Private ruling: GST and supplies of long-term accommodation
Date of advice: 11 January 2019
Published: April 2019
Ruling period: 1 July 20XX – 30 June 20XX

Ruling: Q1: In regard to your operation of the identified Caravan Park, is the value of your supplies of long-term accommodation calculated pursuant to section 87-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: No | Q2: In regard to your operation of the identified Caravan Park, is the value of your supplies of long-term accommodation calculated pursuant to section 87-10 of the GST Act? | A2: Yes | Q3: If the answer to Question 2 is ‘Yes’, can you choose not to apply the concessional treatment under section 87-10, and instead calculate the value of your supplies of long-term accommodation pursuant to section 9-75 of the GST Act? | A3: No

Relevant facts and circumstances: You are registered for GST. You own and operate a caravan park (CP) located at a specified location. You engage an unrelated third-party management company (Operator) to operate and maintain the CP. The Operator invoices and collects the revenue from the CP users/tenants based on rates set by you. The Operator remits the revenue to you periodically less any expenses and commission in respect to the operation of the CP. The CP has a number of long-term tenants/residents (Residents) who sign a 12-month agreement, which entitles Residents to leave their caravan onsite for the relevant 12-month period. Under the agreement, the Residents are entitled to physically occupy their caravan at any time for a maximum total period of up to 13 weeks in the 12-month period. The Residents’ caravans are kept on their relevant individual site for the 12-month period. If required, the caravan may be moved to another individual site within the CP, but the caravans are not moved off-site or put into any kind of storage area or facility when they are not in use. There are no designated areas of the park for the Residents. They are intermingled with casual and short-term guests of the CP. Currently, the CP has XXX sites. Based on a map of the caravan park, there are approximately XXX annual sites in the CP (spread across the CP) and XX casual or short-term sites. Currently, approximately XXX of the annual sites are occupied by Residents’ caravans. This number is expected to remain consistent based on past years’ occupancy rates.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 Section 9-40 | Section 9-70 | Section 9-75 | Paragraph 40-35(1)(b) | Division 87 | Section 87-5 | Section 87-10 | Section 87-15 | Subsection 87-20(1) | Subsection 87-20(3) | Section 195-1

Reasons for decision: Summary: Section 87-5 provides that the ‘value’ of a taxable supply of commercial accommodation is 50% of what would be the price of the supply where the supply of the accommodation: (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; The term ‘commercial accommodation’ is defined in section 87-15 as 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. ‘Commercial residential premises’ is defined in s 195-1 to include a caravan park or camping ground. The CP is considered ‘commercial residential premises’ for GST purposes. ‘Long-term accommodation’ is defined in subsection 87-20(1) as commercial accommodation provided for a continuous period of 28 days or more, in the same premises, to an individual (on their own, or together with other individuals who are not also provided with that commercial accommodation at their own expense). Your supplies of accommodation to Residents of the CP would be considered to be supplies of long-term commercial accommodation in commercial residential premises. Subsection 87-20(3) provides that commercial residential premises are ‘predominately for long-term accommodation’ if at least 70% of the individuals who are provided with commercial accommodation in the premises are provided with commercial accommodation as long-term accommodation. Goods and Services Tax Ruling GSTR 2012/7: Goods and services tax: long-term accommodation in commercial residential premises , discusses at paragraph 54 that any fair and reasonable method may be used to determine whether the 70% requirement is satisfied. The Commissioner accepts that one of the following methods or a combination of both can be used: (a) the actual occupancy of the premises for the twelve months preceding the month for which the booking is made; or (b) the projected occupancy for the twelve months following the month in which the booking is made. Paragraph 55 of GSTR 2012/7 clarifies that when looking at actual or projected occupancy, it is the number of supplies of accommodation or the number of bookings that should be used in the calculation, rather than the number of people for each booking. Given your circumstances, the CP would not be considered to be used for the purposes of providing ‘predominantly’ long-term accommodation as you have advised that XXX sites of a total of XXX sites are provided for long-term accommodation (i.e. less than 70%). As such section 87-5 would not be applicable. Section 87-10 provides for the concessional treatment of supplies of commercial accommodation in commercial residential premises that are not predominately for long-term accommodation. Under these circumstances, the value of a taxable supply is calculated as the sum of: ● the unmodified value of the part of the supply that relates to the provision of the commercial accommodation during the first 27 days; and ● 50% of what would be the price (if Division 87 did not apply) of that part of the supply that relates to provision of the commercial accommodation after the first 27 days. As previously discussed, you make supplies to Residents of the CP of commercial accommodation in commercial residential premises where those premises are not used for predominately making supplies of long-term accommodation. As such, the values of such supplies are calculated in accordance with section 87-10. Section 87-25 provides that you may choose not to apply the special rules for reducing the value on which GST is calculated on your supplies of commercial accommodation. Where you choose not to apply the concessional treatment to calculate the value of your supplies under section 87-10, the supplies will be input taxed pursuant to paragraph 40-35(1)(b). The values of your supplies of long-term accommodation to Residents of the CP are calculated in accordance with the special rule contained in section 87-10. There are no provisions in the GST Act that allow for the basic rules of the GST Act to be applied where a special rule is applicable to the transaction. You cannot choose to calculate the value of such supplies under the basic rules contained in section 9-75.

Reasons for decision: Note: In this reasoning, unless otherwise stated, | ● all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) | ● reference material(s) referred to are available on the Australian Taxation Office (ATO) website www.ato.gov.au | Section 9-40 provides that you are liable for GST on any ‘taxable supply’ that you make. It is common ground that your supplies of accommodation in the CP are ‘taxable supplies’. | Under the basic rules, section 9-70 provides that the amount of GST payable on a taxable supply is 10% of the ‘value’ of the taxable supply. The ‘value’ of a taxable supply is calculated pursuant to section 9-75 effectively calculated as 1/11 th of the price of the supply. | However, sections 87-5 and 87-10 contain special rules that modify the application of the basic rule contained in section 9-75.