Private ruling: Goods and Services Tax (GST) and the hiring of caravans
Date of advice: 9 August 2018
Published: September 2018

Ruling: Q1: Is the hiring of caravans by entity A (“A”) considered to be a taxable supply under section 9-5 of A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: When you, A, are required to be registered for GST your hire of the caravans will be taxable supplies under section 9-5 of the GST Act.

Relevant facts and circumstances: You (being A) are not registered for GST. You conduct an accommodation business. The business includes the hiring of caravans for individuals to live in and the lease of a number of houses that you own to third parties. Your turnover from the hire of caravans is currently below $75,000. You have no other income from any business besides the lease income from renting the houses. When a client wants to hire one of your caravans you enter into an agreement with them for a weekly rental and tow the caravan to the site the client advises. The site must be within X hours from your base. Currently you have X caravans available for hire for accommodation. The longest period of time a client has been living in one of your caravans is for about X years. Your GST turnover is currently less than $75,000 and you have not been charging GST to clients. It is anticipated that your turnover will exceed $75,000 sometime in the future.

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 Paragraph 9-5(a) | A New Tax System (Goods and Services Tax) Act 1999 Paragraph 9-5(b) | A New Tax System (Goods and Services Tax) Act 1999 Paragraph 9-5(c) | A New Tax System (Goods and Services Tax) Act 1999 Paragraph 9-5(d) | A New Tax System (Goods and Services Tax) Act 1999 Section 9-20 | A New Tax System (Goods and Services Tax) Act 1999 Section 23-5 | A New Tax System (Goods and Services Tax) Act 1999 Paragraph 40-35(1)(a) | A New Tax System (Goods and Services Tax) Act 1999 Section 188-10 | A New Tax System (Goods and Services Tax) Act 1999 Section 188-20 | A New Tax System (Goods and Services Tax) Act 1999 Section 195-1

Reasons for decision: Summary: The key issue in this case is in relation to whether your supply or hiring of caravans to clients would be taxable supplies for GST purposes. We consider such supplies as part of your enterprise will be taxable supplies pursuant to section 9-5 of the GST Act when you are required to be registered for GST pursuant to section 23-5. | Detailed Reasoning - Detailed reasoning: In the reasoning unless otherwise stated, ● all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) ● all reference materials referred to are available on the Australian Taxation Office (ATO) website www.ato.gov.au ● all legislative terms of the GST Act marked with an asterisk are defined in section 195-1 of the GST Act You must pay the GST payable on any taxable supply that you make. Section 9-5 provides that you make a taxable supply if: (a) you make the supply for *consideration; and (b) the supply is made in the course or furtherance of an *enterprise that you *carry (c) on; and (d) the supply is *connected with the indirect tax zone; and (e) you are *registered, or *required to be registered. However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed. From the information you have provided, you meet the requirements under paragraphs 9-5 (a) to 9-5(c) and your supplies of hiring of caravans are not GST-free. You are currently not registered for GST since your GST turnover is below the GST registration threshold of $75,000. Therefore, we need to consider whether you are required to be registered for GST under paragraph 9-5 (d) and whether your supplies are input taxed. | Detailed Reasoning - Input taxed GST treatment for residential rental income: Under paragraph 40-35(1)(a), a supply of premises by way of lease, hire or licence is input taxed if it is a supply 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 an entity that owns or controls the commercial residential premises) is input taxed. ‘Residential premises’ is defined in section 195-1 as land or a building that: a) is occupied as a residence or for residential accommodation, or b) is intended to be occupied, and is capable of being occupied, as a residence or for residential accommodation; (regardless of the term of the occupation or intended occupation) and includes a *floating home. From the information you have provided, you conduct an accommodation business. The business includes the hiring of caravans for individuals to live in and you also lease out houses that you own to other parties. Your turnover from the hire of caravans is currently below $75,000. The leasing of houses for residential accommodation meets the criteria of paragraph 40-35(1)(a) and the supply or leasing of houses would be input taxed, which means no GST is payable on the supply. However the Commissioner provides that the hiring of caravans is not an input taxed supply in the Public Ruling Goods and Services Tax Ruling GSTR 2012/5 Goods and services tax: residential premises (GSTR 2012/5). GSTR 2012/5 provides: | Detailed Reasoning - Vehicles designed for road use: 98. Road vehicles, including motor homes, caravans and campervans , are not residential premises as they are not land or a building . This is the case regardless of whether they are used as a residence or for residential accommodation. | Detailed Reasoning - Emphasis added: As set out above the Commissioner does not consider that, caravans are residential premises regardless of whether they are used as a residence or for residential accommodation. Hence, the hiring of caravans is not input taxed under paragraph 40-35(1)(a). | Detailed Reasoning - GST registration,: Section 23-5 of the GST Act requires you to be registered for GST if: a) you are carrying on an enterprise, and b) your GST turnover meets or exceeds the registration turnover threshold. (The current GST registration turnover threshold is $75,000) Section 9-20 relevantly defines enterprise as an activity, or series of activities, done in the form of a business or in the form of an adventure or concern in the nature of trade. An enterprise would include the leasing of real property and/or hiring of caravans. We consider that your hiring of caravans and your leasing of residential premises to be an enterprise and therefore when your turnover exceeds $75,000, you will be required to be registered for GST. Currently your turnover is below $75,000 and you are not required to be registered for GST but you can choose to be registered for GST since you are carrying on an enterprise. Section 188-10 provides that you have a GST turnover that meets a particular turnover threshold if: (a) your current GST turnover is at or above the turnover threshold and the Commissioner is not satisfied that your projected GST turnover is below the turnover threshold, or (b) your projected GST turnover is at or above the turnover threshold. Of relevance here is your projected GST turnover as you are currently under the $75,000. Section 188-20 provides that your projected GST turnover at a time during a particular month is the sum of the values of all the supplies that you have made or are likely to make during that month and the next 11 months other than input taxed supplies which would be the residential lease income you derive. Therefore in your turnover calculations you do not include the income you receive from the rent of the residential premises since these supplies are input taxed. However, you will be required to include the income you receive from hiring out the caravans in your calculation. As set out above you will need to calculate your projected income from the current month forward 11 months and when that amount from hiring the caravans exceeds 75,000 you will be required to be registered for GST. When you are required to be registered for GST under section 23-5, you will meet all the requirements of section 9-5 and be required to charge GST on your supplies from the hiring of caravans to your clients.