Private ruling: GST on residential premises
Date of advice: 27 February 2024
Published: 15 April 2024
Ruling period: DDMMYYYY to DDMMYYYY
Date scheme commenced: DDMMYYYY

Ruling: Q1: Are the supplies made by Entity A by way of rent of the Apartments under the Leases input taxed supplies of residential premises under section 40-35 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: Yes. The supplies made by Entity A by way of rent of the Apartments under the Leases are supplies of residential premises, and are not supplies of commercial residential premises or supplies of accommodation in commercial residential premises. Therefore, the supplies are input taxed supplies under section 40-35. | Q2: Will the proposed sale of the Apartments by Entity A be input taxed supplies of residential premises under section 40-65 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A2: Yes. The proposed sale of the Apartments will be supplies of residential premises that are neither commercial residential premises nor new residential premises. Therefore, the sales will be input taxed pursuant to section 40-65, and GST will not be payable on the sales.

Relevant facts and circumstances: Entity A registered for GST effective from DDMMYYYY. In or about MMYYYY, Entity A acquired the property (the Property). The Property is within walking distance of <education institutions>, but the Property does not have any connection to, or arrangements with, a specific education institution. Entity A constructed a multi-level student apartment complex (the Premises) on the Property. The Premises includes # separately titled apartments, a reception with a reception desk, shared laundry facilities, common rooms, a library, lockers, bike storage / secure carparking and an orchard garden. A number of student apartments were sold off-the-plan to individual purchasers to help finance construction. Construction was completed in or about MMYYYY and occupants began moving in around MMYYYY. Over the years, further student apartments have also been sold. In total, Entity A sold # of the student apartments to individual purchasers. Entity A retained # student apartments (Apartments) for leasing purposes. Entity A has not actively marketed the Apartments for sale for at least 5 years since the Property first became residential premises. Each Apartment contains a sleeping quarters, bathroom, kitchenette, study desk and storage. The Owner's Corporation manages the building's common property and commercial infrastructure including the reception area, shared laundry facilities and car parks. Management of the property Entity A engaged an unrelated third party, Entity B, to manage the property on Entity A's behalf. Entity B acts as Entity A's agent in accordance with the terms of a management agreement. Entity A does not directly provide any pastoral care services to occupants. All such services provided to occupants are provided by Entity B in their capacity as agent for Entity A. Where queries or issues arise regarding the Property, an occupant may contact Entity B for assistance. The reception area is not manned. A representative from Entity B will attend the Property as required by occupants, but there are no fixed hours. Residential Tenancy Agreements and Occupant Rights The Apartments are leased to occupants pursuant to separate Residential Tenancy Agreements (Leases) between Entity A and each occupant. The Leases are governed by the Residential Tenancies Act 1997 (RT Act). Clauses in the Leases provide that: • A bond is payable by the tenant. Entity A (or their agent) must lodge the bond with the Residential Tenancies Bond Authority within 10 business days after receiving payment. • Rent is to be paid per calendar month in advance. • A property condition report is required to be prepared on or before the date the renter moves into the rented premises. • Gas and water are included as part of the rent. All other utilities are the responsibility of the tenant. • Tenants are permitted to make modifications to their apartment, without seeking consent, in accordance with the modifications listed on the Consumer Affairs website. • Tenants are entitled to quiet enjoyment of the rented premises. Entity A (or their agent) may only enter the premises in accordance with the RT Act. • Tenants are responsible for the cleaning and minor maintenance of their apartment, such as changing light globes, fluorescent tubes (and starters) and LED lights. • Entity A must not unreasonably refuse a tenant's request to keep a pet. • Entity A may impose a cleaning fee on the tenant at the end of the lease in certain circumstances. The Apartments have been so leased (or actively marketed for lease during any periods of temporary vacancy) continuously since Entity A completed construction. The Leases are all on broadly similar terms and are mostly for fixed terms varying between <# months> and <# months>. Occasionally a lease will be for a shorter period if a student is completing their course mid-year. On DDMMYYYY, Entity C was appointed as administrator of Entity A. On DDMMYYYY Entity C was appointed as liquidator of Entity A. Entity C is registered for GST in its capacity as a representative. Since its appointment as liquidator, Entity C has continued to lease the Apartments pursuant to the Leases and the management agreement with Entity B. On DDMMYYYY, a Contract of Sale was entered into to sell the Apartments in one line. The Contract of Sale provides that: • The Vendor is Entity A. • The purchase price is <amount> plus GST, subject to a clause in the Contract of Sale. • Settlement is due on DDMMYYYY (unless otherwise as agreed by the parties in writing). • The supply of the property under contract will be treated as an input taxed supply of existing residential property, subject to the receipt of a Private Ruling from the ATO on or before settlement. • The management agreement will not be assigned as part of the sale but each Apartment will be sold subject to any existing Lease. • The margin scheme will not apply. • The sale is not of a going concern.

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 40-65 | A New Tax System (Goods and Services Tax) Act 1999 section 40-75 | A New Tax System (Goods and Services Tax) Act 1999 section 195-1