Private ruling: GST and residential premises
Published: April 2014

Ruling: Q1: Will your supplies of accommodation be taxable supplies pursuant to section 9-5 of the A New Tax System (Goods and Services Tax Act) 1999 (the GST Act)? Answer No, your supplies will be input taxed supplies of residential premises, pursuant to section 40-35 of the GST Act.

Relevant facts and circumstances: You are not registered for GST. You intend to lease residential premises such as houses, townhouses and apartments. These will have a kitchen, bathroom/s, lounge/living and bedroom. You intend to enter into long term residential lease agreement/s with the property owners or their real estate agents. Under the agreements, you will be responsible for payment of the agreed rent, and maintenance (ie gardening and general maintenance) of the property, for the term of the lease. The agreements will state that you use the premises to conduct a business of short-term accommodation and subletting of the properties. You will not be acting as agent for the property owners. If no clients are booked into the premises, you will still pay the monthly rent and maintain the property. You will be subletting each property in its entirety, not individual rooms. Rent will be calculated at a set rate per night, with higher tariffs for peak times and discounts offered for longer stays. A bond will be payable which will be refunded after inspection of the premises. You will provide all required furniture, linen, manchester, cooking and laundry appliances in the properties. Telephone, internet and Foxtel will be provided. Basic essentials such as tea, coffee and dishwashing liquid will be provided. A minibar may be available in the future. You will advertise the properties on 3 rd party websites. Initially, you will use these websites to collect the rent. However, you intend to start your own website in the future. You will organise check-in and check-out times and cleaners at the completion of each stay. Long-term clients will be offered a weekly cleaning service, which will be built into the rate.

Relevant legislative provisions: Section 9-5 of the A New Tax System (Goods and Services Tax Act) 1999 | Section 40-35 of the A New Tax System (Goods and Services Tax Act) 1999

Reasons for decision: Summary: Section 40-35 of the GST Act provides that a supply of premises by way of lease, hire or licence is input taxed if it is a supply of residential premises, other than a supply of commercial residential premises. A supply of commercial residential premises will not be input taxed. A supply of residential premises is input taxed to the extent it is used predominantly for residential accommodation, regardless of the term of occupation. Residential premises are defined in section 195-1 of the GST Act and include land or buildings that are occupied as a residence or for residential accommodation, regardless of the term of occupation. As explained in paragraph 15 of Goods and Services Tax Ruling GSTR 2012/5 Goods and Services Tax: residential premises, to satisfy the definition of residential premises, premises must provide shelter and basic living facilities. Premises that do not have the physical characteristics to provide these are not residential premises to be used predominantly for residential accommodation. The premises you intend to lease will satisfy this requirement. Commercial residential premises are defined in section 195-1 of the GST Act to include (amongst other things): (a) a hotel, motel, inn, hostel or boarding house; or … (f) anything similar to*residential premises described in paragraph (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 terms hotel, motel, inn, hostel in boarding house are not defined in the GST Act and take their ordinary meaning. The Macquarie Dictionary 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 the vehicles Inn a small hotel that provides lodging, food etc, for travellers and others Hostel a supervised place of accommodation, usually supply on 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 kitchen, laundry, living room, etc. In their ordinary meanings, these terms shared a 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 establishment described in paragraph (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. On the facts provided, the premises are not hostels or boarding houses, nor are they similar to these. Therefore, it is necessary to consider whether the premises fit the definition of, or are similar to, a hotel, motel or inn. Paragraph 12 of Goods and Services Tax Ruling GSTR 2012/6 Goods and services tax: commercial residential premises (GSTR 2012/6) , explains that common characteristics of operating hotels, motels and inns include: • commercial intention • multiple occupancy • holding out to the public • accommodation is the main purpose • central management • management offers accommodation in its own right • the provision of, or arrangement for, services • occupants have the status of guests Paragraphs 13 to 25 of GSTR 20012/6 expand on these characteristics. Paragraph 95 of GSTR 2012/6 further explains that in addition to living accommodation areas, premises that are commercial residential premises include commercial infrastructure, such as reception areas, dining and bar areas, meeting/function rooms, commercial kitchens and laundry facilities, storage areas and car parks, to support the commercial operation of the premises. Premises that are hotel, motels, inns or premises that are similar to these contain some, or all, of the commercial infrastructure to some degree. You intend to sublease individual, houses, townhouses and apartments to the public. Your operations will have some of the characteristics listed in paragraph 12 of GSTR 2012/6, such as holding out to the public, accommodation is the main purpose, multiple occupancy and commercial intention. However, you will offer very limited services. Guests will generally be responsible for their own cooking, laundry and cleaning, although you can arrange regular cleaning services if requested.. Longer term guests will be offered a weekly cleaning service (vacuuming, clean linen, etc), which will be factored into the tariff. Further, your premises will not contain any of the infrastructure listed in paragraph 95 of GSTR 2012/6. Therefore, while your residential premises display some characteristics of commercial residential premises, they are not sufficiently similar to a hotel, motel, inn, hostel or boarding house to be commercial residential premises as defined in section 195-1 of the GST Act. Your supplies of the premises by way of lease, hire or licence will be input taxed supplies of residential premises under section 40-35 of the GST Act.