Private ruling: Interaction of the GST Act 1999 (long-term accommodation in commercial premises)
Date of advice: 9 November 2018
Published: January 2019
Date scheme commenced: 9 November 20XX

Ruling: Q1: Is the accommodation (supply) an input taxed sale due to the supplying of residential premises under GST provisions (section 40-35) as the supplies are residential premises to be used predominantly for residential accommodation? | A1: No. the supply is one of commercial premises. | Q2: If yes to question 1 (the supply is input taxed), the company is not required to be registered for GST as the input taxed sales are not taken into account when estimating the GST turnover (regardless the amount of turnover). Please confirm. | A2: As the supply has been determined to be one of commercial premises, the answer to this question is moot. | Q3: If no to question 1 (the supply is not input taxed), the supply will be a taxable supply due to the consideration for supplying of lease of commercial residential premises. Accordingly, the company will be required to register for GST. Please confirm. | A3: Yes, it is commercial premises. However, Divisions 188 & 23 of the GST Act 1999 need to be considered to determine if you are required to be registered for GST. | Q4: If the company is required to be registered then the company will be able to apply Division 87 for concessionary treatment (predominantly for long term accommodation) or make a choice under section 87-25 to treat the supplies of accommodation as being input taxed due to the supplies of long term accommodation that is more than 28 days. Please confirm. | A4: Yes. | Q5: If the company makes an election not to apply Division 87, the supply can be an input taxed supply since the accommodation services are predominantly for long term accommodation (more than 70% of the supplies of accommodation is for a continuous period of 28 days or more)? This treatment also includes the first 27 days of that supply? | A5: Yes. | Q6: It is our understanding that any supplies of accommodation of 27 days or less are not subject to the concessional treatment (even though there is an election in place to treat the supplies of accommodation as input taxed), so these are not input taxed and taxable supplies under the basic GST rules. Please confirm. | A6: Yes. | Q7: If point 6 applies and the entity has mixed supplies of accommodation (taxable supplies for the short term service being less than 28 days and input taxed supplies being long term accommodation 28 days and more) then what would be the fair and reasonable method to determine as to what portion of the GST credits can be claimed on the purchases? | A7: Yes. The apportionment method you choose must correctly distinguish between taxable and input taxed supplies.

Relevant facts and circumstances: 1. Company A is an Australian Private Company (A.C.N. XXX XXX XXX) registered on XX/XX/20XX herein referred to as “Company A or The Company”. 2. The company is not currently registered for GST. 3. Company A is a carrying on a leasing enterprise as franchise business of “XXX Franchising”. The company has been providing executive serviced apartments specialising in accommodating executives when they are travelling on business, projects or relocating since June 20XX. Please find the following link for further information about the operations provided if required (https://www.astraapartments.com.au). 4. The business is operating XX apartments across X buildings. The company offers these apartments to existing XXX corporate clients and other companies on a medium to long term corporate housing. 5. The apartments are required by the corporate clients for staff relocation or projects needing for staff to work away from their home or usual office. 6. The accommodation is generally provided for a periodic term such as for a period of weeks (e.g. 8 to 10) or periods of months or years at a time. 7. The company enters into a lease agreement with occupants to document the condition of the premises before the accommodation. 8. All the apartments are fully furnished, self-contained with kitchens and internal laundry facilities. 9. Company A is not responsible for cleaning but the cleaning can be provided on request. Any maintenance issue is attended by the company or contractors arranged by the company. 10. The company also arranges connection of gas, electricity and internet services for all apartments but there is no telephone provided. 11. There is no central management in the buildings to accept reservations, allocate rooms, receive payments or perform / arrange any service. Also, there are no any other facilities or services are provided such as restaurants or taxi bookings. 12. Company A has one employee who is located off the premises and is responsible for the furnishing, letting and managements of the apartments. The employee is only on the premises to show potential tenants through the apartments and initial meeting to provide keys when a tenant signs a letting agreement. 13. The company manages the invoicing and booking processes. 14. The company provides medium to long term rentals with the average length of stay being 8 to 10 weeks with many clients staying for more than 3 months and some extends to a year. Please note that the average stay of bookings during the last three months was XX nights. 15. With regards to the GST registration requirements under Section 23-5 of the GST Act, we understand that the company is carrying on an enterprise and noted that the annual GST turnover meets the registration turnover threshold.

Relevant legislative provisions: A New Tax System GST Act – Division 23 | A New Tax System GST Act – Division 40 | A New Tax System GST Act – Division 87 | A New Tax System GST Act – Division 188

Reasons for decision: Detailed Reasoning - Detailed reasoning: GSTR 2012/6: Goods and Services Tax: Commercial residential premises and GSTR 2012/7 were discussed in terms of the ATO view for this PBR. The first question we discussed was whether the taxpayer was supplying commercial or residential premises. In particular, we discussed on a point by point basis paragraph 11 and 12 of GSTR 2012/6 which lists the characteristics of operating hotels, motels, inns, hostels, boarding houses or similar premises that are relevant, though not necessarily determinative, to characterising premises as commercial residential premises are: • Commercial intention; • Multiple occupancy; • Holding out to the public; • Accommodation is the main purpose; • Central management; • Management offers accommodation in its own right; • Provision of, or arrangement for, services; and • Occupants have status as guest. Every one of the above stated dot points above stated was discussed with your Tax Agent and referenced back to the facts. As you satisfied nearly all of the above stated criteria in their entirety, it was determined that on the balance of probability that you are carrying on a commercial leasing and not residential leasing enterprise. Pursuant to the facts provided it determined that you are eligible to use Division 87 of the GST Act 1999. Your representative advised that you wished to exercise the discretion pursuant to section 87-25 of the GST Act 1999 and to treat your taxable supplies of commercial rent instead as being input taxed pursuant to section 40-35 of the GST Act 1999. Your representative advised on the XX/XX/20XX that your 20XX financial year turnover was $XXX and the income generated from short term accommodation (under 28 days was $XX is well below the threshold requiring you to be registered for GST of $75,000). Pursuant to paragraph 58 of GSTR 2012/7, your tax agent advised that your current turnover of $XX in the 20XX financial year and also your projected turnover is well below the relevant amount of $75,000 amount which would require you to be registered amount according to the projected and current turnover tests subject to Division 23 of the GST Act 1999. Pursuant to section 188 of the GST Act 1999, you have exercised the discretion to not include your input taxed supplies in the calculation of current and or projected GST turnover. In summary, you are not required to be registered for GST, as you are currently below the threshold of $75,000 to be registered for GST.