Private ruling: GST and electricity for staff accommodation
Published: July 2012

Ruling: Q1: Are you making a creditable acquisition of electricity provided to staff accommodation premises? | A1: Yes. | Q2: Are you making a taxable supply when you on-charge electricity to employees occupying staff accommodation? | A2: Yes. | Q3: Are you entitled to input tax credits when you reimburse an employee's expenses for electricity used in staff accommodation? | A3: Yes. | Q4: Are you entitled to input tax credits when you reimburse an employee's expenses for electricity used in accommodation privately owned or leased by the employee? | A4: Yes.

Relevant facts and circumstances: You are registered for GST. You own or lease accommodation in a remote area to provide to employees stationed in the remote area. In some cases the employee leases accommodation privately in the remote area where they reside and work. In all cases the accommodation satisfies the definition of residential premises contained at section 195-1 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). You provide certain benefits to staff as an incentive to move to, and remain in a remote area to work. One of the benefits is the provision of staff accommodation for a settling-in period when an employee moves to the remote area. The employee is required to find their own accommodation after this period. In some remote areas there is no private accommodation available and the employee is permitted to remain in the staff accommodation after the settling-in period, but is required to pay rent to you. Electricity is connected to the staff accommodation in your name. You pay the electricity account and on-charge the employee for the electricity usage after the settling-in period. Where an employee is occupying private accommodation and has electricity connected in their name, the employee is entitled to an electricity subsidy which is paid as a reimbursement of their electricity account. The electricity account in all cases is in the form of a tax invoice that complies with the requirements of the GST Act. In some cases staff accommodation attached to business premises does not have a separate electricity meter. The electricity account is in the employer's name. The electricity supplied to staff accommodation is apportioned for fringe benefits tax purposes.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 Section 11-5 , | A New Tax System (Goods and Services Tax) Act 1999 Subsection 11-15, | A New Tax System (Goods and Services Tax) Act 1999 Section 11-20, | A New Tax System (Goods and Services Tax) Act 1999 Section 40-35, | A New Tax System (Goods and Services Tax) Act 1999 Subsection 111-5(3), | A New Tax System (Goods and Services Tax) Act 1999 Section 195-1 and | Fringe Benefits Tax Assessment Act 1986 Section 20.

Reasons for decision: Summary: Are you making a creditable acquisition of electricity provided to staff accommodation premises? Under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), you are entitled to an input tax credit for any creditable acquisition you make. In your case, you acquire electricity for staff accommodation that you either own or lease. Under section 11-5 of the GST Act you make a creditable acquisition if: · you acquire anything solely or partly for a creditable purpose · the supply of the thing to you is a taxable supply · you provide, or are liable to provide, consideration for the supply, and · you are registered, or required to be registered for GST. In your case, the supply of electricity to you is a taxable supply, you provide consideration and you are registered for GST. However, we must determine if you acquire the electricity for a creditable purpose. Under subsection 11-15(1) of the GST Act you acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise. In your case, you purchase electricity for staff accommodation that you provide to your employees as a benefit and incentive to move to, and remain in a remote work area. However, under subsection 11-15(2) of the GST Act, you do not acquire the thing for a creditable purpose to the extent that: · the acquisition relates to making supplies that would be input taxed, or · the acquisition is of a private or domestic nature. You provide accommodation in residential premises to employees in remote areas as incentive for your employees to move to, and remain in a remote work area. You also pay for electricity and on-charge this to the employees. Under section 40-35 of the GST Act, a supply of residential premises (other than commercial residential premises), by way of lease, hire or licence, is input taxed to the extent that the premises are to be used predominantly for residential accommodation. Therefore, your supply of accommodation in residential premises to your employees is an input taxed supply. We need to determine if the supply of electricity to your employees relates to making an input taxed supply of residential premises to your employees. Goods and Services Tax Determination GSTD 2000/10 considers whether outgoings payable by a tenant under a commercial property lease form part of the consideration for the supply of the premises. While this deals with commercial property the consideration of a single supply and multiple supplies is equally relevant in your situation. Paragraph 5 of GSTD 2000/10 states: If a payment is for a service that would normally be expected to form part of the supply of the premises and is merely incidental to the supply of the premises, then that payment will be for the supply of the premises. A supply of electricity would not normally be expected to form part of a supply of residential premises. As such the supply of electricity will be a separate supply. You are registered for GST. You supply the electricity to the staff for consideration, as part of your enterprise in Australia. Furthermore, the supply is not GST-free or input taxed. Therefore, your supply of electricity meets all the requirements of a taxable supply. As your supply of electricity to your employees is a taxable supply, your acquisition of electricity is a creditable acquisition. Are you making a taxable supply when you on-charge electricity to employees occupying staff accommodation? As stated above, your supply of electricity to your employees is a taxable supply. Are you entitled to input tax credits when you reimburse an employee's expenses for electricity used in staff accommodation? Under section 111-5 of the GST Act, you can claim an input tax credit where you reimburse an employee for an expense they incur and the reimbursement constitutes an expense payment benefit. An expense payment benefit is defined in section 195-1 of the GST act as a fringe benefit that is a benefit of a kind referred to in section 20 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) Section 20 of the FBTAA provides: Where a person (in this section referred to as the 'provider'): (a) makes a payment in discharge, in whole or in part, of an obligation of another person (in this section referred to as the 'recipient') to pay an amount to a third person in respect of expenditure incurred by the recipient; or (b) reimburses another person (in this section also referred to as the 'recipient'), in whole or in part, in respect of an amount of expenditure incurred by the recipient; the making of the payment referred to in paragraph (a), or the reimbursement referred to in paragraph (b), shall be taken to constitute the provision of a benefit by the provider to the recipient. In your case, you reimburse an employee's expenses for the supply of electricity to staff accommodation. This constitutes an expense payment benefit. Goods and Services Tax Ruling GSTR 2001/3 GST and how it applies to supplies of fringe benefits (GSTR 2001/3) discusses GST and how it applies to supplies of fringe benefits. Paragraphs 48 to 53 and 86 to 88 of GSTR 2001/3 explain that you are entitled to an input tax credit for creditable acquisitions made to provide a fringe benefit to an employee regardless of the fact that it is for the personal and private use of the employee, subject to certain conditions under subsection 111-5(3) of the GST Act. Subsection 111-5(3) of the GST Act provides, amongst other things, that the acquisition is not a creditable acquisition to the extent (if any) that: · the employee is entitled to an input tax credit for the thing acquired in incurring the expense · the thing acquired by the employee was not a taxable supply. In your case, the reimbursements you make for an employee's expenses for the supply of electricity to staff accommodation are expense payment benefits. In the circumstances outlined, the employee will not be entitled to an input tax credit. The supply of the electricity to the employee was a taxable supply. Therefore, you will be entitled to an input tax credit when you reimburse the employee for the electricity expense. Are you entitled to input tax credits when you reimburse an employee's expenses for electricity used in accommodation privately owned or leased by the employee? For the same reasons as detailed in Question 3, you will be entitled to input tax credits for the reimbursement of an employee's expenses for the supply of electricity to accommodation privately owned or leased by the employee.

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