Private ruling: Goods and services tax and residential rent
Date of advice: 21 December 2020
Published: February 2021

Ruling: Q1: Is GST payable on the sub-letting of the apartments? | A1: No. As you supply residential premises by way of lease and the premises are used predominantly for residential accommodation, the sub-letting of the apartments is an input taxed supply in accordance with section 40-35 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). Hence, GST is not payable on the sub-letting of the apartments. As you are making an input taxed supply, you are not entitled to claim input tax credits for acquisitions relating to the sub-letting of the apartments.

Relevant facts and circumstances: You operate a number of businesses, including sub-letting of apartments. You are registered for GST. The apartments that you sub-let are owned by different landlords. You lease the apartments from the landlords and with the landlords' permission you sub-let the apartments to tenants. You currently lease a number of apartments. The apartments are located in different residential buildings. You keep records of your activities, which you undertake on a regular basis. All of the apartments are residential apartments, which contain bedrooms, a kitchen, a laundry, and at least one bathroom and toilet. Most of the apartments contain two bedrooms; however, some apartments contain three bedrooms. It is common for unrelated persons to occupy each bedroom in an apartment. You arrange for the connection and pay the bills for the internet connection, electricity and gas services provided at each apartment that you sub-lease. The rent that you charge the tenants is inclusive of the cost of these services. You sub-let the apartments fully furnished. The furnishings include a bed, bedside table, desk, chair, mattress, sofa, coffee table, dining table and chairs, washing machine and fridge. You do not provide tenants with fresh linen or towels, nor is linen or crockery provided at the start of a lease. You pay for the costs associated with furnishing an apartment. You do not get any reimbursement of these costs (from either the landlord or the tenant(s)). You do not provide short-term accommodation. Tenants must stay a minimum of half a year, although normally they stay for one year. You enter into a fixed term residential tenancy agreement with all tenants that you sub-let apartments to. Sometimes there is only one lease covering the entire apartment even when there are multiple tenants (in such a case all of the tenants' names are listed on the one lease). At other times, you will enter into multiple leases for the one apartment (a separate lease for each of the tenant). The tenants need to pay a bond prior to moving into an apartment. A condition report is completed when the tenant(s) first moves into an apartment and also after vacating of the apartment. If the apartment is left in an unclean condition on vacation, the tenant(s) needs to go back and clean the apartment; otherwise the tenant(s) will be liable for cleaning costs. The apartment buildings are all located in the same city in Australia. However, they are located in different suburbs of that city. None of the apartment buildings are next door or adjacent to each other. Individual parking spaces and storage areas are allocated at each apartment. In some of the apartment buildings, there are communal facilities consisting of gymnasiums and swimming pools, which the strata / building manager runs. These facilities can be accessed for free by your tenants, who must follow the strata by-laws relating to the use of these facilities. None of the apartment buildings have a reception desk, restaurant or bar. The tenants pay their rent to you every two weeks. The rent is a weekly amount over the fixed term of the lease. For urgent repairs, tenants are provided with a telephone number to call which is available 24 hours a day, seven days a week. That number belongs to another business, and on calling that number the call goes directly through to the relevant service provider, for example, the plumber. The landlord pays the relevant service provider for the cost of any necessary repairs. For any non-urgent repairs, the tenants contact you so that you can then contact the landlord who will organise any repairs. The tenants are not responsible for any repair costs, not even for minor costs such as those associated with replacing a light bulb. You advertise the apartments for rent, arrange open inspections, sign residential tenancy agreements, hand over keys and undertake a final inspection on vacation of the apartment by the tenants. You advertise both the entire apartments or room/s in an apartment. You advertise the apartments for rent only to students, using your website and using another information source. You do not sub-let any apartments to tourists or holiday makers. You do not include any advertising on the sides of the apartment buildings themselves. You do not currently provide any breakfast service or cleaning service, other than cleaning any apartments before someone moves in or after someone moves out. You only check the condition of the apartments once tenants vacate and not at other times. Your entry into the apartments is restricted to first giving notice in accordance with the residential tenancy agreement. Other than as mentioned above, you do not provide any other services to tenants (either yourself or through third parties). The tenants have your number so that they can contact you directly, but only if they have any issues related with the apartment they are sub-letting. You do not provide any supervision of the tenants in relation to the sub-letting of apartments to them. You do not provide any educational courses to the students that sub-let apartments from you. The accommodation that you provide is not in connection with a school nor is it in connection with an education institution which is not a school. Your sub-letting of apartments is not directed at students from rural or remote locations who are undertaking primary, secondary or special education courses.

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