Private ruling: GST and letting of apartments
Published: November 2012

Ruling: Q1: Are you required to be registered for GST? | A1: No.

Relevant facts and circumstances: You carry on a leasing enterprise. You manage strata titled apartments, which are fully furnished and fully equipped, with kitchen. The apartments are located in Australia. You provide medium to long term rentals for clients requiring accommodation for relocating staff and staff on projects away from their home office. The average length of stay is greater than 8 weeks, with many stays being longer than three months and some extended stays of more than a year. You employ part time staff, who work from home. You do not maintain an office. You advertise on the internet. The apartment blocks are only attended to hand over keys to tenants and to attend to maintenance issues. The lessor can only access the apartments if permission is granted by the tenant. One of the apartment buildings has a pool and gym and the other buildings have a gym. There is a telephone connected in the apartments however, they are call barred and clients must pay a fee to be able to make calls. Occupants can request a weekly cleaning service if required. A compulsory departure clean is completed at the end of each rental period, the cost of the clean is included in the rental charge. Cleaning is performed by a subcontractor. No other services are provided. Tenants are responsible for their own cooking and laundry. Utilities are connected and associated costs are incorporated in the rent.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 Section 23-5. | A New Tax System (Goods and Services Tax) Act 1999 Paragraph 23-5(a). | A New Tax System (Goods and Services Tax) Act 1999 Paragraph 23-5(b). | A New Tax System (Goods and Services Tax) Act 1999 Section 40-35. | A New Tax System (Goods and Services Tax) Act 1999 Subsection 40-35(1). | A New Tax System (Goods and Services Tax) Act 1999 Section 195-1.

Reasons for decision: Summary: Section 23-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that, you are required to be registered under this Act if: (a) you are carrying on an enterprise, and (b) your GST turnover meets the registration turnover threshold. You advised that you are carrying on a leasing enterprise. Therefore, you meet the requirement in paragraph 23-5(a) of the GST Act. What we need to determine is whether your annual turnover meets the registration turnover threshold. The registration turnover threshold for an entity (other than a non-profit entity) is $75,000. Subsection 188-10(1) of the GST Act provides that your annual turnover will meet the registration turnover threshold if: (a) your current annual turnover is $75,000 or more, and the Commissioner is not satisfied that your projected annual turnover is below $75,000, or (b) your projected annual turnover is $75,000 or more. Your current annual turnover at a time during a particular month is the sum of the values of all the supplies that you have made, or are likely to make, during the 12 months ending at the end of that month. Your projected annual turnover at a time during a particular month is the sum of the values of all the supplies that you have made, or are likely to make, during that month and the next 11 months. When calculating your current and projected annual turnover some supplies, for example, supplies that are input taxed are excluded from the calculation of current and projected annual turnovers. In your case, we need to determine if the supply of the apartments, by way of leasing is the supply of residential premises which is input taxed and therefore excluded from the calculation of your current and project annual turnover. Subsection 40-35(1) of the GST Act provides, in part, that a supply of premises by way of lease, hire or licence is input taxed if: · the supply is of residential premises (other than commercial residential premises), or · the supply is of commercial accommodation and Division 87 of the GST Act (which is about long-term accommodation in commercial premises) would apply to the supply but for a choice made by the supplier under section 87-25 of the GST. However, paragraph 40-35(2)(a) of the GST Act provides that the supply is input taxed only to the extent that the premises are to be used predominantly for residential accommodation. Section 195-1 of the GST Act defines residential premises as land or a building that is occupied as a residence, or is intended to be occupied, and is capable of being occupied as a residence, and includes a floating home. Goods and Services Tax Ruling GSTR 2012/D1 provides guidance on the term predominantly for residential accommodation. Specifically, paragraph 9 of GSTR 2012/D states: The requirement in sections 40-35, 40-65 and 40-70 that premises be 'residential premises to be used predominantly for residential accommodation (regardless of the term of occupation)' is to be interpreted as a single test that looks to the physical characteristics of the property to determine the premises' suitability and capability for residential accommodation. The physical characteristics common to residential premises that provide accommodation are: The premises provide the occupants with sleeping accommodation and at least some basic facilities for day to day living. A supply of residential premises may consist of a single room or apartment, or a larger complex consisting of rooms or apartments. Paragraph 15 of GSTR 2012/D1 further states: 'Residential premises' are not limited to premises suited to extended or permanent occupation. Residential premises provide 'living accommodation', which does not require any degree of permanence. It includes lodging, sleeping or overnight accommodation. From the facts of your case, you are leasing fully furnished self contained apartments which contain living and sleeping spaces, and kitchens. In this regard, the apartments are considered to possess physical characteristics which satisfy the definition of residential premises to be used predominantly for residential accommodation. However residential premises that are similar to hotels, motels, inns, hostels or boarding houses are also commercial residential premises. The supply of commercial residential premises are not input taxed. The supply of commercial residential premises are included in the calculation of current and projected annual turnover. Accordingly, we need to consider whether your apartments are commercial residential premises. GSTR 2012/D1 provides the Commissioner's view on the meaning of the definition of commercial residential premises. Paragraph 50 of GSTR 2012/D1 lists the main characteristics of commercial residential premises as follows: · Commercial intention · Accommodation is the main purpose · Multiple occupancy · Occupants have status as guests · Holding out to the public · Central management · Services offered The above characteristics are explained in more detail in GSTR 2012/D1. Basically, to be considered as commercial residential premises, an establishment must exhibit all of the above characteristics to some degree. You do not provide any services to the tenants, except for cleaning if requested. You do not provide meals or room services or reception services. The tenants are expected to do their own cooking, cleaning and laundering during their stay. Based on the facts provided the premises do not contain infrastructure, such as a restaurant, reception area, laundry or office, which would be expected in a premises that is similar to commercial residential premises. In addition, it is considered from the information provided that the individuals residing in the apartments have rights that are similar to that of a tenant rather than that of guest. This is supported by the fact that you must request permission from the tenant if you wish to access the apartment; and that the tenant is able to enjoy and occupy the apartment with little to no disruption for the term of their occupancy. Accordingly, as all the necessary characteristics of commercial residential premises are not present, the apartments are not considered to be similar to a hotel, motel, inn, hostel or boarding house. Therefore, the apartments do not constitute commercial residential premises. The supply of these apartments is input taxed under section 40-35 of the GST Act. Therefore, the supply will be excluded from the calculation of your current and projected annual turnovers. Since you do not meet the registration turnover threshold, you are not required to be registered for GST.

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