Compendium
On completion, Developer sold all of the 30 apartments on the top floors to individual investors who may choose to live in these apartments. Developer and Sky entered into 90 leases for the remaining apartments, a lease for the management lot which includes the reception area, management offices, the restaurant and conference facilities; and a further lease for the parking lot.
Developer's sale of the 30 apartments are taxable supplies of new residential premises. As Developer is supplying multiple apartments and the infrastructure or other features that give all of the supplies the physical character of commercial residential premises each lease is the supply of commercial residential premises.
Using the facts provided in paragraphs 62 and 63 of this draft Ruling, however, the entire premises are strata titled. Developer and Sky entered into 120 leases for the apartments, a lease for the management lot which includes the reception area, management offices, the restaurant and conference facilities; and a further lease for the parking lot.
Developer sells 40 apartments to investors subject to the lease with Sky. Developer continues to lease the remaining 80 apartments, management and parking lots to Sky.
Developer's sales of the 40 apartments are taxable supplies of new residential premises. Developer's supply by way of leases of the 80 apartments, management and parking lots to Sky are taxable supplies of commercial residential premises.
including an explanation of the difference between binding and non-binding examples, as taxpayers do not understand why an example that is not binding on the ATO would appear in a public ruling;
include examples on student accommodation to reduce confusion in this sector; and
specifically deal with issues that arise from a change in character or owner of the premises.
Compendium
The ATO published responses to 49 submissions on this ruling in GSTR 2012/6EC. Outcome labels are heuristic — read the ATO response for the detail.
D2 1.1Physical characteristics & paragraphs (a) & (f) of the definition The submission raised concerns over statements made in the draft Ruling that were perceived to be inconsistent concerning the relevance of physical characteristics (paragraph 166) and the list of characteristics common to hotels, motels, hostels and boarding houses (paragraph 50). It was submitted that the paragraphs addressing commercial residential premises need to be reconsidered. The definition of commercial residential premises is an exclusive one. Only premises falling within paragraphs (a) - (f) of the definition have the identity or character of commercial residential premises. It was noted that Example 9 did not define what the physical characteristics of a motel are and that the Ruling should be defined or determined at least partially by reference to its physical design or construction. This also applied to the other forms of premises set out in paragraph (a) of the definition. It was also noted that the physical characteristics of premises is not one of the eight characteristics listed in paragraph 176. It was submitted that the eight characteristics are best employed to define what premises are similar to those set out in paragraphs (a) to (e) of the definition for the purposes of paragraph (f) rather than to define what is in paragraphs (a) to (e) themselves. The current structure of the draft Ruling referring to physical characteristics, dictionary meanings, and the eight characteristics may result in it being no easier, and may even be more difficult, than was previously the case in determining when premises are commercial residential premises. The submission raised the issue as to whether the sale of a vacant retirement village could be compared to the sale of a vacant motel based on physical characteristics. It submitted that the ruling should discuss whether the sale of a vacant retirement village would be the supply of commercial residential premises. It was queried why Example 10 (paragraph 62) considered the manner in which the premises was operated once the example established that the premises have physical characteristics that allow the premises to be used in a manner similar to a hotel.