ATO ID 2005/189: GST and supply of student accommodation by a hostel whose primary purpose is to accommodate overseas students
Date of decision: 27 June 2004
Business line: Indirect Tax

Issue
Is the entity, a hostel that provides accommodation to students that undertake a secondary course at a separate institution, making a GST-free supply under subsection 38-105(2) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when:

Decision
No, the entity is not making a GST-free supply under subsection 38-105(2) of the GST Act. The entity is making a taxable supply under section 9-5 of the GST Act.

Facts
The entity is a hostel and its stated and demonstrated primary purpose is the provision of accommodation to students from outside of Australia. Occasionally it will supply accommodation to students from rural or remote locations in Australia. All students being accommodated are undertaking a secondary course at a separate institution. The entity is registered for goods and services tax and the supply satisfies the other positive limbs of section 9-5 of the GST Act.

Reasons for decision
Summary: A supply is GST-free under subsection 38-105(2) of the GST Act if: The entity is supplying accommodation in a hostel to students who are undertaking a secondary course. The remaining requirement in subsection 38-105(2) of the GST Act is that the hostel's primary purpose must be to provide accommodation for students from 'rural or remote locations'. The entity's primary purpose is the provision of accommodation to students from outside of Australia. Therefore, it must be determined whether overseas students are from 'rural or remote locations'. The GST legislation only applies to Australia and its States and Territories. Therefore, it excludes areas outside Australia unless specified. The term 'rural or remote locations' is not defined in the GST Act and as such is considered to be rural or remote locations in Australia only. Rural or remote locations in Australia are listed in the Rural, Remote and Metropolitan Areas Classification (RRMA) (see Note 1), which delineates Australia into a seven-scale classification system. Of the seven classifications, two are metropolitan, three are rural and two are remote. A student will be from a rural or remote location if they are from an area designated as R1, R2, R3, Rem 1 or Rem 2 as described in the following table. The entity's primary purpose is to provide accommodation to students from outside of Australia, not to provide accommodation to students from 'rural or remote locations'. Therefore, the entity does not satisfy the requirements in subsection 38-150(2) of the GST Act and is not making a GST-free supply even when made to students from rural or remote locations. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. The supply is neither GST-free under any other provision in Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 9-5 subsection 38-105(2) Division 87
Related ATO interpretative decisions: ATO ID 2004/977
Other references: Department of Primary Industries and Energy and the Department of Human Services 1994, Rural, Remote and Metropolitan Area Classification
Subject references: Goods and services tax GST free GST education Student accommodation