Private ruling: GST and supply of accommodation
Date of advice: 23 January 2019
Published: May 2019

Ruling: Q1: Are your supplies of accommodation input taxed supplies pursuant to section 40-35 of the A New Tax System (Goods and Services Tax) Act 1999 ? | A1: Yes

Relevant facts and circumstances: You are registered for GST effective from xx/xx/xxxx. You carry on an enterprise of supplying accommodation in fully furnished premises. You enter into leases (typically for 12 months) with the owners of the properties. The leases provide for a monthly rental amount and bond. You have consent from the owners of the properties to sublease the properties to third parties. You are obligated to pay the agreed monthly rental amount to the owners of the properties you lease (via their respective real estate agents) whether or not you have subleased the property to a third party. You currently lease and sublease xx properties. Sixteen of the apartments are located in separate apartment buildings. Two apartments are in a building containing a total of xxx apartments. Two apartments are in a building containing a total of xxx apartments. Three apartments are in a building containing a total of xxx apartments. Five apartments are in a complex containing x apartment towers with a combined total of xxxx apartments. Two apartments are in a building containing a total of xxx apartments. Two apartments are in a building containing a total of xxx apartments. Four apartments are in a building containing a total of xxx apartments. Five apartments in a building containing a total of xxx apartments. Where you lease multiple apartments in the same building, none of the apartments are adjacent to one another or located on the same floor/level. You do not have any agreements, contracts or leases in place for the common areas nor control of how any of the buildings are operated. You sublease the properties in your own right and are not acting as an agent for the property owners. All of the properties you currently lease are fully self-contained apartments that contain bedrooms, bathroom, kitchen and living facilities. You intend to also lease and sublease other forms of property such as houses and town houses in the future. All properties to be subleased by you are either furnished by you (at your cost) or leased furnished to you by the owner. The properties you sublease are made available to the public through on-line rental platforms. The online rental platforms are used to advertise the availability and facilitate the tenanting process for each individual property. Potential tenants can choose their duration of tenancy which is ultimately agreed upon with you via the rental platform. There is a minimum rental period of one night but no restrictions on the length of the tenancy. When the duration and dates are confirmed the tenant pays the agreed rent and also a bond, which is refundable at the conclusion of the rental period. Each apartment is rented out as a whole to the one tenant. No shared accommodation arrangements are entered into. The rental platforms take a small percentage on each rental transaction as a listing fee and the net rental amount is then paid to you. Utilities and access to the Internet are included in the nightly tariff charged to occupants of the apartments. You enter into contractual arrangements with service providers (ISP in regard to Internet access, electricity, gas and water). You do not provide any other services to the tenants such as food and beverages or concierge type services. At the time the tenant vacates the premises, you organise for the property to be cleaned. A fee for cleaning is paid by the tenant when the tenancy is confirmed during the process on the on-line rental platform. You do not provide cleaning or any other services during the duration of a tenant’s occupancy. You have previously been unsure as to the correct GST treatment of your supplies and have erred on the side of caution and treated the supplies as taxable supplies and thus remitted the GST in respect to the supplies, albeit that no GST has been charged to the tenants.

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

Reasons for decision: Summary: Note: In this reasoning, unless otherwise stated, ● all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) ● reference material(s) referred to are available on the Australian Taxation Office (ATO) website www.ato.gov.au The issue in this case is whether your supply of accommodation is an input taxed supply under section 40-35. 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. Under subsection 40-35(1), 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 an entity that owns or controls the commercial residential premises) is input taxed. Under subsection 40-35(2) of the GST Act, the supply will only be input taxed to the extent that 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’ suitabilit y 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. The apartments in question will satisfy the definition of ‘residential premises’ as the apartments are self-contained providing shelter and basic living facilities such as bedroom, bathroom, kitchen and living areas. As such, the next issue to consider is whether your supplies fall within the exclusion in paragraph 40-35(1)(a) of being supplies of accommodation in commercial residential premises that you own or control. The term ‘commercial residential premises’ is 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. The terms hotel, motel, inn, hostel and boarding house are not defined in the GST Act and take their ordinary meaning. 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. Paragraph 12 of GSTR 2012/6 lists the following eight characteristics that are considered to be common to 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, and ● occupants have the status of guests. | Detailed Reasoning - Application to your situation: You are supplying accommodation in residential apartments in buildings/complexes across a number of locations. It has not been established whether, for GST purposes, these buildings/complexes would fall within the definition of ‘commercial residential premises’. In all cases you advised that you do not have any agreements, contracts or leases in place for the relevant common areas. You do not control how any of the buildings/complexes are operated as a whole. Given the above, we consider that you are making supplies of accommodation in premises (regardless of whether, as a whole, the buildings or complexes are ‘commercial residential premises’) that you neither own nor control. Therefore your supplies of accommodation do not fall within the exclusions in paragraph 40-35(1)(a). Your supplies of accommodation are input taxed supplies pursuant to section 40-35.