Residential colleges – do you know your GST position?

As residential colleges review their fee structures for the 2026 academic year, it’s an ideal time to reassess GST treatment. 

Taking a fresh look now can help ensure your compliance approach is both accurate and you are well positioned for the year ahead.

Have you considered your GST position?

Endorsed charities

If your residential college is an endorsed charity, you may be eligible to treat certain supplies – such as student accommodation and meals – as GST-free under the GST Act. This can result in a significantly lower GST liability, however, eligibility depends on meeting specific criteria.

To qualify, the fees you charge must be considered nominal, meaning they must fall below the thresholds set out in section 38-250 of the GST Act. For endorsed charities, this generally means charging less than 75 per cent of the GST-inclusive market value for accommodation, or less than 50 per cent for other supplies such as meals.

Why does it matter? 

If your fees exceed these thresholds:

• Accommodation may become input taxed, meaning you do not charge GST but also cannot claim input tax credits on related expenses.
• Other services such as meals may become taxable, requiring you to remit GST to the ATO.

This shift can significantly affect your financial position.

The ATO recognises that determining the correct GST treatment can be particularly complex for residential colleges, as these institutions typically provide a mix of supplies including accommodation, meals, pastoral care, and educational support. 

Disaggregated fee approach

PCG 2022/3 outlines a practical method for residential colleges to break down student fees into components such as accommodation, meals, and other services and assess each for GST treatment. This allows GST-free treatment where applicable (e.g. under section 38-250), while ensuring that non-qualifying components are correctly accounted for.

The approach under PCG 2022/3 offers flexibility and can help colleges more accurately reflect the GST treatment of their services. However, it also comes with specific responsibilities.

While residential colleges may choose to rely on the methodology outlined in PCG 2022/3, they are not required to do so and may adopt an alternative approach provided it is fair, reasonable, and supported by appropriate documentation.

Division 129 adjustments – has the use of your acquisitions changed? 

Taxpayers who have claimed an input tax credit for acquisitions with a GST-exclusive value over $1,000 should assess whether a Division 129 adjustment is required in their June BAS. This applies where the actual use of an asset has changed from its intended use at the time the credit was claimed – for example, shifting from taxable or GST free use to an input taxed use.

Division 129 is particularly relevant for residential colleges, where the proportion of taxable, GST-free, and input taxed supplies can vary from year to year. 

Key points to consider:

• Adjustments must be reviewed annually and reported in the June BAS.
•  Division 129 does not apply where the GST-exclusive value of an acquisition is $1,000 or less.
• Division 129 does apply where the GST-exclusive value of an acquisition exceeds $1,000. The higher the value of the acquisition, the longer the period over which its use must be monitored for potential GST adjustments:
  • $1,001–$5,000: 2 adjustment periods
  • $5,001–$499,999: 5 adjustment periods
  • Over $500,000: 10 adjustment periods

Division 129 is easy to overlook; but forgetting it can lead to an unexpected GST liability – often catching taxpayers off guard when it is too late. 

Next steps

• Review your rent setting and fee structures to ensure GST treatment is correct, and understand how it affects your GST liability and input tax credit recovery. 
• Consider whether a Division 129 adjustment is required in your June BAS.
• Ensure that input tax credits claimed throughout the year for ongoing costs are appropriately restricted in line with the GST treatment of related supplies. 

If you’re unsure about your GST treatment, please get in touch with Grant Thornton’s Indirect Tax experts who can assist with tailored advice and compliance support.

Article contributed to by Christopher Lillis - Senior Manager, Indirect Tax

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