- Tax Alert: ATO releases long overdue guidance about GST treatment of premises
Late last year the ATO released guidance on the GST treatment of residential premises and commercial residential premises in the form of three new GST rulings.
- GSTR 2012/5 – Residential premises
- GSTR 2012/6 – Commercial residential premises
- GSTR 2012/7 – Long-term accommodation in commercial residential premises
The Rulings replace an earlier GST public ruling issued at the time GST was first introduced more than 12 years ago (GSTR 2000/20), which has now been withdrawn.
We believe this is a good step forward and while long overdue, provides some much needed clarity around the GST treatment of residential and commercial residential premises. Below is a summary of the key points for taxpayers to be aware of:
GSTR 2012/5: GST and residential premises
This ruling provides guidance on when the ATO considers premises are “residential premises” used predominantly for residential accommodation, including the ATO’s view on land supplied with a residential building. The ATO does not specify a restriction on the area of land supplied with a residential building. However, each case is a question of fact and degree.
The ruling also confirms that the ATO will not generally regard accommodation provided in an office building, private hospital, residential care facility or a shop as “residential premises”.
GSTR 2012/6: GST and commercial residential premises
The second ruling provides guidance on when the ATO considers premises to be “commercial residential premises”.
The ruling includes a list of factors that may indicate that premises are not considered to be commercial residential premises, but this list is not exhaustive.
The ruling sets out the ATO’s view that supplying premises by sale or lease which consist of rooms, apartments, cottages or villas as well as commercial infrastructure, regardless of whether they are separately titled, is a supply of commercial residential premises.
The ATO has introduced changes to the GST treatment of manager/caretaker residences, where they form part of the commercial residential premises (for example, a manager’s unit in a hotel). The ATO is of the view that where the unit or apartment physically forms part of the building, it forms part of the commercial residential premises.
GSTR 2012/7: GST and long-term accommodation in commercial residential premises
The third ruling provides guidance on supplies of “long-term accommodation” in commercial residential premises.
The ruling explains the concessionary treatment for entities that supply commercial accommodation that is provided to an individual as long-term accommodation. A taxpayer can elect to have the accommodation taxed on a concessional basis (of 5% GST) or as an input taxed supply that is not subject to GST. The implication of the input taxed treatment is that input tax credits on costs associated with the supply cannot be recovered.