the GST Act. This is because you have confirmed that:
• you will not be making a choice pursuant to section 87-25 of the GST Act to treat the supplies of the accommodation as input taxed under section 40-35 of the GST Act, and
• you expect 100% of the students will be provided with accommodation that satisfies as 'predominantly for long-term accommodation' as how this term is defined in subsection 87-20(3) of the GST Act, and
• you will continuously monitor that at least 70% of the students are provided with accommodation that satisfies as 'predominantly for long-term accommodation' for the 50% concession in section 87-5 of the GST Act to be applicable.
This ruling applies for the following periods:
<date> to <date>
The scheme commenced on:
<date>
Relevant facts and circumstances
On <date>, you acquired land (the Property) with the intention of building a multiple purpose student accommodation. The Property is classified as building class 3, commercial residential. According to the Victoria Building Authority, building classifications under the National Construction Code (NCC) are as follows:
Class 3, Residential buildings other than a Class 1 or Class 2 building providing long-term or transient accommodation for a number of unrelated persons. For example:
• boarding house
• hotel, motel or guest house
• hostel or backpackers
• student accommodation or workers' quarters
• residential care building.
Class 1 and 2 refer to residential buildings.
The Property is located near Monash University Caulfield but will not be affiliated with any specific educational institution.
You plan to develop a purpose-built student accommodation building on the Property. Currently the Property is in the planning phase and not yet operational. The student accommodation is expected to be operational right after the completion of construction works.
The Property, once completed, will have a specified number of self-contained rooms, as well as communal areas on each floor level. The Property will have four levels being, the ground level, level one, level two, and level three.
You are currently registered for GST and you will claim input tax credits associated with the construction and operation of the Property.
You will not be making a choice pursuant to section 87-25 of the GST Act to treat the supplies of the accommodation as input taxed.
Prior to the purchase of the Property, a planning permit for the student accommodation was obtained by the seller of the Property. You have submitted a Development Amendment to the Council, but a new permit has not been issued yet. The Development Amendment aims to:
• improve urban design initiatives that present the street with active frontage to main road; and
• increase total number of accommodations for residential growth area to enhance council population growth and university demands.
Accommodation rooms
The Property will contain # rooms and will feature a mix of studios and ensuite rooms. Each room is designed for single occupancy. The Property will offer four types of student living and amenity options being:
• Standard Suite-#sqm Self Contained Student Suite
• Medium Suite-#sqm Self Contained Student Suite
• Large Suite- # sqm Self Contained Student Suite
• Accessible Suite-# sqm Self Contained Student Suite that complied with Disability Discrimination Act (DDA)
The floor plan provided shows all accommodation units will include a kitchenette, bedspace, bathroom/toilet, dining area and a separate study area. The layout for the different room configuration is shown below.
Communal spaces
The Property will have common areas shared by the students on each floor, with varying configurations on each floor. The amenity space will include the following:
• Outdoor BBQ area
• Outdoor amphitheatre courtyard
• Indoor group study areas; and
• Indoor individual study booths
The floor plan of the Property features the following communal spaces:
• Communal dining room
• Study lounge
• Multimedia lounge
• Outdoor sky lounge
• Communal laundry
• Open garden terraces (an outdoor dining area and communal area for exercising equipment's)
• Barbecue area
• Carparks area
• Building managers office located on the ground floor
• Bin room
Intended operation of the property
Once construction is completed, you will appoint a third-party manager (the Manager) to manage the Property.
You expect X% of the students will stay for a continuous period of X days or more.
You expect the typical length of occupancy to be from # to # weeks dependent on the student's study requirements. This can be independently verified by the Manager or through the confirmed agreements when construction is completed and operation commences.
The Property will provide accommodation only to bona fide students in complaint with the conditions set out in the Planning Permit no #.
Accommodation agreements
You have provided us with a copy of the Accommodation Agreement (draft).
The proposed arrangements under the Accommodation Agreement (the Agreement) include:
• You will grant a licence to the guests to temporarily occupy the room on the terms and conditions of this Agreement
• The commencement date of the Agreements is the date the guest commences occupation of the Room
• The Agreement expires on the expiry date stated in the Agreement unless an extension is explicitly agreed upon in writing by both you and the guest.
• The guest must only use the room for permitted use, keep the room and common services clean, orderly, and free of rubbish and debris at all times, pay or reimburse you demand of any loss or claim suffered or incurred by you as a result of the individual's use or occupation of the room etc.
• You and the Manager and your respective employees, officers, agents, contractors, and invitees shall be entitled to access to the room at all times for cleaning purposes, emergencies, and all urgent repairs
• The location of the room may be varied from time to time at your and/or the Manager's discretion.
Pricing of accommodation rooms
The accommodation will be priced at market related value for similar accommodations.
No upfront payment for the entire tenancy term is required unless specifically agreed upon. According to the Agreement, the following applies:
• The guests will pay the fees to the Manager (on behalf of the owner) monthly in advance by way of direct debit or electronic funds transfer.
• Any usage of utilities during the term which exceed the utilities threshold will incur costs which are to be paid by the guest by way of electronic funds transfer to the Manager (on behalf of the owner) within 3 business days of written notice of those amounts from the Manager to the guest.
• The Guest must provide the Manager with a copy of a receipt confirming payment of the Fees and any excess utilities charges, if requested by the Manager.
Management of the property
You will engage the professional services of a Manager to manage and facilitate the guest's occupation of the room. The Manager, acting as your agent will enter into contracts with the guest. These contracts will grant the individuals a license to occupy a part of the Property. The contract is between you (as principal) and the guest. You will pay the Manager a management fee for their services which will include the following:
• Maintaining a reception and office on the ground floor, providing reception and residential advice services during specified hours.
• Organising onsite residential manager and caretaker to ensure someone is always available on the Property.
• Subcontracting personnel for cleaning, maintenance, key replacement, and security services.
• Providing cleaning services for all common areas of the Property.
• Managing security services, including issuing resident key cards, CCTV monitoring, and security guards.
• Repairing and maintaining fixed assets and the Property.
• Conducting random room inspections, with resident's permission, to ensure cleanliness.
The Manager will carry out the day-to-day management of the accommodation, while you will bear the financial risks. The Manager will collect revenue from the accommodation and pay related expenses. Each month, the Manager will prepare a cash position document recording the surplus after deducting all expenses, including management fees. Surplus funds will be transferred to you, and any shortfall amounts will be covered by you.
The Manager will propose rental rates periodically, subject to your approval. You will continuously monitor the number of individuals provided with accommodation and the length of their continuous period of stay in accordance with the provisions of Division 87 of the GST Act.
The Manager will not reside on the Property. However, you will provide a reception and office space for the Manager on the ground floor to oversee the Property's operations.
Costs covered under the accommodation agreement
The Manager, acting as your agent, will enter into contracts with the guest. These contracts will grant a license to occupy a part of the Property.
The fees paid by the guest covers the following costs:
• Electricity
• Water
• Hot water and gas
• Internet
• Air Conditioning
• Furniture
• Appliances (fridge, microwave, and cooking)
• Broadband
• Cleaning of the common areas
• On-site managers
House rules
In the House rules, the term 'unit' is used to mean the bedroom and bathroom of guests under the Agreement. The terms 'you' and 'your' refers to guests. Some extracts from the house rules are as follows:
Absences from the property
• If you expect to be absent for more than X hours, please notify us at the front desk and provide a contact phone number and email address whilst you are away in case of emergency. If you have not been seen here for X hours and you have not informed us that you will be away, we may enter your Unit to check that you are okay. If you have not been seen at the Property for more than X hours, and you have not recorded your absence with us, we may contact your emergency contact and/or the Police.
Access
• By signing the Agreement and without limiting any provisions of the Agreement, resident agree to give our management access to Units according to the minimum notice periods in the relevant Legislation (for the avoidance of doubt, our Management is not required to give notice to access, conduct works and/or inspect Common Areas).
Where notice is required to be given pursuant to the Legislation, our Management may not be able to specify the exact time that access will be required but will use reasonable endeavours to a specify time period in which the entry may take place.
Check out
Prior to the end of your accommodation agreement, our Management will contact you via email and/or mail to confirm your departure date. You must comply with the following procedures and requirements when moving out of your Unit in addition to any other reasonable requirements requested by our Management:
• You must vacate your Unit on or before the end of date of your Accommodation Agreement unless you have signed another rental agreement to stay here for another term.
• Upon moving out of your Unit, it is your responsibility to endure that your Unit and Common Area is left in the same state of cleanliness and condition as at the start of your Accommodation Agreement (as documented in the condition report) except for wear and tear
• Our Management will conduct a departure inspection of your Unit, Common Area and FF&E to determine any damage, missing items or similar. If you wish to be present during this inspection, please notify our Management at least X days prior to your departure date
• Before moving out, you must ensure all fees and charges payable under the Accommodation Agreement have been paid in full. Any outstanding amounts owed by you to us after you have left the Property will be claimed from your Security Deposit. Please be aware that this may hinder your future tenancy applications
• All your personal belongings must be removed from Unit and the Property by XXam on the end date of your Accommodation Agreement. For share apartments, this includes removing all your belongings from the Common Areas including from within the cupboards and fridge.
Cleaning and damages
• You are liable for the cost of repairs and/or cleaning of any damage you or your guests cause to Communal Areas, your Unit and/or your Common Area.
Guest
• You will be responsible for any guest or visitor who is here by way of your invitation or their company. You must ensure that they sign-in with our Management upon arrival and sign out with Management at the time they leave the premises and that they comply fully with the House Rules and any reasonable direction of Management. Guest will be liable for any loss, damage or cost that Property will incur due to actions taken by guests visitor.
• Guests are not allowed to have their visitors stay overnight unless approved in advance by Management in writing. Management we will not approve minors (under 18-year old's) as overnight visitors.
• Guest must have their visitors signed out by 10pm. Management reserves the right to restrict or prohibit the use of the Communal Areas by non-residents.
Running a business from the property
• Guests are not permitted to conduct a business of any description from their room, common area or any other part of the Property.
No sub-letting
• For the safety and security of the building, you must not sub-let or license out your Unit. This includes but is not limited to giving the access to your Unit to friends, family and/or strangers from accommodation websites to stay within your Unit. The Property is a purpose-built student accommodation and is governed by council and state requirements and laws that may be above and beyond a normal residential property. Unauthorised individuals on the premises may be a security risk to your fellow residents and may breach council and state laws. To end your lease early, please see section 9 (Lease Cancellation Request).
Pets
No pets, including fish, birds or reptiles may be in the Property. This does not apply to a guide (seeing eye) or hearing dogs.
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 9-40
A New Tax System (Goods and Services Tax) Act 1999 section 38-105
A New Tax System (Goods and Services Tax) Act 1999 section 40-35
A New Tax System (Goods and Services Tax) Act 1999 section 87-5
A New Tax System (Goods and Services Tax) Act 1999 section 87-15
A New Tax System (Goods and Services Tax) Act 1999 section 87-20
A New Tax System (Goods and Services Tax) Act 1999 section 87-25
A New Tax System (Goods and Services Tax) Act 1999 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 terms marked with an asterisk are defined in section 195-1 of the GST Act
• all reference materials cited are available on the ATO website www.ato.gov.au
Question 1
Summary
The supply of student accommodation by You will be a taxable supply under section 9-5 as all the requirements specified in section 9-5 will be satisfied.
Detailed reasoning
Section 9-40 provides that an entity is liable for GST on any taxable supply that it makes.
Section 9-5 states that you make a taxable supply if:
(a) you make the supply for consideration; and
(b) the supply is made in the course or furtherance of an enterprise that
(c) you carry on; and
(d) the supply is connected with the indirect tax zone; and
(e) 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.
In your case, you are developing a purpose-built student accommodation building expected to be completed and operational in or around MMYYY, and you will thereafter be making supplies of the student accommodation.
'Student accommodation' is a defined term under subsection 38-105(3) for GST purposes to mean the following:
Student accommodationmeans the right to occupy the whole or part of the premises used to provide the accommodation, 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.
Based on the facts, you will be supplying student accommodation.
You are registered for GST and the supplies will satisfy the positive limbs of section 9-5 because of the following:
• The supply of the student accommodation will be for monetary consideration
• You will be supplying the accommodation in the course or furtherance of the leasing enterprise that you will be carrying on
• As the Property is in Australia, supplies of accommodation in the Property will be connected with the indirect tax zone, and
• You are currently registered for GST.
Furthermore, we consider that in your circumstances, the supply of the student accommodation will not be GST-free. Therefore, it remains to be determined if, by providing the student accommodation, you will be making input taxed supplies.
Subsection 40-35(1) provides that 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 taxed if:
(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.
Subsection 40-35(2)(a) provides that 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).
Residential premises
The definition of residential premises in section 195-1 refers to land or a building that is occupied as a residence or for residential accommodation, or is intended to be occupied, and is capable of being occupied as a residence or for residential accommodation (regardless of the term of occupation or intended occupation).
The Commissioner's view on whether premises are considered residential premises is provided in Goods and Services Tax Ruling GSTR 2012/5 Goods and services tax: residential premises (GSTR 2012/5).
Paragraph 8 of GSTR 2012/5 provides that a supply of residential premises may consist of a single room or apartment, or a larger complex consisting of rooms or apartments.
Paragraph 9 of GSTR 2012/5 continues to explain that the requirement in section 40-35 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.
Paragraph 15 of GSTR 2012/5 provides that to satisfy the definition of residential premises, premises must provide shelter and basic living facilities. Premises that do not have the physical characteristics to provide these are not residential premises to be used predominantly for residential accommodation.
The Commissioner considers there is a relationship between residential premises and some commercial residential premises in the GST Act. In some cases, there may be an overlap in that some premises which fit within the definition of residential premises also fit within the definition of commercial residential premises. However, some things listed in the definition of commercial residential premises do not also fall within the definition of residential premises.
In this case, the accommodation rooms will include bedspace, bathroom/toilet and dining area exhibiting physical characteristics that are suitable and capable of providing shelter and basic living facilities for residential accommodation. The Property is currently in the planning/development stage and are intended to be occupied, and will be capable of being occupied, as a residence or for residential accommodation.
Accordingly, the student accommodation rooms will satisfy as residential premises. The student accommodation rooms will also satisfy as 'residential premises to be used predominantly for residential accommodation'.
Accordingly, the requirements in subsection 40-35(1)(a) will be satisfied and your supplies of the student accommodation in the Property will be input taxed supplies unless the Property satisfy the definition of 'commercial residential premises'.
Commercial residential premises
'Commercial residential premises' is defined in section 195-1 to include:
(a) a hotel, motel, inn, hostel or boarding house; or
...
(f) anything similar to residential premises described in paragraphs (a) to (e).
However, it does not include premises to the extent that they are used to provide accommodation to students in connection with an education institution that is not a school.
While paragraph (f) extends the scope of the definition, its operation is limited to premises that have some or all of the characteristics of both residential premises and one of the classes of premises listed in paragraphs (a) to (e) of the definition.
Goods and Services Tax Ruling GSTR 2012/6 Goods and services tax: commercial residential premises (GSTR 2012/6) sets out the ATO view on how GST applies to supplies of commercial residential premises and supplies of accommodation in commercial residential premises.
Paragraph 8 of GSTR 2012/6 states that a supply by way of sale or lease of commercial residential premises is a taxable supply. A supply of accommodation in commercial residential premises provided to an individual by the entity that owns or controls the commercial residential premises is also a taxable supply.
Paragraph 9 of GSTR 2012/6 provides that the terms hotel, motel, inn, hostel or boarding house in paragraph (a) of the definition are not defined in the GST Act and take their ordinary meanings in context.
Paragraph 95 explains that in addition to living accommodation areas, premises that are commercial residential premises include commercial infrastructure to support the commercial operation of the premises. This infrastructure may include (but is not limited to) reception areas, dining and bar areas, meeting/function areas, kitchens, laundry facilities, storage areas and car parks. This infrastructure is used to provide services to occupants. Premises described in paragraph (a) and similar premises under paragraph (f) of the definition contain some or all of these areas to some degree.
Paragraph 141 of GSTR 2012/6 outlines the following meanings sourced from the Macquarie Dictionary 5th Edition (Macquarie), the Oxford English Dictionary 2nd and 3rd editions (OED) and the Shorter Oxford English Dictionary 5th Edition (SOED), which were referred to by Nicholas J in ECC (at 48) as being 'most relevant':
Hotel
building in which accommodation and food, and alcoholic drinks are available. (Macquarie)
building or establishment where travellers or tourists are provided with overnight accommodation, meals and other services. (OED)
an establishment, esp. of a comfortable or luxurious kind, where paying visitors are provided with accommodation, meals and other services. (SOED)
Motel
a roadside hotel which provides accommodation for travellers in self-contained, serviced units, with parking for their vehicles. (Macquarie)
a hotel catering primarily for motorists; spec. on comprising self-contained accommodation with adjacent parking space. (OED)
Inn
a small hotel that provides lodging, food, etc., for travellers and others. (Macquarie)
a public house providing accommodation, refreshments, etc., for payment, esp. for travellers. Now also, a public house serving alcoholic liquor for consumption on the premises, whether providing accommodation or not. (SOED)
Hostel
a supervised place of accommodation, usually supplying board and lodging, provided at a comparatively low cost, as one for students, nurses, etc. (Macquarie)
a public house of lodging and entertainment for strangers and travellers; an inn, a hotel. (OED)
a house of residence for students at a university or on a course, esp. at a non-residential college, or for some other special class of people. (SOED)
Boarding House
a dwelling in which lodging is provided to paying residents who share common facilities such as a kitchen, laundry, living room, etc. (Macquarie)
a dwelling, usually a private house, in which board and lodging are provided for payment. (Macquarie)
a house offering board and lodging for paying guests. (SOED)
In their ordinary meanings, these terms share the common attribute of providing accommodation to occupants.
Paragraph 143 of GSTR 2012/6 provides that while paragraph (f) extends the scope of the definition, its operation is limited to premises that have some or all of the characteristics of both residential premises and one of the classes of premises listed in paragraphs (a) to (e) of the definition.
Paragraph 145 of GSTR 2012/6 provides that premises that fall within paragraph (f) may be described as something other than those premises listed in (a) to (e), for example, a 'resort' or 'serviced apartments'. These premises are commercial residential premises if they are used in a particular way.
Premises that are 'similar' to establishments that are commercial residential premises must have sufficient characteristics in common with the class of premises described.
In ECC Southbank Pty Ltd as Trustee for Nest Southbank Unit Trust v Commissioner of Taxation [2012] FCA 795 (ECC), Nicholas J was required to determine whether premises designed to provide low cost student accommodation were commercial residential premises. In determining this, Nicholas J relevantly considered:
50. The test to be applied for the purpose of determining whether the Urbanest premises are commercial residential premises involves asking whether the Urbanest premises is a hotel, motel, inn, hostel or boarding house or whether it is similar to - in the sense that it has a likeness or resemblance to - any of those types of establishment. The application of this test necessarily raises questions of fact involving matters of impression and degree.
Examples 6 and 7 in GSTR 2012/6 provide guidance when considering premises to be used for student accommodation and have some relevance to your situation.
Example 6 - supply of whole premises to be used for student accommodation
58. King Accommodation constructs premises that have been designed to provide low cost accommodation to students (occupants). The premises predominantly consist of shared accommodation rooms configured so that occupants share kitchenettes and living facilities. The premises also include studio apartments which include self-contained kitchenettes and living facilities. The premises have a reception desk. The premises contain facilities for a coin operated laundry, and recreational areas. The premises do not contain a kitchen, restaurant or dining room for the preparation or service of meals to occupants. The premises have been built on land that is zoned for student accommodation by the local planning authority.
59. King Accommodation leases the premises to King Operator. Under the terms of the lease, King Operator will operate the premises by supplying accommodation to students. In supplying accommodation to students, King Operator will have on-site management to centrally manage the premises through which occupants can raise queries and concerns pertaining to the management of the premises.
60. In characterising the supply made by way of lease of the premises made by King Accommodation to King Operator, it is relevant to consider the physical characteristics of the premises. These demonstrate that the premises were designed to provide low cost accommodation to students. Further, the contractual documentation and the local planning authority permissions objectively show that King Operator will operate the premises to supply low-cost accommodation to students.
61. The physical characteristics together with the contractual documentation and planning permissions show that the premises are, or are at least sufficiently similar to, a hostel. King Accommodation therefore makes a taxable supply of commercial residential premises to King Operator.
Example 7 - student accommodation
62. Following on from Example 6, King Operator uses the premises to carry on an enterprise of supplying relatively low cost accommodation to students. The premises will not be used to provide accommodation to students in connection with an education institution that is not a school for the purposes of the definition of commercial residential premises.4
63. King Operator, through the on-site management staff, provides various services to occupants. Supervised accommodation is provided to occupants in the sense that occupants are able to raise complaints and concerns about the management and operation of the premises with the reception staff.
64. King Operator and the occupants enter into agreements, which set out the following conditions:
• the occupant pays a bond, and
• the occupants have quiet enjoyment of their rooms and associated living areas.
65. The operation of the premises and the premises' physical characteristics show that the premises are, or are sufficiently similar to, a hostel. While the occupants obtain certain rights under the agreements entered into with King Operator, including the right to have quiet enjoyment of their rooms and associated living areas, these rights are not inconsistent with the premises being characterised as, or similar to, a hostel.
66. The supply of accommodation by King Operator to an occupant is a supply of accommodation in commercial residential premises provided to an individual by the entity that owns or controls the commercial residential premises. The supply of accommodation to the occupant is therefore not an input taxed supply for the purposes of paragraph 40-35(1)(a) and is a taxable supply.5
Physical and design characteristics
Although the Property is not currently built and operating, paragraphs 86 and 87 of GSTR 2012/6 provide that premises may be characterised under paragraphs (a) or (f) of the definition of commercial residential premises when they are not operating. Premises that are not being operated at the time of supply may be classified by their overall physical character, considered with other objective characteristics.
Evidence that may objectively indicate whether premises are a hotel, motel, inn, hostel or boarding house includes:
• the premises' physical characteristics,
• architectural plans and drawings,
• contractual documentation that provides evidence of how the premises will be used in the future, or
• council or other government planning and zoning restrictions and approvals and permissions.
In this case, in terms of the physical characteristics and other objective design characteristics of the Property:
• It is a development of a multi-storey building comprising # accommodation rooms. Each accommodation room will contain a kitchenette, dining area and bedspace, private bathroom, and a study area.
• The accommodation agreement will include the provision of furniture, electricity, water, hot water, broadband internet, cleaning of common areas and on-site managers.
• The Property has communal areas including outdoor BBQ area, outdoor amphitheatre courtyard, indoor group study areas and indoor individual study booths.
• The Property will be a Class 3 building in accordance with the National Construction Code.
The Property will be supplied under a license by the Manager to guests. The Agreement indicates the Manager will be in charge of the day-to-day operations of the Property.
Paragraph 12 of GSTR 2012/6 sets out some common characteristics of hotels, motels, inns, hostels, boarding houses or similar premises. These are:
• Commercial intention - The premises are operated on a commercial basis or in a business-like manner even if they are operated by a non-profit body.
• Multiple occupancy - The premises have the capacity to provide accommodation to multiple, unrelated occupants or residents at once in separate rooms, or in a dormitory.
• Holding out to the public - The premises offer accommodation to the public or a segment of the public.
• Accommodation is the main purpose - Providing accommodation is the main purpose of the premises.
• Central management - The premises have central management to accept reservations, allocate rooms, receive payments, and perform or arrange services. This can be provided through facilities on-site or off-site.
• Management offers accommodation in its own right - The entity operating the premises supplies accommodation in its own right rather than as an agent.
• Provision of, or arrangement for, services - Management provides occupants and residents with some services and facilities or arranges for third parties to provide them.
• Occupants have status as guests - Predominantly, the occupants are travellers who have their principal place of residence elsewhere. The occupants do not usually enjoy an exclusive right to occupy any particular part of the premises in the same way as a tenant.
Ultimately, whether premises are commercial residential premises is a matter of overall impression involving the weighing up of all relevant factors. (Paragraph 41 of GSTR 2012/6)
In your case, the Property demonstrates some of the characteristics of commercial residential premises as outlined in paragraph 12 of GSTR 2012/6.
• The Property will be operated on a commercial basis, in a business-like manner.
• The Property will provide accommodation to multiple occupants at once in separate accommodation rooms.
• The Property will be available for accommodation to students, a segment of the public.
• Providing accommodation will be the main purpose of the Property.
• The Property will have a building management office and an on-site manager during specified hours who will arrange services for occupants. The Manager will arrange for a caretaker so there is always someone available on the Property for the occupants.
• The Manager will provide occupants with some services (cleaning of the communal rooms, onsite caretaker, security, repairing and maintaining fixed assets).
The shared facilities, such as the shared lounge area, dining room, laundry, and multimedia room will be commercial infrastructure to support the commercial operation of the Property as outlined in paragraph 95 of GSTR 2012/6.
In this case, based on the guidelines above and in considering all the relevant factors including the physical characteristics and planned operation of the Property as student accommodation, the Commissioner characterises the premises as, or similar to, a hostel. The Property will be of a transient nature in the sense that occupants would remain for the duration of their study but then be expected to leave. The Property will provide accommodation only to bona fide students in complaint with the conditions set out in the Planning Permit.
Conclusion
The Commissioner considers the student accommodation you provide will be supplies of commercial accommodation provided in commercial residential premises. Accordingly, the supplies will not be input taxed supplies under section 40-35. The supplies will be taxable supplies pursuant to section 9-5.
The accommodation also satisfies commercial accommodation as defined in section 87-15 as determined under question 2 below.
Question 2
Summary
The value of the supply will be reduced to X% of the price under Division 87 as there will be a supply of accommodation in commercial residential premises that are predominately for long-term accommodation.
Detailed reasoning
It has been determined above under question one that the student accommodation you provide will be taxable supplies of commercial accommodation in commercial residential premises.
Division 87 to long-term commercial accommodation
Subsection 87-5(1) provides that:
The value of a taxable supply of commercial accommodation that:
(a) is provided in commercial residential premises that are predominantly for long-term accommodation; and
(b) is provided to an individual as long-term accommodation;
is 50%, or such other percentage as is specified in the regulations, of what would be the price of the supply if this Division did not apply.
Commercial accommodation' is defined in section 87-15 to mean 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.
In your case, the accommodation agreement includes electricity, water, air-conditioning and heating, broadband internet, cleaning of common areas and on-site management.
Accordingly, the student accommodation you provide will be commercial accommodation pursuant to section 87-15.
Subsection 87-20(1) provides the meaning of 'long term accommodation':
Long-term accommodation is provided to an individual if *commercial accommodation is provided, for a continuous period of 28 days or more, in the same premises:
(a) to that individual alone; or
(b) to that individual, together with one or more other individuals who:
(i) are also provided with that commercial accommodation; and
(ii) are not provided with it at their own expense (whether incurred directly or indirectly).
The Commissioner provides guidance in relation to commercial accommodation in Goods and Services Tax Ruling GSTR 2012/7 Goods and services tax: long-term accommodation in commercial residential premises (GSTR 2012/7).
The following paragraphs in GSTR 2012/7 explain:
10. For commercial accommodation to be provided to an individual as long-term accommodation, it is only necessary for the supply of commercial accommodation to be made to an entity for 28 days or more, and for the accommodation, under the terms of the agreement, to be able to be taken up by an individual. It is not necessary for the commercial accommodation to be actually taken up by an individual.
Predominantly for long-term accommodation
15. Commercial residential premises are predominantly for long-term accommodation under subsection 87-20(3) where at least 70% of the supplies of accommodation in the commercial residential premises is for a continuous period of 28 days or more, and may, under the terms of the agreement, be taken up by an individual.
16. Any fair and reasonable method may be used to determine whether the 70% requirement is satisfied.
Option to input tax supplies of long-term accommodation
17. If a choice is made under section 87-25 to not apply Division 87 to supplies of long-term accommodation in commercial residential premises (other than a berth at a marina), paragraph 40-35(1)(b) applies, resulting in the supply of long-term accommodation being input taxed.
In your case,
• you will not be making a choice pursuant to section 87-25 to treat the supplies of the accommodation as input taxed in accordance with section 40-35, and
• you expect the typical length of occupancy to be from # to # weeks dependent on the student's study requirements
you expect 100% of the students will stay for a continuous period of 28 days or more which will satisfy as 'predominantly for long-term accommodation' as how this term is defined in subsection 87-20(3) of the GST Act, and
• you will continuously monitor that at least 70% of the students are provided with accommodation that satisfies as 'predominantly for long-term accommodation' for the 50% concession in section 87-5 to be applicable
Conclusion
In view of the above guidelines and considering all the relevant factors including that you will be making taxable supplies of commercial accommodation in commercial residential premises, the value of the taxable supplies will be 50% of the price of the supplies pursuant to section 87-5.
This is because you have confirmed that:
• you will not be making a choice pursuant to section 87-25 of the GST Act to treat the supplies of the accommodation as input taxed under section 40-35 of the GST Act, and
• you expect 100% of the students will be provided with accommodation that satisfies as 'predominantly for long-term accommodation' as how this term is defined in subsection 87-20(3) of the GST Act, and
• you will continuously monitor that at least 70% of the students are provided with accommodation that satisfies as 'predominantly for long-term accommodation' for the 50% concession in section 87-5 of the GST Act to be applicable.