Edited version of private advice

Authorisation Number: 1052394576819

Date of advice: 12 May 2025

Ruling

Subject: Commercial residential premises

Question

Is the supply of the cottages by way of a short-term lease a taxable supply of commercial residential premises pursuant to section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes.

This ruling applies for the following periods:

DDMMYYYY

The scheme commenced on:

DDMMYYYY

Relevant facts and circumstances

The partnership is a family partnership. You registered for an Australian Business Number (ABN) on DDMMYYYY.

On DDMMYYYY, you acquired the property situated at address (the property) for $ value.

The property is a working farm and short stay farm accommodation provider. The development zoning for the property is listed as farming zone.

You are carrying on two enterprises on the property:

   • farming

   • short stay farm accommodation.

The cottages have been set up as short stay farm accommodation and you are registered as a prescribed accommodation provider with the Council. The Council's health department undertake annual inspections on behalf of the State Government. The annual inspections are a statutory requirement for registered Prescribed Accommodation Providers. An annual registration fee is paid to the Council to issue compliance certification based on the annual inspection.

The Council charges a fee for business that operates an accommodation business. The property pays this fee for the provision of the short stay farm accommodation.

The property has a business insurance with an indemnity limit of $ amount. This is the recommended amount by the State Government for prescribed accommodation provider.

You also operate a farm from the property and send the animals to market for sale once a year. The farm has been in operation since the purchase of the property.

The property also contains a manager's/owner's residence on site with a front office/guest reception area. This is your residence.

A communal garden area and walking tracks are made available to the guests, as well as a shared guests herb and vegetable garden, and a fruit orchard. Car parking facilities are located near the cottages. Each cottage has its own carpark which is located at entrance to each individual cottage. There is also a designated 'visitors carpark' located next to the cottages if additional carparking is needed, if guests have visitors or if guests have larger vehicles which require a larger carparking area.

You do not provide food services and meals are not provided to guests. Multiple unrelated guests can book to stay at the cottages during the same period. However, guests have sole occupancy of the cottage they book (unrelated guests do not share the same cottage)

The cottages are cleaned after the departure of the previous guests in preparation for the next guests. The guests are permitted to request for the maintenance of the cottages by the onsite managers at a negotiated time. This includes cleaning, the replenishment of amenities and/or change of linen. No additional fee is charged for this service. A small fee may be charged for extra provision of new linen or additional towels for guest staying less than seven days. All services are provided to guests seven days a week, usually between the hours of 9am to 6pm, or outside of these hours if required. The guests are provided with your contact details and they can contact you in the event that they require further assistance and/or clarification on any details or amenities in the cottages.

Guests check into the property at the office/reception area situated in the manager's residence.

All guests are provided with directions to their cottage and information on key access if their expected arrival time is after 8pm. Upon departure, all guests are provided with instructions which includes either leaving the key in the cottage or at the reception's desk.

The services provided to guests has not changed since the commencement of the enterprise.

You advertise the cottages on your own website, and external booking platforms.

You also market the cottages internationally with overseas booking agents and deal directly with individual travel agency businesses when required.

Payment of tariffs are deposited to your business account via the following avenues:

   • all bookings made through your website are paid via the EFTPOS machine at your front office, or

   • directly to your business account when booked through third parties online.

You work full time at the property and perform activities in relation to the provision of the short stay farm accommodation:

When you are away from the property on holidays or overnight, an onsite manager is on hand to assist and service the guests need. Where you have online access while offsite, you remotely perform administration tasks such as receiving online bookings, responding to enquiries.

You engage the services of contractors to perform the cleaning of the cottages and the upkeeping of the garden. The services of the contractors are engaged three times per week on average.

You are registered for GST from DDMMYYYY. You have reported GST on sales and claimed input taxed credits. The GST reported and GST credits claimed are in relation to both enterprises operated on the property.

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 40-35

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

Reasons for decision

Section 9-40 provides that you must pay the GST payable on any taxable supplies that you make.

Section 9-5 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 Australia; 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.

Your supply of the cottages satisfies the requirements under section 9-5 because of the following:

   • the supply is for monetary consideration

   • you make the supply in the course of your accommodation enterprise that you carry on

   • the property is located in Australia, hence, supply of the cottages at the property is connected with the indirect tax zone and

   • you are registered for GST.

In your circumstances, the supply of the cottages is not GST-free. Therefore, it remains to be determined if, by supplying the cottages, you are making input taxed supplies.

Residential premises

Section 40-35 provides that a supply of residential premises by way of lease, hire or licence (other than a supply of commercial residential premises or a supply of accommodation in commercial residential premises provided to an individual by an entity that owns or controls the commercial residential premises) is input taxed.

In your case the cottages satisfy the definition of 'residential premises' as the premises provide shelter and basic living facilities as explained at paragraph 9 of Goods and Services Tax Ruling GSTR 2012/5 Goods and services tax: residential premises.

The primary issue in this case is whether your supplies fall within the exclusions in paragraph 40-35(1)(a), being a supply of commercial residential premises or a supply to an individual of accommodation in commercial residential premises that you own or control. If this is the case, the supply is taxable.

Commercial residential premises

Commercial residential premises are defined in section 195-1 to include, amongst other things:

   (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.

The definition of 'commercial residential premises' encompasses similar establishments or establishments that exhibit characteristics that place them on a similar footing to hotels, motels, inns, hostels and boarding houses. Goods and Services Tax Ruling GSTR 2012/6 Goods and services tax: commercial residential premises provides the ATO view of the definition of commercial residential premises.

The terms hotel, motel, inn, hostel and boarding house are not defined in the GST Act and take their ordinary meaning. The Macquarie Dictionary 5^th Edition provides the following definitions:

   Hotel - a building in which accommodation and food, and alcoholic drinks are available

   Motel - a roadside hotel which provides accommodation for travellers in self-contained, serviced units, with parking for their vehicles.

   Inn - a small hotel that provides lodging, food etc., for travellers and others

   Hostel - a supervised place of accommodation, usually supplying board and lodging provided at a comparatively low cost, as one for students, nurses, etc.

   Boarding house - a dwelling in which lodging is provided to paying residents who share common facilities such as a kitchen, laundry, living room, etc.

In their ordinary meanings, these terms share the common attribute of providing accommodation to guests. Paragraph (f) of the definition of commercial residential premises extends the scope of the definition to premises that are 'similar' to one of the class of establishments described in paragraphs (a) to (e). Premises that are 'similar' to establishments that are commercial residential premises must have sufficient characteristics in common with one of the class of premises described.

Paragraphs 10 and 11 of GSTR 2012/6 provide that the tests to be applied in determining whether premises fall within either paragraph (a) or (f) of the definition of 'commercial residential premises' necessarily raise questions of fact involving matters of impression and degree which include consideration of the overall physical character of the premises together with how the premises are operated.

In addition to the physical characteristics of the premises, paragraph 12 of GSTR 2012/6 lists the following eight characteristics that are considered to be common to operating hotels, motels, inns, hostels and boarding houses:

   • commercial intention

   • multiple occupancy

   • holding out to the public

   • accommodation is the main purpose

   • central management

   • management offers accommodation in its own right

   • provision of, or arrangement for, services, and

   • occupants have the status of guests.

Paragraph 41 of GSTR 2012/6 states that ultimately, determining whether premises are commercial residential premises is a matter of overall impression involving the weighing up of all relevant factors.

Paragraphs 95, 96 and 98 of GSTR 2012/6, discusses separately titled rooms, apartments, cottages or villas, relevantly provide as follows:

   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.

   96. Separately titled rooms, apartments, or adjacent cottages or villas located on adjoining or abutting land can be combined with sufficient commercial infrastructure (as discussed in paragraph 95 of this Ruling) so that, as a whole, it can be operated similarly to a hotel, motel, inn, or hostel. Supplies of accommodation in premises operated in this way are supplies of accommodation in commercial residential premises.

   98. A supply by sale or lease of real property consisting of part of a building cannot be characterised by reference to another supply. For example, a hotel may be strata titled so that each hotel room and the commercial infrastructure are separate strata units. Where the strata units are individually supplied under multiple sale contracts or leases, each individual supply of a strata unit must be characterised without reference to other supplies of strata units. A supply by sale or lease of strata titled rooms, apartments, cottages or villas without sufficient commercial infrastructure referred to paragraph 95 of this Ruling is an input taxed supply of residential premises to be used predominantly for residential accommodation regardless of whether the building complex, or any part of it, is being, or will be, operated as commercial residential premises.

Although the abovementioned paragraphs from GSTR 2012/6 concentrate on separately titled rooms and cottages, etc., what is made clear in those paragraphs is that commercial residential premises must include sufficient commercial infrastructure before the supply of those premises can be that of commercial residential premises.

Paragraphs 53 to 55 of GSTR 2012/6 provides an example of commercial residential premises as follows:

   Example 4 - farm stays

   53. Delta Farm Holidays is a farm stay business conducted in association with an adjacent alpaca farm. An on-site manager advertises the farm stays in national lifestyle magazines as 'eco-friendly' holidays.

   54. Accommodation is offered as bed and breakfast, and suites are cleaned daily. Guests are invited to participate in the workings of the farm and stay in renovated farm buildings that sleep up to twelve guests in four separate suites.

   55. The premises are being operated so as to provide accommodation on a commercial basis to travellers (guests) who are temporarily away from their usual homes. The premises provide accommodation to multiple occupants. The guests do not have an exclusive right to occupy any particular part of the premises during their stay. The on-site manager provides central management and services to guests. The accommodation is supplied by Delta Farm Holidays in its own right. Delta Farm Holidays' premises are sufficiently similar to a hotel, inn or boarding house to be characterised as commercial residential premises. The supplies of the farm stays are taxable supplies of accommodation in commercial residential premises.

While there are some similarities, your activities can be distinguished from example 4 above for the following reasons:

   • bed and breakfast are provided, however you do not provide meals

   • the suites are cleaned daily, while in your situation the cottages are cleaned after the guest stay has ended; however, you offer additional cleaning for longer stays of more than 2 days upon request by the guest.

On the facts provided we consider the cottages in question bear the closest resemblance to a 'motel'. Paragraphs 13 through 25 of GSTR 2012/6 describe the features typical of hotels, motels and inns with the qualification that a motel primarily caters to the needs of motorists seeking roadside accommodation.

A motel is a particular type of hotel that primarily caters to the needs of motorists seeking roadside accommodation. An inn is a small hotel at which board (meals) and lodging are provided to travellers. Subject to those qualifications, the following features of hotels are equally relevant to motels and inns:

   • Hotels provide accommodation for a commercial purpose.

   In this case we consider your activities are conducted for a commercial purpose given the business-like manner you operate the farm stay business, as well as the extent and nature of your activities.

     • Hotels have the capacity to provide for multiple occupancy.

   The cottages are advertised on a number of websites with the property having the capacity to provide accommodation to multiple, unrelated guests or occupants at once (multiple occupancy).

     • Hotels usually offer meals to guests and usually have a kitchen where meals are prepared for guests. The premises usually include a restaurant or dining room for guests. A motel need not necessarily have a dining room, but guests of the motel may still be provided meals.

   Whilst motels will usually offer meals to guests and may have a kitchen to prepare such meals, the cottages in this case are fully self-contained with kitchen and dining facilities in each cottage.

     • Rooms are invariably furnished.

   Your cottages are fully furnished and equipped with a bed, lounge area, cooking utensils, etc.

     • Linen and towels are usually supplied. The rooms are usually cleaned and serviced by staff on a daily basis, with the costs of these services being included in the tariff.

   You provide adequate linen and towels during guest stay, that are replaced at the end of a guest's stay or weekly if guest is staying more than seven days. Additional linen/cleaning can be provided upon request.

     • Predominantly, guests of hotels are travellers who ordinarily have their principal place of residence elsewhere, and who need or desire accommodation while away for business or pleasure.

   This is the situation in your case with guests of the cottages typically staying for a minimum of two nights and maximin of twenty-eight days.

   You also provide on-site parking facilities for each of the self-contained cottages.

     • Guests of hotels do not enjoy an exclusive right to occupy any particular part of the premises in the same way as a tenant to whom a house or apartment is let. Nor does a guest of a hotel usually let a room for a term. The guest is usually charged at a daily rate multiplied by the number of days of occupancy.

   This is the case in your cottages as indicated on the booking facility on your website and external booking platforms. Guests do not enjoy an exclusive right to occupy any particular part of the premises.

     • Hotels usually have a reception desk to handle the requirements of both management and guests. Hotels may offer concierge services at either the reception desk or at a separate desk.

   In your case, you have a reception area with facilities to accept reservations and receive payments. In addition, guests are provided with your contact details, and they can contact you in the event that they require further assistance and/or clarification on any details or amenities in the cottages.

     • A hotel is centrally managed by the operator, having at least one person present, or offsite but readily accessible to manage the accommodation and arrange for and provide services.

   In your case, the premises are centrally managed with the office serving as the reception with facilities to accept reservations and receive payments. In addition, you are also available to arrange for the provision of other services such as farm tours and animal feeding on the property.

     • Accommodation in a hotel is supplied by the operator of the hotel in its own right and not in the capacity of an agent for a third party.

   In this case you supply the accommodation to the guests in your own right.

Whilst the infrastructure to provide meals or the provision of meals via a third party is an indication of a premises being similar to commercial residential premises, the level of services may vary between establishments.

Nicholas J addressed this issue in the ECC Southbank decision and stated at [70]:

   [70]... It is true that in comparison with some other types of establishment referred to in the relevant definition, the level of services provided in addition to accommodation may seem slight. But the services provided by staff to residents through the reception desk are by no means insignificant and, should be considered together with all other relevant matters.

You do not have facilities at the property for the provision of food or drink; however, you have an onsite reception desk to provide services to guests including accepting reservations and receiving payments from guest. In addition, you arrange for the provision of other services such as farm tours and animal feeding on the property. Your cottages are fully self-contained with kitchen and dining facilities in each cottage.

In considering those features the following is noted:

   • Motels provide accommodation for a commercial purpose. In this case we consider your activities are conducted for a commercial purpose given the business-like manner you operate the farm stay business, as well as the extent and nature of your activities.

   • The cottages are advertised on a number of websites with the property having the capacity to provide accommodation to multiple, unrelated guests or occupants at once (multiple occupancy).

   • Whilst motels will usually offer meals to guests and may have a kitchen to prepare such meals, the cottages in this case are fully self-contained with kitchen and dining facilities in each cottage.

   • Guest rooms in a motel are invariably furnished and always include a bed and some living area. Your cottages are fully furnished and equipped with a bed, lounge area, cooking utensils, etc.

   • Motels will usually provide linen and towels with rooms typically cleaned and serviced by staff on a daily basis. Costs of such services being included in the tariff. You provide adequate linen and towels during guest stay, that are replaced at the end of a guest's stay or weekly if guest is staying more than seven days.

   • Predominately, the guests of motels are travellers who ordinarily have their principal place of residence elsewhere. This is the situation in your case with guests of the cottages typically staying for a minimum of two nights and maximin of twenty-eight days.

   • Guests of a motel do not usually let a room for a term with accommodation usually charged on a daily rate multiplied by the number of days of occupancy which is the case in your cottages as indicated on the booking facility on your website and external booking platforms.

   • Motels typically have a reception desk to handle the requirements of both management and guests particularly when guest's check-in or check-out of the establishment.

In your case, the premises are centrally managed with the office serving as the reception with facilities to accept reservations, allocate rooms and receive payments. In addition, you are also available to arrange for the provision of other services on the farm.

   • Motels do not normally provide shared accommodation to guests in the sense of having a number of unrelated guests sharing a kitchen and living facilities. As discussed above, the cottages are fully self-contained with guests not required to share kitchen and living facilities.

   • Accommodation in a motel is supplied by the operator of the motel in its own right and not in the capacity of agent for a third party. In this case you supply the accommodation to the guests in your own right.

   • You also provide on-site parking facilities for each of the self-contained cottages.

As stated above, determining whether the cottages are commercial residential premises is a matter of overall impression involving matters of impression and degree and weighing up all relevant factors.

In this case, while the property doesn't have all the commercial infrastructure of a more traditional motel, we consider that the operation of the property brings the premises in to being similar to that of a motel. Weighing up all the relevant factors as discussed above, we consider that the cottages exhibit sufficient characteristics typically inherent to a motel to be classified as being similar enough to this type of establishment under paragraph (f) of the definition of 'commercial residential premises' at section 195-1.

As such, your supplies of accommodation in the cottages are not input taxed, but rather are taxable supplies under section 9-5, being supplies of accommodation in 'commercial residential premises'.