Private ruling: GST and supply of accommodation in a rooming house
Published: December 2013

Ruling: Q1: Is your supply of accommodation in the rooming house a taxable supply? | A1: No, your supply of accommodation in the rooming house is not a taxable supply.

Relevant facts and circumstances: You are registered for goods and services tax (GST). You provide accommodation in a residential property located in Australia. The property is a single storey house with several rooms. The rooms are not self-contained. A resident enters into a Rooming House Agreement (the agreement) and occupies a room for at least three months. Under the agreement, a resident has exclusive right to occupy one room and has shared rights to use other parts of the house such as the kitchen, bathroom, laundry and the backyard. The resident is required to return a signed copy of the Condition Report within three business days after moving in. The rooms are not furnished. In some cases, a resident brings their own furniture (including bed and mattress); however, they can arrange for you to provide other furniture, fridge, and TV. You do not provide meals to the residents; and they are not allowed to cook in their rooms. The residents are allowed to install new telephone lines and satellite dish in their rooms. The rental payment includes unlimited use of water, gas, and electricity (for lighting). In accordance with the house rules, the residents must change the light globes in their rooms once broken and provide for their own bed sheets, blankets, toiletries, cutlery and kitchenware. The residents clean their own rooms. When they hand back the room and extra cleaning is required, the resident is required to pay specified amounts. You clean the common areas twice a week. Residents are given your telephone number to call for urgent repairs. The residents are not allowed to bring in pets to the house. They are also not allowed to fix hooks, nails and self-adhesive tape in the room. There is no permanent in-house personnel. You collect rental payments (and issue receipts) fortnightly at a specified date and time. Some residents pay by direct deposit to your account.

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 40-35 and | A New Tax System (Goods and Services Tax) Act 1999 section 195-1.

Reasons for decision: Summary: GST is payable on a taxable supply. Section 9-5 of the A New Tax System (Goods and Services tax) Act 1999 (GST Act) states: You make a taxable supply if: you make the supply for *consideration; and (a) the supply is made in the course or furtherance of an *enterprise that you *carry on; and (b) the supply is *connected with Australia; and (c) 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. (* denotes a term defined under section 195-1 of the GST Act) You supply accommodation in the rooming house for consideration (being the rental payments); you make the supply in the course of your leasing enterprise; the supply is connected with Australia; and you are registered for GST. All the requirements in paragraphs 9-5 (a) to 9-5(d) of the GST Act are satisfied. Therefore, your supply of accommodation in the rooming house is a taxable supply unless it is GST-free or input taxed. There is no provision in the GST Act under which your supply of accommodation in the rooming house would be GST-free. What remains to be determined is whether the supply is input taxed. Under subsection 40-35(1) of the GST Act, a supply of premises that is by way of lease, hire or licence (including 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). Section 195-1 of the GST Act defines 'commercial residential premises' to include a hotel, motel, inn, hostel, boarding house or similar premises. Goods and Services Tax Ruling GSTR 2012/6 considers how section 9-5, Subdivision 40-B (residential rent) and Subdivision 40-C (residential premises) apply to supplies of commercial residential premises. Paragraph 246 of GSTR 2012/6 describes a class of premises often referred to as rooming houses or rooming accommodation. According to paragraph 247, the presence of features set out at paragraphs 41 and 187 may indicate that rooming houses are not commercial residential premises. Paragraphs 41 and 187 of GSTR 2012/6 provide the following factors that may indicate that premises are not a hotel, motel, inn, hostel, boarding house or similar premises: (a) the operator and occupant agree for accommodation to be supplied for a periodic term (which may be for a period of months or years at a time); (b) the operator and occupant document the condition of the premises under a written contract before the accommodation is initially supplied and when the occupant ceases to occupy the premises; (c) the operator has the right to impose a cleaning fee on the occupant when the occupant ceases to occupy the premises; (d) the occupant is permitted, subject to the terms of the lease or licence, to alter the part of the premises occupied by the occupant, such as by attaching hanging devices on a wall; (e) the occupant is permitted, subject to the terms of the lease or licence, to keep pets in the premises; (f) the occupant must separately arrange and pay for the connection of a telephone, electricity, or gas service; (g) the occupant is responsible for the cleaning and minor maintenance of the premises, such as changing light bulbs in their room; (h) the premises are unfurnished; and (i) the right to occupy the residential premises is supplied to the occupant in exchange for the occupant loaning an amount together with other fees. The absence of the features set out above does not, of itself, mean that premises are, or are similar to, a hotel, motel, inn, hostel, or boarding house. Similarly, the presence of some of these factors does not necessarily mean that the premises are not commercial residential premises. Determining whether the rooming house falls within the definition of commercial residential premises involves matters of impression and degree. You supply accommodation in the rooming house under contracts that run for at least three months. The residents must complete, sign, and give you a Condition Report shortly after they move in. The residents are responsible for cleaning their rooms and should pay a specified amount if the rooms need extra cleaning when they hand them back. The residents are not allowed to bring in pets and fix hooks, nails and adhesive tapes in the room. You do not provide meals to the residents. They are not allowed to cook in their rooms, but can do so in the shared kitchen. The residents must provide for their own bed sheets, blankets, toiletries, cutlery and kitchenware. Some residents bring their own furniture, bed and mattress; however, they can arrange for you to provide them. The residents are allowed to install telephone lines and satellite dish in their rooms. Some of the factors set out in paragraphs 41 and 187 of GSTR 2012/6 are present to a certain degree while the rest are either absent or do not apply. The rooming house in which you supply accommodation does not display characteristics of a hotel, motel, inn, hostel or boarding house particularly in relation to accepting reservations, allocation of rooms, provision of meals and services, central management and the status of the occupants as guests (rather than as residents). On balance, we consider that the rooming house is not commercial residential premises. Therefore, your supply of accommodation in the rooming house is an input taxed supply in accordance with subsection 40-35(1) of the GST Act. Accordingly, the supply is not a taxable supply.