Edited version of private advice

Authorisation Number: 1052389154356

Date of advice: 28 April 2025

Ruling

Subject: GST and residential premises

Question 1

Is your supply of premises by way of licence considered to be a supply of commercial residential premises for the purposes of section 40-35 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No, your supply of premises by way of licence is a supply of residential premises and is an input taxed supply under section 40-35 of the GST Act.

Question 2

Is your supply of services associated with the supply of the premises a taxable supply under section 9-5 of the GST Act?

Answer

No, your supply of services is an input taxed supply under section 9-30 of the GST Act.

This ruling applies for the following period:

XXXX - XXXX

The scheme commenced on:

XXXX

Relevant facts and circumstances

You are an Australian entity and registered for GST.

You carry on an enterprise of supplying rental accommodation.

You lease a number of properties from their owner or landlord through real estate agents. This ruling focuses on the X properties (the Properties):

The Properties are representative of the other properties you lease.

You provided a copy of the rental agreement for each of the Properties. The term of each lease is one year. You paid a bond for each lease and you pay rent on a weekly or fortnightly basis.

The rental agreements include a clause granting you permission "to use the property for the purposes of subletting to short term rental clients and guests. For example AirBnB."

You make the Properties available to guests either directly through your website or via accommodation platforms such as Airbnb and Vrbo.

A reservation made by a guest grants them a licence to occupy the premises. A tenancy is not created, and guests do not have a legal interest in the premises. You retain control and access to the premises during each stay and have the right to ask any guest to leave at any time (within reason).

The minimum stay is X nights and you allow long term stays of 28 days or more. Bookings can only be made by one guest or group at a time.

The Properties are stand-alone dwellings and contain bedrooms, living areas, bathrooms, a kitchen, a laundry, and a garage.

Each Property has a key safe which guests use to access the Property.

The Properties are fully furnished and you provide bedding, linen and towels, along with basic refreshments such as tea, coffee, and biscuits. Utilities and internet access are included in the price of the accommodation. You offer Port-a-cot and high-chair hire for an additional fee.

You provide cleaning services to guests for which you charge an additional fee. The fee is included in the price of the accommodation for long term stays and charged separately for short term stays.

There is no on-site reception at the Properties nor any central reception location. Guests can contact you by phone if they require assistance.

You have been charging GST on the cleaning services since XXXX and on the supply of accommodation since XXXX.

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 40-35

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

Reasons for decision

Question 1

Input taxed supplies and residential premises

Subsection 40-35(1) of the GST Act 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.

Note that terms preceded by an asterisk (*) are defined terms under section 195-1 of the GST Act.

Paragraph 40-35(2)(a) of the GST Act 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' is defined in section 195-1 of the GST Act:

residential premises

means 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) and includes a *floating home.

Goods and Services Tax Ruling GSTR 2012/5 Goods and services tax: residential premises (GSTR 2012/5) outlines the characteristics of residential premises. Paragraphs 9 and 15 of GSTR 2012/5 discuss when premises satisfy the definition of residential 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.

...

15. 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 Properties are stand-alone houses that provide shelter and basic living facilities; therefore, they satisfy the definition of residential premises.

Commercial residential premises

It must now be considered whether the Properties meet the definition of commercial residential premises. 'Commercial residential premises' is defined in section 195-1 of the GST Act:

commercial residential premises

means:

(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.

Goods and Services Tax Ruling GSTR 2012/6 Goods and services tax: commercial residential premises (GSTR 2012/6) considers the characteristics of commercial residential premises. Paragraphs 10 and 11 of GSTR 2012/6 provide:

10. Objective factors that are relevant to characterising premises as falling within either paragraph (a) or (f) of the definition include the overall physical character of the premises and how the premises are operated.

...

11. The tests to be applied are whether the premises are a hotel, motel, inn, hostel or boarding house for the purposes of paragraph (a), or whether the premises are similar to these types of premises, in the sense that they have a sufficient likeness or resemblance to any of these types of establishments for the purposes of paragraph (f). These tests necessarily raise questions of fact involving matters of impression and degree.

The terms hotel, motel, inn, hostel, and boarding house are not defined in the GST Act and take their ordinary meaning. The Macquarie Dictionary provides the following definitions:

The Properties are not hotels, motels, inns, hostels, or boarding houses. It must be considered whether the Properties are similar to any of these types of premises.

Features of hotels, motels, inns, hostels and boarding houses

Paragraph 12 of GSTR 2012/6 lists common characteristics of operating hotels, motels, inns, hostels and boarding houses. Note that these characteristics are not necessarily determinative in characterising premises.

12. Common characteristics of operating hotels, motels, inns, hostels and boarding houses that are relevant, though not necessarily determinative, to characterising premises as commercial residential premises 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 guests 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 guests 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.

Paragraphs 13 to 40 of GSTR 2012/6 further explore the features of hotels, motels, inns, hostels and boarding houses. In addition to those listed in paragraph 12, other features identified include:

•         Provision of meals for guests, along with a kitchen where meals are prepared and a communal restaurant or dining room.

•         Provision of linen and towels.

•         Reception desk and concierge services.

Paragraph 41 of GSTR 2012/6 provides features that indicate premises are not similar to a hotel, motel, inn, hostel or boarding house:

41. Ultimately, whether premises are commercial residential premises is a matter of overall impression involving the weighing up of all relevant factors. While not an exhaustive list, factors that may indicate that premises are not a hotel, motel, inn, hostel, boarding house or similar premises include:

(a)  the operator and occupant agree for accommodation to be supplied for a periodic term (which may be for a period of months or years at a time), such as in a residential lease;

(b)  the operator and occupant document the condition of the premises under a written contract before the accommodation is initially supplied and when the occupant ceases to occupy premises;

(c)   the operator has the right to impose a cleaning fee on the occupant when the occupant ceases to occupy the premises;

(d)  the occupant is permitted, subject to the terms of the lease or licence, to alter the part of the premises occupied by the occupant, such as by attaching hanging devices on a wall;

(e)  the occupant is permitted, subject to the terms of the lease or licence, to keep pets in the premises;

(f)    the occupant must separately arrange and pay for the connection of a telephone, electricity, or gas service;

(g)  the occupant is responsible for the cleaning and minor maintenance of the premises, such as changing light bulbs in their room;

(h)  the premises are unfurnished; and

(i)    the right to occupy the residential premises is supplied to the occupant in exchange for the occupant loaning an amount to the operator together with other fees. ...

However, Paragraph 42 of GSTR 2012/6 notes:

42. The absence of the features set out in paragraph 41 of this Ruling does not, of itself, mean that premises are, or are similar to, a hotel, motel, inn, hostel, or boarding house. Similarly, the presence of some of these factors does not necessarily mean that the premises are not commercial residential premises. As stated at paragraph 11 of this Ruling, determining whether premises fall within either paragraph (a) or (f) of the definition involves matters of impression and degree.

Paragraph 95 of GSTR 2012/6 discusses commercial infrastructure:

95. 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.

Application to your Properties

You operate your enterprise on a commercial basis. You offer accommodation in the Properties to the public and the main purpose of the Properties is to provide accommodation. You offer accommodation in your own right (not as an agent) and arrange certain services (such as cleaning) for guests, as well as providing bedding, linen and towels.

There is no on-site management at each Property, nor a central off-site management location, though guests can contact you by phone for assistance. Occupants have the status of guests, but they do have the right to occupy the entire property.

You do not allow for multiple occupancy; only one guest or group can book the Properties at a time. Although you provide basic refreshments, you do not provide meals to guests. The Properties do not include any commercial infrastructure such as reception desks. The Properties are stand-alone houses that are not primarily designed for commercial use.

As stated in paragraph 41 of GSTR 2012/6, whether premises are commercial residential premises is a matter of overall impression involving the weighing up of all relevant factors. While the operation of your enterprise has several features in common with the operation of commercial residential premises, we note that these are not necessarily determinative in characterising the premises. Taking into account the physical characteristics of the Properties along with the above, we consider that the overall impression is that the Properties are not commercial residential premises.

Therefore, your supply of the Properties by way of licence to guests is not a supply of commercial residential premises, nor a supply of accommodation in commercial residential premises. It is a supply of residential premises and is input taxed under paragraph 40-35(1)(a) of the GST Act.

Note that you are not entitled to claim input tax credits for acquisitions made in relation to making input taxed supplies.

Question 2

The cleaning services and Port-a-cot/high-chair hire are collectively referred to as "the Services" below.

Section 9-5 of the GST Act provides 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 you carry on; and

(c)   the supply is connected with the indirect tax zone[1]; and

(d)  you are 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.

You charge a fee for the supply of the Services. The Services are provided in the course of an enterprise that you carry on. The Services are supplied in Australia. You are registered for GST.

Subsection 9-30(4) of the GST Act provides that a supply is taken to be a supply that is input taxed if it is a supply of anything (other than new residential premises) that you have used solely in connection with your supplies that are input taxed but are not financial supplies.

Your supply of the Services is made solely in connection with your supply of the premises. You do not offer the Services in isolation. As your supply of the premises is input taxed, your supply of the Services is input taxed under subsection 9-30(4) of the GST Act.

[1] Section 195-1 of the GST Act defines the "indirect tax zone" as Australia but does not include external Territories and certain offshore areas.