ATO ID 2004/977: GST and student accommodation in boarding schools
Date of decision: 15 December 2004
Business line: Indirect Tax

Issue
Is the entity, a boarding school, making a GST-free supply under section 38-105 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it provides accommodation to a student from a metropolitan location undertaking a primary course at a separate institution?

Decision
Yes, the entity is making a GST-free supply under section 38-105 of the GST Act when it provides accommodation to a student from a metropolitan location undertaking a primary course at a separate institution.

Facts
The entity is a boarding school. Its documented principal objectives are to provide education to primary students and to provide accommodation to students from rural or remote locations. Students from rural or remote locations are given preference when accommodation places are offered by the entity. However, where vacancies exist, students from metropolitan locations may be accommodated. The entity supplies supervised accommodation to a student from a metropolitan location who is undertaking a GST-free primary course supplied by another entity at a separate institution. The entity is registered for goods and services tax (GST).

Reasons for decision
Summary: Section 38-105 of the GST Act sets out when a supply of student accommodation is GST-free. A supply is GST-free under subsection 38-105(1) of the GST Act if: Although the entity is supplying student accommodation to a student that is undertaking a primary course, the student is undertaking that primary course at a separate institution. The entity is not the supplier of that primary course. Therefore, the entity's supply of accommodation is not GST-free under subsection 38-105(1) of the GST Act. A supply of accommodation is GST-free under subsection 38-105(2) of the GST Act if: Therefore, in order for the entity to provide GST-free student accommodation under subsection 38-105(2) of the GST Act, these criteria must be satisfied: The entity is supplying supervised accommodation to a student that is undertaking a primary course. It does not matter that the entity is not the supplier of the primary course, as long as the student is undertaking a primary course. Therefore, the first criterion is satisfied. In relation to the second criterion, it must be determined whether the entity's boarding operation has similar characteristics to that of a 'hostel'. The word 'hostel' is defined in The Macquarie Dictionary , 1997, 3rd Edition, The Macquarie Library Pty Ltd, NSW as 1. a supervised place of accommodation, usually supplying board and lodging, provided at a comparatively low cost, as one for students, nurses or the like. The entity supplies supervised accommodation, the characteristics of which are similar to those provided by a 'hostel'. Therefore, the entity's supervised accommodation will be treated as a hostel for the purposes of paragraph 38-105(2)(b) of the GST Act, and satisfies the second criterion. In order to satisfy the third criterion, the stated and demonstrated primary purpose, objective, goal, aim or mission of the entity's boarding operation must be to provide accommodation to students from rural or remote locations who are undertaking a primary, secondary or special education course. The documented principal objective of the entity's boarding operation is to provide accommodation to students from rural or remote locations. Further, as it gives preference to those students from rural or remote locations, the entity is demonstrating that its activities are consistent with its principal objective. The supply of accommodation to a student from a metropolitan location does not change the underlying primary purpose. Therefore, the third criterion is satisfied. As all three criteria are satisfied, the entity is making a GST-free supply under subsection 38-105(2) of the GST Act when it provides accommodation to a student from a metropolitan location undertaking a primary course at a separate institution. As the entity satisfies subsection 38-105(2) of the GST Act, the supply of accommodation by the entity to all students undertaking a primary course will be GST-free, whether or not the student is from a rural or remote location and whether or not the entity is making the supply of the primary course.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 38-105 subsection 38-105(1) subsection 38-105(2) paragraph 38-105(2)(b)
Related public rulings and determinations: Goods and Services Tax Ruling GSTR 2000/30
Other references: The Macquarie Dictionary, 1997, 3rd Edition, The Macquarie Library Pty Ltd, NSW
Subject references: Goods and services tax GST free GST education Student accommodation Student accommodation - non-tertiary