Private ruling: GST, the supply of accommodation an impact on registration requirements
Published: July 2012

Ruling: Q1: Are you required to be registered for GST? | A1: No.

Relevant facts and circumstances: You are a partnership. You are currently not registered for GST. You acquired a block of land where you plan to build a guest house. The plans for the guest house are approved, the building contract is signed and construction has commenced. The quest house is a single level standalone dwelling with a double carport. It comprises a kitchen, lounge, dining laundry, and other room with 3 bedrooms, each with its own ensuite. You supplied a copy of the floor plan in your application. The house will be available for a maximum of 6 guests. It will be let out to single groups wanting accommodation for 1 to 6 people, but is not available on a room by room basis. The nightly tariff is based on 2 people occupying 1 bedroom and 1 bathroom. Additional quests will pay extra per night to cover the extra cleaning and linen hire costs. You have a business name and you will be advertising the accommodation on the national advertising websites and your own website. The house will be available for holiday rental, charged on a nightly rate for a minimum 2 night stay and maximum 30 night stay. You expect that your turnover from this activity may exceed $75,000 per annum. You will not conduct any other activities through this partnership. Guests will be required to bring their own food as no meals or catering is available. There is a fully equipped kitchen available for use. There will be no onsite manager or booking office on the premises. However, you will engage a manager to assist with taking phone bookings, internet enquiries, accept payments and organise house keeping/cleaning contractors. This manager will be paid on a 'per nightly' booking commission. Servicing of the quest house will only occur between guest turnarounds, so there is no daily house keeping. There is no employee accommodation on the premises. The premises are fully furnished and come with the following items supplied: · linen/towels, (supplied through a commercial laundry/linen hire company) · appliances, (TV, stereo, kitchen appliances and laundry appliances) · services:, (Internet, phone, cable TV and heating and bath room amenities (shampoo, soap etc hair dryers)) and · another room and bbq.

Relevant legislative provisions: 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, | A New Tax System (Goods and Services Tax) Act 1999 Section 23-5 and | A New Tax System (Goods and Services Tax) Act 1999 Division 188.

Reasons for decision: Summary: Section 23-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that you are required to be registered if you are carrying on an enterprise; and your GST turnover meets the registration turnover threshold. The current registration turnover threshold is $75,000. In your case: · you are carrying on an enterprise of providing accommodation, and · you expect that your turnover from this activity will exceed $75,000 per annum. Generally, when considering whether your turnover meets the registration turnover threshold you need to consider both your current and projected turnover from all supplies that you are likely to make, excluding input taxed supplies. You have advised that you will not be making any other supplies through this partnership. Therefore we will consider whether your supplies of accommodation are input taxed or taxable supplies. Section 40-35 of the GST Act provides that a supply of premises that is by way of lease, hire or licence (including a renewal or extension of a lease, hire or licence) is input taxed if: · the supply is of residential premises (other than a supply of commercial residential premises or a supply of accommodation in commercial residential premises provided to an individual by the entity that owns or controls the commercial residential premises); or · the supply is of commercial accommodation and Division 87 (which is about long-term accommodation in commercial premises) would apply to the supply but for a choice made by the supplier under section 87-25. However, the supply is input taxed only to the extent that the premises are to be used predominantly for residential accommodation (regardless of the term of occupation). | Detailed Reasoning - Residential premises: The definition of residential premises in section 195-1 of the GST Act refers to land or a building that is occupied as a residence, or for residential accommodation, or is intended and capable of being occupied as a residence or for residential accommodation (regardless of the term of occupation), and includes a floating home. Draft Goods and Services Tax Ruling GSTR 2012/D1: residential premises and commercial residential premises (GSTR 2012/D1) represents the Commissioners preliminary though considered view about the characteristics of residential and commercial residential premises. Paragraph 26 of GSTR 2012/D1 explains that the physical characteristics common to residential premises are premises that provide the occupants with sleeping accommodation and at least some basic facilities for day to day living. The premises on the property is described as a single story house containing bedrooms, bathroom and a kitchen and is fit for human habitation. Therefore, your premises meet the definition of residential premises and the lease of the accommodation will be an input taxed supply unless it is: · a supply of commercial residential premises or a supply of accommodation in commercial residential premises provided to an individual by the entity that owns or controls the commercial residential premises); or · the supply is of commercial accommodation and Division87 (which is about long-term accommodation in commercial premises) would apply to the supply but for a choice made by the supplier under section 87-25. | Detailed Reasoning - Commercial residential premises: The term commercial residential premises is defined in section 195-1 of the GST Act to mean among other things: (a) a hotel, motel, inn, hostel or boarding house; or (b)….. (f) anything similar to residential premises described in paragraphs(a). For your premises to be commercial residential premises, they must be one of the types of establishments listed in paragraph (a), or, under paragraph (f), must possess the characteristics that are common to the premises listed in paragraph (a) to a degree that would place them in that class rather than with premises of another kind. Paragraph 50 of GSTR 2012/D1 lists the following as the main characteristics of commercial residential premises. While not an exhaustive list, the following are considered to be characteristics that are commonly found in operating hotels, motels, inns, hostels and boarding houses: (i) commercial intention The premises are operated on a commercial basis or in a business-like manner even if they are operated by a non-profit body. (ii) accommodation is the main purpose Providing accommodation is the main purpose of the premises. 6 (iii) multiple occupancy The premises have the capacity to provide accommodation to multiple, unrelated guests at once in separate rooms, or in a dormitory. (iv) occupants have status as guests 7 The premises are used to provide accommodation of a transient nature to guests. A guest is someone who is away from their usual home, or who has no other home. The accommodation may be of a short or long term nature. As a guest, a person has the right to occupy and enjoy the premises, but accepts as part of the hire of accommodation that the management maintains overall control of both their room, and the premises as a whole. (v) holding out to the public The premises offer accommodation for guests to the public or a segment of the public. (vi) central management The premises have central management to accept reservations, allocate rooms, receive payments and perform or arrange services. This can be provided through facilities on-site or off-site. (vii) provision of, or arrangement for, services Management provides guests with some services and facilities, or arranges for third parties to provide them. (viii) management offers accommodation in its own right The entity operating the premises supplies accommodation in its own right rather than as an agent. Paragraph 53 of GSTR 2012/D1 explains that to be classified under paragraph (a) of the definition of commercial residential premises or under paragraph (f) for premises that are similar to those described in paragraph (a), it is necessary that the premises be principally used to provide accommodation to individuals who have the status of guests (as discussed in subparagraph 50(iv)). Other than this characteristic, it is not a requirement for all of the remaining operating characteristics or additional objective factors to be present. It is necessary to weigh up each of the other characteristics and the additional objective factors to determine whether the overall character of the premises satisfies either paragraph (a) or (f) of the definition. On the information provided, the premises satisfy items i, ii, iv, v and vii which includes that your clients have the status of guests. However, in your application, you advised that you only take single bookings for guests and do not take multiple bookings for unrelated guests. In addition, you provide no services to the clients besides booking services and cleaning of room prior to arrival. You advised in a subsequent conversation that you may have coffee or tea making facilities. However, you will not provide daily cleaning or any meals. Therefore, although you satisfy some of the characteristics identified in paragraph 50 of GSTR 2012/D1, we consider that because you do not provide accommodation on a multiple occupancy basis and the services are minimal, your accommodation does not have the characteristics of accommodation in commercial residential premises. | Detailed Reasoning - Conclusion: Therefore your supply of accommodation is an input taxed supply of accommodation in residential premises. As such the supplies you make are excluded from calculation of both current and projected turnover. Consequently, as you make no other supplies, you do not meet the registration threshold and are not required to be registered for GST.

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