Private ruling: GST and the supply of short term accommodation
Date of advice: 27 September 2016
Published: November 2016

Ruling: Q1: Is the supply by Entity A of short term accommodation in hotel rooms an input taxed supply of accommodation in residential premises under paragraph 40-35(1)(a) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: No. | Q2: Is the supply by Entity A of short term accommodation in serviced apartments an input taxed supply of accommodation in residential premises under paragraph 40-35(1)(a) of the GST Act? | A2: No.

Relevant facts and circumstances: Entity A operates a Hotel Function Centre which includes accommodation over several properties located in close proximity. The accommodation is advertised online as: It features accommodation rooms, apartments and suites to suit any circumstance. In every room there is complimentary wifi, complimentary broadband internet connection, mini bar and room service. Additional features of the property include complimentary self-car parking, valet laundry service, extensive dining facilities, sports bar and a gaming lounge to ensure you and your guests can simply relax and enjoy. All accommodation is cleaned daily with the exception of Sundays.

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 195-1 | A New Tax System (Goods and Services Tax) Act 1999 paragraph 40-35(1)(a)

Reasons for decision: Summary: All references to Australia mean the indirect tax zone. | Detailed Reasoning - Question 1 & 2: You make a taxable supply were you satisfy section 9-5 of the GST Act. The section provides you make a taxable supply if: ● you make a supply for consideration, and ● the supply is made in the course or furtherance of an enterprise that you carry on; and ● the supply is connected with Australia, and ● you are registered or required to be registered. However, the supply is not taxable to the extent that it is GST-free or input taxed. Entity A will satisfy section 9-5 of the GST Act and make taxable supplies when they provide accommodation of a hotel room or a serviced apartment. As the supply of the accommodation will be for consideration, the supply will be made in the course or furtherance of an enterprise that Entity A carries on, the supply is connected with Australia as it is done in Australia, and Entity A is registered or GST. However, the supply will only be taxable to the extent that it is GST-free or input taxed. There are no provisions that would result in the supply of accommodation being GST-free but we need to consider if the supply is input taxed under Division 40 of the GST Act. In particular, paragraph 40-35(1)(a) of the GST Act. The paragraph provides: (1) A supply of premises that is by way of lease, hire or licence is input taxed if: (a) 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 premise); or (b) … (* defines a term under section 195-1 of the GST Act) residential premises means 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) … commercial residential premises means: (a) a hotel, motel, inn, hostel or boarding house, or (b) … (c) anything similar to *residential premises described in paragraphs (a) to (e). The accommodation provided by Entity A will satisfy commercial residential premises pursuant to paragraph (a) under section 195-1 of the GST Act. 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 12 of GSTR 2012/6 provides that the common characteristics of operating hotels, motels, inns, hostels and boarding houses that are relevant, though not necessarily determinative, to characterising premises as commercial residential premises are: ● Commercial intention The premises are operated on a commercial basis or in a business-like manner even if they are operated by a non-profit body. ● Multiple occupancy The premises have the capacity to provide accommodation to multiple, unrelated guests or residents at once in separate rooms, or in a dormitory. ● Holding out to the public The premises offer accommodation to the public or a segment of the public. ● Accommodation is the main purpose Providing accommodation is the main purpose of the premises . ● Central management The premises have central management to accept reservations, allocate rooms, receive payments and perform or arrange services. This can be provided through facilities on-site or off-site. ● Management offers accommodation in its own right. The entity operating the premises supplies accommodation in its own right rather than as an agent. ● Provision of, or arrangement for, services Management provides guests and residents with some services and facilities, or arranges for third parties to provide them. ● Occupants have status as guests Predominantly, the occupants are travellers who have their principal place of residence elsewhere. The occupants do not usually enjoy an exclusive right to occupy any particular part of the premises in the same way as a tenant. Entity A, in supplying accommodation, has a commercial intention as it operates on a commercial basis, the premises have capacity to provide accommodation to multiple unrelated guest, Entity A offers accommodation to the public by advertising via varies means such as internet, Entity A offers accommodation as the main purposes of the premises, there is central management evidenced by the advertising, the management of Entity A supplies accommodation in its own right, management provides guests with services and facilities as advertised, and the occupants have the status of guests. Paragraphs 13 to 25 of GSTR 2012/6 provides features of hotel and motels as follows: 13. A motel is a particular type of hotel that primarily caters to the needs of motorists seeking roadside accommodation. An inn is a small hotel at which board (meals) and lodging are provided to travellers. Subject to those qualifications, the following features of hotels are equally relevant to motels and inns. 14. Hotels provide accommodation for a commercial purpose. Non-profit entities can also operate commercial residential premises. For example, various non-profit organisations operate hotels in a business-like manner. 15. Hotels have the capacity to supply accommodation for multiple occupancies. 16. Hotels usually offer meals to guests and they usually have a kitchen where meals are prepared for guests. The premises usually include a restaurant or dining room for guests. A motel does not necessarily have a dining room, but guests of the motel may still be provided meals. 17. The guest rooms in a hotel are invariably furnished, and always include a bed, and some living area, and usually an adjoining bathroom. In some cases, hotel rooms may also have a kitchenette for self-catering. 18. Linen and towels are usually supplied. The rooms are usually cleaned and serviced by staff on a daily basis, with the costs of these services being included in the tariff. 19. Predominantly, the guests of hotels are travellers who ordinarily have their principal place of residence elsewhere, and who need or desire accommodation while away for business or pleasure. However, this feature may not be evident in hotels, sometimes referred to as residential or private hotels, that provide accommodation to long-term residents for whom the premises are a permanent place of residence. 20. Guests of hotels do not usually enjoy an exclusive right to occupy any particular part of the premises in the same way as a tenant to whom a house or apartment is let. Nor does a guest of a hotel usually let a room for a term. The guest is usually charged at a daily rate multiplied by the number of days of occupancy. However, it is not essential that all guests in a hotel stay for a short period. This feature may not be evident in hotels that provide accommodation to long-term residents. 21. Hotels usually have a reception desk to handle the requirements of both management and guests, particularly when guests check in or check out of the establishment. Hotels may also offer concierge services either at the reception desk or at a separate concierge's desk. 22. Hotels do not normally provide shared accommodation to guests in the sense of having a number of unrelated guests sharing a kitchen and living facilities. 23. A hotel is centrally managed by the operator, typically having at least one person present, or offsite but readily accessible, to manage the accommodation and arrange or provide services. 24. Accommodation in a hotel is supplied by the operator of the hotel in its own right and not in the capacity of agent for a third party. The arrangement between the parties will reveal whether there is an agent-principal relationship. 25. When determining whether premises are, or are similar to, a hotel, motel or inn, it is necessary to consider the premises in its entirety. It is not sufficient to only consider the features of part of the premises, such as an individual room, in which accommodation is provided. It is clear that Entity A has the features of a hotel and motel in that you offer meals to guests as the premises include extensive dining facilities including room service, the guest rooms are furnished and may also have a kitchenette for self-catering, linen and towels are supplied, the rooms are cleaned daily with the exception of Sunday with the cost being included in the tariff, and the guests, as it is short term accommodation, would be more than likely have a principal place of residence elsewhere and are guests of Entity A. Therefore, on the facts, Entity A has the common characteristics and features of a hotel and motel that provides commercial residential premises and paragraph 40-35(1)(a) of the GST Act will not be satisfied and the supply of accommodation of a hotel room or serviced apartment by Entity A will be taxable.