Private ruling: Supply of accommodation
Date of advice: 1 May 2020
Published: June 2020
Ruling period: 1 July 20XX - 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you liable to pay GST (if any), under section 9-40 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), on the supply of short term accommodation | A1: No.

Relevant facts and circumstances: You are registered for GST. You lease a property at (the Property) from the owners. Your rental expense is $X per annum plus GST, paid monthly. The terms of lease gives the owners the right to occupy the Property for around X weeks each year during the off-peak season. The Property consists of townhouses. Each townhouse has X bedrooms and X bathrooms. You on-supply accommodation in the townhouses to third parties. You sometimes advertise the accommodation as smaller apartments. When this is done the excess rooms are locked off. All of the townhouses are leased as holiday rentals. The premises are advertised on: · your website; · Airbnb; and · some other online travel agencies, such as booking.com, homeaway.com and wotif.com There is no signage at the Property. Each townhouse has a maximum occupancy. They are built for residential accommodation with physical characteristics including bedroom(s), bathroom(s), toilet(s) and kitchen. They provide basic living facilities and shelter. There is no minimum stay. Most occupants stay 1 or 2 nights. There is no reception on site. You manage the dwellings. Occupants are provided with a mobile phone number to call when they arrive. The phone number is also displayed in a location at the Property. You meet the occupants to provide the key. You also provide maps and local travel advice to occupants. Keys can be dropped off in a secured letterbox at the end of the occupants' stay. There is no lock box available at the Property. Occupants can contact you on your mobile number to raise any queries. Generally you attend to them. You do not have the right to access the premises during an occupant's stay. The occupants are not allowed to make small changes to their apartments, such as hanging personal pictures on walls, rearranging and supplying their own furniture with prior permission. The townhouses are fully furnished. Laundry facilities: · Initially, washing machines and dryers were located in some of the townhouses: during this time, the occupants of the other units could make arrangements with you to use a washing machine and dryer in another townhouse · From xx/xx/xxxx, each townhouse has a washing machine and clothes dryer. Each townhouse has a small back yard, a garage and a parking space on the driveway. The common areas between the townhouses are driveways, entry pathway and small garden beds in front of each town house. Fresh linen is provided to the occupants for the duration of their stay. Cleaning is provided on a weekly basis for stays over one week. The premises are cleaned and the linen is changed after each occupant has vacated. Cleaning is done by contractors engaged by you. Coffee, tea, and milk are provided. No other food services are provided. No pets are permitted. You pay for electricity, gas and Wi-Fi. You do not separately charge the occupants for such usage. No bond is paid by the occupants. If repairs of more than $1,000 are required due to damage caused by occupants then you negotiate with them for payment. Repairs of lesser value are borne by you. In the case of Airbnb bookings, resolution can be provided by that platform.

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 9-40 | A New Tax System (Goods and Services Tax) Act 1999 section 40-35 | A New Tax System (Goods and Services Tax) Act 1999 subsection 40-35(1) | A New Tax System (Goods and Services Tax) Act 1999 section 195-1

Reasons for decision: Summary: In this ruling: · unless otherwise stated, all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) · all terms marked by an *asterisk are defined terms in the GST Act · all reference materials, published by the Australian Taxation Office (ATO), that are referred to are available on ato.gov.au Section 9-40 provides that you must pay GST on any taxable supply that you make. Under section 9-5, 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 on; and (c) the supply is *connected with the indirect tax zone, and (d) you are *registered, or *required to be registered However, the supply is not a *taxable supply (emphasis added) to the extent that it is *GST-free or * input taxed (emphasis added). The primary issue in this case is whether your supply of the townhouses through leasing or letting out of the property would be an input taxed supply. Input taxed means that GST is not payable on the supply and there is no entitlement to an input tax credit for anything acquired to make the supply. | Detailed Reasoning - Input taxed supplies and residential premises: Subsection 40-35(1) provides that a supply of premises by lease, hire or license is input taxed if the supply is of residential premises (other than a supply of commercial residential premises or accommodation in commercial residential premises provided to an individual by the entity that owns or controls the commercial residential premises). 'Residential premises' is defined in section 195-1 as 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 the occupation or intended occupation). Goods and Services Tax Ruling GSTR 2012/5 Goods and services tax: residential premises (GSTR 2012/5) provides the Australian Tax Office's view of the factors to consider and the characteristics of residential premises. Paragraphs 9 and 15 of GSTR 2012/5explain that a single test looking at the physical characteristics of the property will determine the premises' suitability and capability for residential accommodation. To satisfy the definition of residential premises, the premises must provide shelter and basic living facilities. Paragraph 7 of GSTR 2012/5 explains that the physical characteristics of the premises will determine whether the property is residential premises for the purposes of subsection 40-35(1). It states that the definition of residential premises 'refers to premises that are designed, built or modified so as to be suitable to be occupied, and capable of being occupied, as a residence or for residential accommodation. This is demonstrated through the physical characteristics of the premises'. From the facts provided, your townhouses provide shelter and basic living facilities and their physical characteristics satisfy the definition of 'residential premises'. | Detailed Reasoning - Commercial residential premises: However, it is necessary to further consider whether you are supplying accommodation in commercial residential premises. Commercial residential premises are defined in section 195-1 as: (a) a hotel, motel, inn, hostel or boarding house, or (b) ... ... (f) anything similar to residential premises described in paragraphs (a) to (e). ... Guidance on whether premises are characterised as residential premises or commercial residential premises is provided in Goods and Services Tax Ruling GSTR 2012/6 Goods and services tax: commercial residential premises (GSTR 2012/6). Paragraph 10 of GSTR 2012/6 explains that the objective factors that are relevant to characterising premises under paragraph (a) or (f) of the definition of 'commercial residential premises' include the overall physical character of the premises and how the premises are operated. Paragraph 11 of GSTR 2012/6 provides that the tests to be applied are whether the premises are a hotel, motel, inn, hostel or boarding house for the purposes of paragraph (a), or whether the premises are similar to these types of premises, in the sense that they have a sufficient likeness or resemblance to any of these types of establishments for the purposes of paragraph (f). These tests necessarily raise questions of fact involving matters of impression and degree. Paragraph 95 to 98 of GSTR 2012/6 considers separately titled rooms, apartments, cottages or villas and explains that in order for premises to be commercial residential premises, the living accommodation areas must be accompanied by commercial infrastructure to support the commercial operation of the premises. Paragraph 95 of GSTR 2012/6 outlines that commercial infrastructure includes (but is not limited to) reception areas, dining and bar areas, meeting/function areas, kitchens, laundry facilities, storage areas and car parks. This commercial infrastructure is used to provide services to occupants. We are of the view that you are not making supplies of accommodation in commercial residential premises after considering: · all of the physical and operating characteristics of the lease of the properties; and · the lack of sufficient commercial infrastructure supplied. You are making an input taxed supply of accommodation in residential premises when you let the Property to the occupants. Therefore, the leasing or letting out of your Property is not a taxable supply under section 9-5. Your supply of accommodation in those premises is not subject to GST. You cannot claim input tax credits (ie GST credits) on acquisitions that relate to your letting of the Property. If you have made such claims then the normal way to correct these mistakes is to revise the previous activity statement(s). However, in some cases you can correct it on a later activity statement. Please refer to our publication 'Correcting GST Mistakes' on our website (www.ato.gov.au).