Private ruling: GST and nominal consideration at market value for accommodation
Date of advice: 20 July 2015
Published: July 2015

Ruling: Q1: Can you use the proposed methodology for calculating whether the accommodation you provide is less than 75% of the GST inclusive market value of the supply? | A1: Yes, you can use the proposed methodology for calculating whether the accommodation you provide is less than 75% of the GST inclusive market value of the supply.

Relevant facts and circumstances: You are an endorsed charity pursuant to Division 176 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). You own and operate a number of accommodation facilities. You have conducted a review of the facilities market in the immediate vicinity with an intention of being able to supply GST-free accommodation to your clients. Therefore, you have developed a proposed methodology for calculating whether the accommodation you will provide is less than 75% of the GST inclusive market value of the supply. You have provided a worked example to show how your proposed methodology would operate. The proposed methodology involves establishing the GST inclusive market value of the similar supply by comparing a wide selection of facilities to determine the rents charged at those facilities for particular types of accommodation which are similar to those offered by you.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-250(1)

Reasons for decision: Summary: Under subsection 38-250(1) of the GST Act a supply is GST-free if: a) the supplier is an endorsed charity, a gift-deductible entity or a government school, and b) the supply is for consideration that: i. if the supply is a supply of accommodation - is less than 75% of the GST inclusive market value of the supply, or ii. if the supply is not a supply of accommodation - is less than 50% of the GST inclusive market value of the supply. You are an endorsed charity pursuant to Division 176 of the GST Act. Therefore, you satisfy paragraph 38-250(1)(a) of the GST Act. To satisfy subparagraph 38-150(1)(b)(i) of the GST Act you need to make a supply of accommodation that is less than 75% of the GST inclusive market value of the supply. The Goods and Services Tax Industry Issues Charities Consultative Committee - Non-commercial activities of charities, cost of supply and market value tests publication provides guidance on how to calculate whether you are providing accommodation that is 75% of the market value. Section B provides the market value guidelines. You have used this document to assist you to determine the market value of a similar supply to the accommodation you provide. You will be providing accommodation in the facilities and have provided a worked example of how you have calculated the market value in the area where these facilities are located. You have determined that there is no supply that is the same and therefore have used the similar supply test. You have considered the quality and nature of the supply, the size and duration of the supply and the conditions of the supply. It is considered that your proposed methodology provides a reasonable picture of the market value of accommodation that is similar to the facilities. You have made reasonable adjustments. It is not necessary to currently make adjustments for size and quality as you have a large sample size to make comparisons. However, in other markets this may not be the case. Therefore, it is considered that your proposed methodology can be used for calculating whether the accommodation you provide is less than 75% of the GST inclusive market value of the supply.