Private ruling: GST and supplies of accommodation
Date of advice: 15 June 2018
Published: August 2018
Ruling period: 1 July 20xx – 30 June 20xx
Date scheme commenced: 1 July 20xx

Ruling: Q1: Are you making a taxable supply pursuant to section 9-5 of the A New Tax System (Goods and Services Tax Act) 1999 when you supply accommodation at a specified location? | A1: Yes.

Relevant facts and circumstances: You are registered for GST. You acquired property situated at a specified location. The property comprises approximately 200 acres of which approximately 90% is farmland that was immediately leased to a neighbouring farmer for grazing and fodder production following settlement of the property. The remaining 10% of the property (hereafter referred to as the ‘Property’) comprises an entrance way, extensive gardens, two storey 19 th century Georgian house, service wings at the rear of the house and a large building comprising stables, upstairs woolshed and storage areas. There are other buildings on the Property comprising a green house, walled garden, cattle yards, barn, etc. The Property had been renovated by the previous owners who operated the property as a country guest house. You currently operate the Property as a ‘bed and breakfast’ with the Property able to accommodate a total of 14 guests. Meeting/conference room facilities are also available for hire with food and beverages for up to 30 delegates. The Property is also available for hire for functions and events including weddings, parties, High Teas, etc. You utilise the upper floor of the main house as your principal residence. Your residence also contains a dedicated room used as an office/reception. The lower floor of the main house comprises a large kitchen and also large breakfast/dining room (referred to as the ‘conservatory’). The kitchen facilities are suitable to prepare meals for guests and have been approved by the relevant Council in their process of approving the Development Plan. The lower floor also contains a large dining room and a large lounge room games room and library. These rooms may be utilised to accommodate functions such as weddings. Guests and event attendees have access to the lower areas of the main house with guests having restricted access when events are being held. The stables and woolshed building is a stand-alone two storey building approximately 100 metres from the main house converted by the previous owners to comprise a large unit consisting of three bedrooms suitable to accommodate six people, living areas, kitchen and bathrooms. The two service wings referred to above were originally used as servant’s quarters and whilst connected to the main house, each has their own separate entrances. The service wings comprise four units each capable of accommodating two persons with each unit containing bedroom, bathroom and living facilities. Sealed car parking spaces for 14 guests are available as approved by the relevant Council in their process of approving the Development Plan. Accommodation is advertised on the Internet and social media. Breakfast is included in the tariff charged and held in the Conservatory. Meals are provided upon request in the formal dining room. Laundry facilities and a drying area are also available for wet camping and hiking gear. Guests will stay an average of one night with rooms cleaned on a daily basis and after each stay. Cleaning services include replacing towels and making beds. The cleaning fee is included in the daily tariff and is not a separate fee imposed on the guest. Other services and facilities provided include: ● basic essentials such as towels, linen, soap, shampoo and toilet paper ● TV ● Free Wi-Fi ● additional pillows and blankets ● hair dryer ● iron ● tours of the historic property and gardens of the Property ● arranging visits to local private art studios Accommodation is not supplied for a periodic term. The price for accommodation is based on a daily rate multiplied by the number of days of occupancy. You do not document the condition of the premises under a written contract before the accommodation is initially supplied and upon vacancy. The guest is not permitted to alter the part of the premises occupied by the guest. Guests are not permitted to keep pets on the Property. Utilities (electricity and gas) are included in the daily tariff. You are responsible for the cleaning and minor maintenance of the premises, such as changing light bulbs. Such tasks are not the responsibility of the guest.

Relevant legislative provisions: A New Tax System (Goods and Services Tax Act) 1999 Section 9-5 | Section 9-40 | Section 40-35 | Paragraph 40-35(1)(a) | Subsection 40-35(2) | Section 195-1

Reasons for decision: Summary: Section 9-40 of the Goods and Services Tax Act 1999 provides that you are liable for GST on any taxable supplies that you make. Section 9-5 of the Goods and Services Tax Act 1999 provides you make a taxable supply if: ● you make the supply for consideration; and ● the supply is made in the course or furtherance of an enterprise that you carry on; and ● the supply is connected with the indirect tax zone (Australia); and ● you are registered, or required to be registered for GST. However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. Under paragraph 40-35(1)(a), a supply of residential premises by way of lease, hire or licence (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) is input taxed. Under subsection 40-35(2), the supply is input taxed only to the extent the premises are to be used predominately for residential accommodation (regardless of the term of occupation). The definition of ‘residential premises’ in section 195-1 refers to land or a building that is occupied as a residence or for residential accommodation, or is intended to be occupied, and is capable of being occupied as a residence or for residential accommodation (regardless of the term of occupation or intended occupation). Goods and Services Tax Ruling GSTR 2012/5 Goods and services tax: residential premises outlines the characteristics of residential premises. Paragraph 9 of GSTR 2012/5 explains that the requirement in section 40-35 that premises be ‘residential premises to be used predominately for residential accommodation’ is to be interpreted as a single test that looks to the physical characteristics of the property to determine the premises’ suitability and capability for residential accommodation. Further, paragraph 15 of GSTR 2012/5 states that to satisfy the definition of residential premises, premises must provide shelter and basic living facilities. In your case, the Property satisfies the definition of ‘residential premises’ as the units provide shelter and basic living facilities. The next issue to consider is whether the Property falls within the definition of ‘commercial residential premises’. Commercial residential premises are defined in section 195-1 to include, amongst other things: (a) a hotel, motel, inn, hostel or boarding house; or (b) … … (f) anything similar to residential premises described in paragraphs (a) to (e). However, it does not include premises to the extent that they are used to provide accommodation to students in connection with an *education institution that is not a *school. Goods and Services Tax Ruling GSTR 2012/6 Goods and services tax: commercial residential premises sets out the ATO view on how GST applies to supplies of commercial residential premises and supplies of accommodation in commercial residential premises. Paragraphs 140 and 141 of GSTR 2012/6 emphasise that the terms hotel, motel, inn, hostel and boarding house are not defined in the GST Act and therefore take their ordinary meaning in context. The Macquarie Dictionary 5 th Edition provides the following definitions: Hotel a building in which accommodation and food, and alcoholic drinks are available. Motel a roadside hotel which provides accommodation for travellers in self-contained, serviced units, with parking for their vehicles. Inn a small hotel that provides lodging, food etc., for travellers and others Hostel a supervised place of accommodation, usually supplying board and lodging provided at a comparatively low cost, as one for students, nurses, etc. Boarding house a dwelling in which lodging is provided to paying residents who share common facilities such as a kitchen, laundry, living room, etc. a dwelling, usually a private house, in which board and lodging are provided for payment. In their ordinary meanings, these terms share the common attribute of providing accommodation to guests. Paragraph (f) of the definition of commercial residential premises extends the scope of the definition to premises that are ‘similar’ to the class of establishments described in paragraphs (a) to (e). Premises that are ‘similar’ to establishments that are commercial residential premises must have sufficient characteristics in common with the class of premises described. Paragraphs 10 and 11 of GSTR 2012/6 provide that the tests to be applied in determining whether premises fall within either paragraph (a) or (f) of the definition of ‘commercial residential premises’ necessarily raise questions of fact involving matters of impression and degree which include consideration of the overall physical character of the premises together with how the premises are operated. Paragraph 12 of GSTR 2012/6 identifies a number of characteristics common to those exhibited by operating hotels, motels, inns, hostels and boarding houses: ● 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 ● occupants have status of guests. The Property exhibits all of the characteristics of commercial residential premises as listed above to some extent. Given the facts provided we consider the Property bears the closest resemblance to a ‘hotel’ or ‘motel’. Paragraphs 13 through 25 of GSTR 2012/6 describe the features typical of hotels. In considering those features the following is noted: ● Hotels provide accommodation for a commercial purpose. In this case we consider your activities are conducted for a commercial purpose given the extent and nature of your activities. ● Hotels have the capacity to supply accommodation for multiple occupancies as is the case in this situation. ● Hotels usually offer meals to guests and they usually have a kitchen where meals are prepared for guests. The premises usually include a restaurant or dining room for guests. In this case, breakfast is provided and included in the daily tariff. Furthermore, guests may request other meals to be served/consumed in the formal dining room. The Property also has kitchen facilities capable to cater for groups of up to 30 people. ● The guest rooms in a hotel are invariably furnished, and always include a bed, and some living area, and usually an adjoining bathroom such is the case in this instance. ● Rooms/apartments in hotels are usually cleaned and serviced by staff on a daily basis, with the costs of these services being included in the tariff. This feature is present in the current case. ● Predominantly, the guests of hotels are travellers who ordinarily have their principal place of residence elsewhere, and who need or desire accommodation while away for business or pleasure. Again, such in the case in regard to the occupants/guests of the Property. ● Guests of hotels do not usually enjoy an exclusive right to occupy any particular part of the premises in the same way as a tenant to whom a house or apartment is let. Nor does a guest of a hotel usually let a room for a term. The guest is usually charged at a daily rate multiplied by the number of days of occupancy. In this case, guests book accommodation based on a daily rate and do not let a unit for a term. Guests are not required to share facilities with other guests and have exclusive use of the unit they occupy. ● Hotels usually have a reception desk to handle the requirements of both management and guests, particularly when guests check in or check out of the establishment. In this case the Property has a separate dedicated reception and office area to perform such functions. Paragraph 25 of GSTR 2012/6 provides that when determining whether premises are, or are similar to, a hotel, motel or inn, it is necessary to consider the premises in its entirety. Paragraph 41 of GSTR 2012/6 states in part that ultimately, whether premises are commercial residential premises is a matter of overall impression involving the weighing up of all relevant factors. In this case, after weighing up all the relevant factors as discussed above, we consider that the premises exhibit sufficient characteristics typically inherent to a hotel or motel to be classified as being similar enough to these types of establishments under paragraph (f) of the definition of ‘commercial residential premises’ at section 195-1. Example 2 at paragraphs 49 and 50 of GSTR 2012/6 illustrate the GST treatment of premises similar to those in this case: Example 2 - bed and breakfast accommodation 49. Bob operates a bed and breakfast accommodation business from his premises. The premises contain three bedrooms, communal dining and lounge areas and sealed car parking spaces for guests. The premises contain a room used as an office / reception as well as a kitchen that is suitable to prepare meals for guests. Bob lives on site. He advertises the accommodation in a tourist magazine. The rooms are not self-contained and are cleaned daily during stays and after each stay. The daily cleaning includes replacing towels and making beds. Breakfast is provided in the dining room . 50. Bob operates the premises which are aimed at providing accommodation to travellers (guests ). The premises provide accommodation on a multiple occupancy basis. The guests do not have overall control over their rooms. Bob provides central management and services. The accommodation is supplied by Bob in his own right. Bob's bed and breakfast accommodation has the characteristics of commercial residential premises. The premises have sufficient features to be characterised as being similar to a hotel, motel, or inn. Alternatively, the premises may be characterised as sufficiently similar to a boarding house. Bob's supplies of accommodation are taxable supplies of accommodation in commercial residential premises . In conclusion we consider your supplies of accommodation in the premises are not input taxed and you will be making taxable supplies where the requirements of section 9-5 are satisfied.