Private ruling: Goods and services tax - Charities and non-profit
Date of advice: 24 August 2016
Published: September 2016

Ruling: Q1: Are you entitled to rely on the benchmark market value for supplies of long term accommodation for the purposes of applying section 38-250 of the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act)? | A1: Yes, you can use the benchmark market values in respect of the supplies of long term residential accommodation. | Q2: Will payments other than rent (such as water usage and repair and maintenance costs) be ignored for the purposes of the 75% test in section 38-250 of the GST Act? | A2: If you use the benchmark market value rates, the reimbursement that you receive for the additional services is not consideration for your supply of residential accommodation and is excluded when calculating whether the consideration for the accommodation is less than 75% of the GST inclusive market value of the supply. The consideration for the accommodation component (the rent amount) is compared to the relevant benchmark market value rate in Table 5 of the Charities Document. Where the rent amount is less than 75% of the benchmark market value, the supply of the accommodation will be a GST-free supply.

Relevant facts and circumstances: You are registered for GST and were granted concessionary GST status as a result of being endorsed as a charitable institution in accordance with Division 426 of Schedule 1 to the Tax Administration Act 1953 . The process of being allocated a property, and as a result, becoming a tenant, is detailed in your factsheet. The criteria you use in the allocation of housing to prospective tenants, is explained in this fact sheet. Once a tenant has been placed in suitable housing the tenant has rights and responsibilities to you. The annual rent will be less than 75 percent of the market value of the supply of accommodation and long term social and affordable housing using benchmark market values as published by the ATO in the Charities Consultative Committee Resolved Issues Section C - Benchmark Market Values for Charities ('the Benchmarking Guidelines'). You have historically relied on the Benchmarking Guidelines for long term accommodation so that the accommodation can be provided GST-free to the tenants pursuant to section 38-250 of the GST Act. You also claim full input tax credits in relation to expenditure incurred in connection with providing this GST-free accommodation due to the accommodation being GST-free, as opposed to being input taxed residential rent under section 40-35 of the GST Act. As with most rental properties, damage can occur from time to time, due to either intentional or negligent acts of the tenants In situations where repairs and maintenance are required for any intentional or negligent damage caused to the premises by the tenants themselves or their visitors, you will invoice the tenant for the cost of repairing same. You also pass on to the tenants (at cost) the water and electricity usage charges attributable to their accommodation.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 38-250

Reasons for decision: Summary: In this reasoning, unless otherwise stated, all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). Section 38-250 of the GST Act provides that (1) A supply is GST-free if: (a) the supplier is an *endorsed charity, a *gift-deductible entity or a *government school; and (b) the supply is for *consideration that: (i) if the supply is a supply of accommodation - is less than 75% of the *GST inclusive market value of the supply; or (ii) if the supply is not a supply of accommodation - is less than 50% of the GST inclusive market value of the supply. (2) A supply is GST-free if: (a) the supplier is an *endorsed charity, a *gift-deductible entity or a *government school; and (b) the supply is for *consideration that: (i) if the supply is a supply of accommodation - is less than 75% of the cost to the supplier of providing the accommodation; or (ii) if the supply is not a supply of accommodation - is less than 75% of the consideration the supplier provided, or was liable to provide, for acquiring the thing supplied.' The Charities Consultative Committee Resolved Issues Document (Charities Document) provides guidance in respect of the market value test under subsection 38-250(1). The Charities Document explains that: For supplies of accommodation only costs incurred in providing the accommodation can be included in the calculation. The market value of a supply may be determined using the following methods: • Actual market value for a supply • Market value of the same supply or a similar supply • Other methods approved by the Commissioner • Market value benchmarks Charities that provide long term residential housing are eligible to use the benchmark market values. Charities that are eligible to use the benchmark market values for their supplies will only need to use another method as listed above, if they choose not to use the benchmark market values. The accommodation benchmark rates in Table 5 of the Charities Document lists the market value for the supply of long-term residential accommodation. The benchmarks provided allow for either of the following: • differing standards of accommodation • other locations and regional areas • seasonality of market rates. The benchmark rate may be used across all regions for the relevant state. You are entitled to use the benchmark market value for the purposes of subsection 38-250(1) of the GST Act because you are a charity and you make supplies of long term residential accommodation. Your supply is GST-free if the consideration for the supply is less than 75% of the GST inclusive market value of the supply. Where you choose to apply the benchmark market value rates to determine whether the supply of accommodation is GST-free under section 38-250 of the GST Act, the following methodology applies. The benchmark market value rates only apply in respect of the supply of long term residential accommodation. These rates do not include consideration that is not in respect of the supply of accommodation. You charge tenants a rental amount for the supply of the accommodation and you also charge for additional services such as water, electricity, repairs and replacement of keys. If you use the benchmark market value rates, the consideration that you receive for the additional services is excluded in order to calculate whether the consideration for the accommodation is less than 75% of the GST inclusive market value of the supply. The consideration for the accommodation component (the rent amount) is compared to the relevant benchmark market value rate in Table 5 of the Charities Document. Where the rent amount is less than 75% of the benchmark market value, the supply of the accommodation will be a GST-free supply.