Private ruling: GST and the supply of student accommodation
Published: December 2014

Ruling: Q1: Will your supply of accommodation to students be commercial accommodation that is long-term accommodation provided in commercial residential premises that are predominantly for long-term accommodation, pursuant to Division 87? | A1: Yes On the facts provided, you, entity A will supply commercial accommodation that is long-term accommodation to students, in commercial residential premises that are used predominantly for long-term accommodation. Unless you elect otherwise under section 87-25 of the GST Act, section 87-5 of the GST Act will apply to your taxable supplies of accommodation. Accordingly, in the circumstances described, your acquisitions for the construction of the student accommodation will be for a creditable purpose. Where the other requirements of section 11-5 of the GST Act are satisfied, your acquisitions will be creditable acquisitions and you will be entitled to GST credits on those acquisitions.

Relevant facts and circumstances: You, Entity A are a member of a GST group. You own land. A joint venture was established between another entity of the same GST Group and a third party developer, and the joint venture was appointed to develop the land. The Joint venture will be known as the Developer. The Developer has obtained development consent (DC) to develop a building (the Facility) which will include student accommodation with X beds, Xm 2 of retail floor space, construction of the surrounding public domain, public art and bicycle parking. Under clause X of the DC, the accommodation can only be supplied to students of tertiary education facilities. Entity A is eligible to (and will) supply student accommodation in line with the National Rental Affordability Scheme (NRAS) whereby accommodation is supplied at less than 80% of the market rent. The GST group representative received notification on ddmmyyyy that they were successful in their application for funding under the NRAS. The letter provided that the funding had been approved for $X per annum per approved dwelling and that they had received funding for up to X dwellings. The approval is still current. Each studio apartment will contain one bathroom/wc and a kitchenette. Each bedroom in a cluster room apartment will contain a bathroom/wc and will share a communal kitchenette. All apartments will be provided with phone, electricity and gas services. The reception and administration areas for the complex will be located on the upper ground floor. Communal laundry facilities will be located on level X which will contain commercial washing machines and dryers available for all students. Other facilities available for the students will be • Bicycle storage facilities • TV facilities • Dining areas • Lounge and other socialising areas • Study rooms • Theatre • Gym, and • Outdoor roof terrace area containing seating and BBQ facility. You have commenced negotiations to enter into an Operating and Maintenance Agreement with a specialist student housing operator (Operator) to operate, manage and maintain the facility. Negotiations are ongoing, however, you advised that under the Operating and Maintenance Agreement it is intended that the Operator will: • Enter into licenses (licenses to Occupy) with students and collect revenue from the students in its capacity as your agent • Provide various preoperational services to assist you with the opening of the facility • Procure the various amenities such as telephone, internet and laundry services as your agent, and • The Operator will employ a General Manager who will be contactable 24 hours a day, 7 days a week and professional staff who will be on site during business hours. It is expected that the length of stays of most of the students will be for the length of the full academic year and typically between 6 to 12 months. Students are responsible for cleaning their rooms. However, they can request the Operator to clean for a fee. The occupants cannot separately pay for their utilities such as telephone, water, electricity, gas and internet connections. You intend that the facility will be actively marketed to student from a number of nearby tertiary institutions. No educational institution has an interest in either yourself or the Operator. No agreements have been entered into with any educational institutions relating to the facility.

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, | A New Tax System (Goods and Services Tax) Act 1999 Section 87-5, | Student Assistance Act 1973 Subsection 3 (1), | A New Tax System (Goods and Services Tax) Act 1999 Section 87-15 and | A New Tax System (Goods and Services Tax) Act 1999 Section 87-20.

Reasons for decision: Summary: Is your supply of accommodation to students a supply of accommodation in commercial residential premises? Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that you make a taxable supply if you meet all of the conditions of paragraphs (a) to (d) of section 9-5 of the GST Act and your supplies are not GST free or input taxed. Where you do not meet all of the requirements your supply will not be taxable. On the facts supplied, your supply of the accommodation meets the conditions of paragraphs (a) to (d) of section 9-5 of the GST Act and is not GST-free. Therefore it is necessary to determine whether your supply will be input taxed. Sub-section 40-35(1) of the GST Act provides that a supply of premises by 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); or • the supply is of commercial accommodation and Division 87 of the GST Act would apply but for a choice made by the supplier under section 87-25 of the GST Act. 'Residential premises' is defined in section 195-1 of the GST Act to mean land or a building that: (a) is occupied as a residence or for residential accommodation; or (b) 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…) The Commissioners view on whether premises are considered residential premises is provided in Goods and Services Tax Ruling GSTR 2012/5 Goods and services tax: residential premises. (GSTR 2012/5) Paragraphs 9, 10 and 15 of GSTR 2012/5 highlight a single test that looks to the physical characteristics of the property to determine the premises suitability and capability for residential accommodation. Premises need to have the physical characteristics to provide shelter and basic living facilities to be residential premises to be used predominantly for residential accommodation. Given the physical characteristics of your premises it is considered that they exhibit the characteristics of 'residential premises'. However, it is necessary to further consider whether they have characteristics that align with commercial residential premises and, therefore, whether you are making a supply of accommodation in commercial residential premises. 'Commercial residential premises' is defined in section 195-1 of the GST Act to mean: (a) a hotel, motel, inn, hostel or boarding house; … (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. The Commissioners view on whether premises are commercial residential premises is provided in Goods and Services Tax Ruling GSTR 2012/6 Goods and services tax: commercial residential premises. (GSTR 2012/6) The terms in paragraph (a) above are not further defined in the GST Act and therefore take their ordinary meaning in context. Paragraph 12 of GSTR 2012/6 outlines the common characteristics of operating hotels, motels and hostels that are relevant (but not necessarily determinative) when characterising premises as commercial residential premises: • 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, and • Occupants have status as guests. The features of hotels, motels and inns are further outlined at paragraphs 13 to 25 of GSTR 2012/6. These features are also relevant to the term "hostel", in addition to features outlined in paragraphs 26 to 35. In your case: • Each unit will have its own kitchenette or access to shared kitchen facilities • There is a separate meeting room, coin operated laundry facilities, study room and lounge • There will be a general manager who will be contactable 24 hours a day 7 days a week and professional staff will be on site during business hours. It is expected that the Operator will employ several live-in residential assistants who will assist with the management of day to day operations • You will provide multiple occupancy accommodation • The period of accommodation is generally six to 12 months and is only available to students who are enrolled in study full time • The students cannot separately pay for the utilities, and • Residents will be charged a rate that is 80% of the market rate. Ultimately, whether premises are commercial residential premises is a matter of overall impression involving the weighing up of all relevant factors. In weighing up the characteristics of 'commercial residential premises' and on objective assessment of the characteristics of the premises being supplied by you, we consider that the premises are a hostel or something similar. However the definition of commercial residential premises in section 195-1 of the GST Act expressly excludes premises to the extent that they are used to provide accommodation to students in connection with an education institution that is not a school. The term 'education institution' is defined in section 195-1 of the GST Act as having the meaning given by subsection 3(1) of the Student Assistance Act 1973 (SAA). Although it is our understanding that the manager of the complex does not satisfy the definition of an 'education institution' in the Student Assistance Act, it must be determined whether the accommodation is provided 'to students in connection with an education institution that is not a school'. (Emphasis added) The Commissioners view on whether premises fall within this exclusion may be found in Goods and Services Tax Ruling GSTR 2001/1 Goods and services tax: supplies that are GST- for tertiary education courses. (GSTR 2001/1) Paragraph 150 of GSTR 2001/1 outlines some factors to be considered in determining this question. It is apparent that a close nexus is anticipated between the provision of the accommodation and the education institution. You do not have any arrangements in place whereby you guarantee to make supplies of accommodation to students at any particular institution. You will provide accommodation to students from a number of different campuses, where they attend courses provided by entities other than yourself. There is not considered to be a sufficiently close nexus in this case. Therefore, your premises will not be used to provide accommodation to students in connection with an education institution that is not a school. Accordingly, your premises meet the definition of commercial residential premises. | Detailed Reasoning - Will section 87-5 of the GST Act apply to your supply of accommodation?: Section 87-5 of the GST Act provides that the value of a taxable supply of commercial accommodation that is provided in commercial residential premises that are predominantly for long-term accommodation; and is provided to an individual as long-term accommodation is 50%, or such other percentage as is specified in the regulations, of what would be the price of the supply if Division 87 did not apply. Section 87-5 has effect despite section 9-75 (which is about the value of taxable supplies. | Detailed Reasoning - Commercial accommodation: Commercial accommodation is defined in section 87-15 to mean the right to occupy the whole or any part of commercial residential premises, including, if it is provided as part of the right so to occupy: (a) the supply of cleaning and maintenance or (b) electricity, gas, air-conditioning or heating; or (c) telephone, television, radio or any other similar thing. You will supply to students the right to occupy rooms in your facility and that right includes the supply of, utilities such as telephone, water, electricity, gas and internet connections. Therefore your supply of accommodation will meet the definition of commercial accommodation. | Detailed Reasoning - Long-term Accommodation: Section 87-20 (1) provides that long-term accommodation is provided to an individual if commercial accommodation is provided, for a continuous period of 28 days or more, in the same premises to that individual alone; or to that individual, together with one or more other individuals who are also provided with that commercial accommodation; and are not provided with it at their own expense (whether incurred directly or indirectly). The students will generally occupy their unit for an academic year and typically the stay will be between 6 months to a year. We consider this is long-term accommodation. | Detailed Reasoning - Predominantly for long-term accommodation: Commercial residential premises are predominantly for long-term accommodation if at least 70% of the individuals who are provided with commercial accommodation in the premises are provided with commercial accommodation as long-term accommodation. On the facts provided, at least 70% of the students will be provided with accommodation exceeding periods of 28 days. On this basis, you will supply commercial accommodation that is long-term accommodation to students, in commercial residential premises that are used predominantly for long-term accommodation. Unless you elect otherwise under section 87-25 of the GST Act, section 87-5 of the GST Act will apply to your taxable supplies of accommodation. Accordingly, in the circumstances described, your acquisitions for the construction of the student accommodation will be for a creditable purpose. Where the other requirements of section 11-5 of the GST Act are satisfied, your acquisitions will be creditable acquisitions and you will be entitled to GST credits on those acquisitions.