GST - commercial residential premises

1 Will supplies of student accommodation at Property 1 by you be taxable supplies of 'commercial accommodation provided in commercial residential premises' for the purposes of sections 9-5 and 87-15 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

1 Yes, your supplies of the accommodation at Property 1 will be taxable supplies of 'commercial accommodation provided in commercial residential premises' for the purposes of sections 9-5 and 87-15of the GST Act, except where you make a choice under section 87-25 of the GST Act not to apply Division 87 to those supplies. Question 2 Will your supplies of student accommodation at Property 2 by you be taxable supplies of 'commercial accommodation provided in commercial residential premises' for the purposes of sections 9-5 and 87-15 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? Answer 2 Yes, your supplies of the accommodation at Property 2will be taxable supplies of 'commercial accommodation provided in commercial residential premises' for the purposes of sections 9-5 and 87-15 of the GST Act, except where you make a choice under section 87-25 of the GST Act not to apply Division 87 to those supplies. Question 3 Under Division 87 of the GST Act, will the value of your taxable supplies of accommodation provided to individuals at Property 1 and Property 2 (the Properties) for a continuous period of 28 days or more be reduced to 50% of the price of the supply?

Answer 3 Yes, under Division 87 the value of your supplies of accommodation provided to individuals at the Properties for a continuous period of 28 days of more will be reduced to 50% of the price of the supply provided that at least 70% of these individuals are provided with long-term commercial accommodation and provided that you do not make a choice under section 87-25 of the GST Act not to apply Division 87 to your supplies of long-term accommodation. Question 4 Pursuant to Division 87 and paragraph 40-35(1)(b) of the GST Act, will your supplies of long-term accommodation in respect of the Properties be treated as input taxed supplies where: •                every lease is provided directly by you as the owner of the property to individuals at 'the Properties' for a continuous period of 28 days or more; and •                more than 70% of all leases are provided to individuals as commercial accommodation for long-term accommodation in each of the Properties; and •                you elect not to apply Division 87 in relation to all of your leasing supplies in relation to each of the Properties pursuant to section 87-25. Answer 4

Yes, where you make a choice under section 87-25 of the GST Act not to apply Division 87 to the supplies of commercial accommodation in respect of the Properties, the supplies will be input taxed under subsection 40-35(b). This ruling applies for the following periods : <date> to <date> The scheme commenced on: <date>

You own properties located at address 1 and address 2, collectively the Properties. You are registered for GST effective from <date> . Property 1 Property 1 is solely operated as a student hostel and accommodation business providing long-term accommodation (i.e. more than 28 days) to students undertaking study in nearby facilities. Property 1 has current Public Health and Wellbeing Act registration as a student dormitory, authorised by the Council. The permit has been issued on the basis that the accommodation is solely restricted for use by eligible students and or the management of the building for use as student accommodation. On or about <date>, an agreement pursuant to section 173 of the Planning and environment Act 1987 was entered into with the Council whereby the accommodation is solely restricted for use by students and the management of the building and is to be used as accommodation for students enrolled part time, full time or short time. A minimum of XX on site car parking spaces are to be provided for students within the basement.

The property is a four-storey building that comprises a XX room student accommodation facility with access to basement car parking for XX car parking spaces that are leased to students residing in the premises. The student accommodation includes bedsit ensuite rooms, one-bedroom apartments and two-bedroom apartments. An adjoining annexed block contains a management office and an apartment available for student leasing. The ensuite rooms contain either a single or double bed with drawers, desk, chair, wardrobe, shower and toilet. The occupants are provided with access to a communal laundry, kitchen, lounge room, sitting area and corridors and common areas on all floors. The apartments, while containing the basic furniture listed above, also contain a fridge, laundry machine, couch and TV. These rooms have access to the common areas in the other floors.

Each ensuite utilises the common areas available on each floor, comprising of a shared kitchen, bank of fridges, kitchen appliances, cooking stations as well as individual cupboard storage. A shared living area provides casual and dining seating, TV and access to a balcony. A communal laundry featuring coin operated washing machines and dryers is also provided. Vending machines are present on the property and are accessible to all residents. The ground floor contains games rooms, television lounges, external garden areas with barbecue facilities and group study rooms. The parent development also contains a basement providing car spaces, XX spaces of which are allocated to the property. All car-park spaces are leased pursuant to the terms of the leases for student accommodation or used for commercial purposes. Internet/wi-fi is available free of charge throughout the building. Linen is provided when the tenant moves in with additional linen available to purchase from reception. Pastoral care is also available to the students with a focus on student wellbeing through support from a Resident Advisor or Warden.

The current management agreement, dated <date>, determined minimum rental charges. The parties agreed that the minimum rental charges would be revised annually or as otherwise agreed to by the parties in writing. Current accommodation pricing ranges from $ (bedsit) to $ (one/two bedroom) per week. The student accommodation is comparatively low cost considering the location, facilities and utilities provided, in that it is materially lower than other accommodation in the local area - where one-bedroom apartments typically cost $ per week and twin bedroom apartments $ per week, generally exclusive of services and utilities. The rent on all leases on the property is charged to tenants inclusive of GST. Property 2 Property 2 has current Public Health and Wellbeing Act registration for XX beds as a student dormitory, authorised by the Council. On <date>, an agreement pursuant to section 173 of the Planning and Environment Act 1987

was entered into with the Council whereby the accommodation was solely restricted for use by eligible students and the management of the building, and was to be used as accommodation for students enrolled full time at a secondary or tertiary level education institute and employees of two local hospitals provided that not more than XX% of the apartments are utilised by those employees. However, you have always operated the property solely as student accommodation. The property is a subdivided building with a ground and XX upper levels. The facility was originally constructed in year XXXX to provide for nurses' accommodation and has since been refurbished. The ground floor contains reception and staff areas, a student study area, games room, lounge and TV room and an external garden area with BBQ facilities. The accommodation features a configuration of a mix of rooms containing either one or two beds. Each room also contains the comparative number of desks, chairs, wardrobes and bar fridges.

Each floor holds a kitchen, TV lounge, storeroom and separate male and female communal bathrooms. The shared kitchens contain microwave ovens, fridges (one per student), furniture and kitchen appliances. The shared living area incorporates casual seating, table and chair arrangements in a cafeteria-style eating area, TV and access to a balcony. There is a communal laundry featuring coin operated washing machines and dryers on each floor except the XX th floor - although the occupants of that floor will have access to communal laundries. Parcel lockers are present on the ground floor of the building which allows for a self-managed parcel collection service that is overseen by the reception staff. There is no parking available on site. Internet/wi-fi is available free of charge throughout the building. Linen is provided when the tenant moves in with additional linen available to purchase from reception. Pastoral care is also available to the students with a focus on student wellbeing through support from a Resident Advisor or Warden. The current management agreement, dated <date>, determined minimum rental charges.

The parties agreed that the minimum rental charges would be revised annually or as otherwise agreed to by the parties in writing. Current average pricing ranges from $ (studio rooms) to $ (twin rooms) per week. The student accommodation is comparatively low cost considering the location, facilities and utilities provided, in that it is materially lower than other accommodation in the local area - where one-bedroom apartments typically cost $ per week and twin bedroom apartments around $ per week, generally exclusive of services and utilities. The rent on all leases on the property is charged to tenants inclusive of GST. Management of the Properties You have engaged a management company XX (the Manager) to operate both properties as student hostels and accommodation businesses. The Manager manages a number of similar facilities including multiple rooming houses and is a medium size student accommodation operator.

The management offices at each property are operated by X full-time staff members, with office hours being 9am to 5pm. The management offices handle check in, check out, room changes, maintenance requests, complaints, queries about the rooms and services offered, organises events for the building and handles any online customer queries. An emergency hotline is available during non-on call hours. Additional part-time staff is available to work on call with similar responsibilities to the full-time staff. Management reserves the right to access any of the accommodations with a master key and performs periodic check-ins to ensure the health and wellbeing of the students living on the property. Under the terms of each management agreement, you pay a management fee based on the monthly gross rental as well as additional one-off fees. The service terms in the current management agreements for both Properties are largely the same and include amongst other things: •                The Properties are currently used for the operation of a student hostel and accommodation business (the Business).

•                The manager has the knowledge, expertise and technical know-how in respect of the Business including but not limited to its operation, management, sales and marketing. •                The manager is engaged to manage and operate the Properties. •                The parties agree to the minimum rental charges. •                The manger is responsible for: ­        Organising repairs and maintenance and inspection of rooms upon check in and check out. ­        Managing and maintaining the Properties, at your cost, ensuring the good operating condition and repair of furniture, fixtures and fittings. ­        Providing you with monthly operational reports and financial statements, ­        Preparing annual budgets and recommending improvements for marketing, rental and property care for your review. ­        Subcontracting personnel for cleaning and rubbish disposal. ­        Advertising, marketing and promoting the Properties to overseas education agents and agents and general market awareness ­        Collecting rents and other income, issuing and serving notices or demands in relation to defaulted tenants

­        Providing ancillary services to the tenants such as internet, telephone and IT services, laundry, vending machines, cleaning and other services as the tenants require. ­        Achieving minimum key performance indicators; % gross operating profit and % occupancy rate (period) •                As owner of the Properties, you bear the financial risk of the operation of the business and are responsible for the following, amongst other things: ­        Meeting with the Manager to discuss business operations ­        Paying all property related expenses (cleaning, maintenance, repairs, council rates, utilities (electricity, water, gas), marketing) ­        Maintaining Properties and public liability insurance Accommodation agreements All leases of rooms at each property comprise of student accommodation agreements made in accordance with the Residential Tenancies Act. Relevantly, the sample agreements provided reflect the following, among other things: •                The premises is defined as a room in the relevant property. •                You are the rental provider while the Manager is nominated as the agent

•                Renter details and length of the agreement (ordinarily a 6 or 12 month period). •                Bond agreement - lodged with the Residential Tenancies Bond Authority (RTBA). •                The rent payable by the renter to the rental provider on the first of each calendar month. •                Any urgent repairs are to be directed to the manager •                Renter acknowledgement that the room comes with the items listed as part of the furniture package, including but not limited to, beds, chairs, tables, room keys, pantry keys and any remotes for air conditions or TV. •                Internet is provided as a complementary service by the rental provider. •                A cleaner is appointed to maintain common area, kitchens and bathrooms. •                The rental provider must not require the renter to arrange professional cleaning at the end of the tenancy, unless it is required to restore the rented premises to the same condition they were in immediately before the start of the tenancy. •                The renter has a number of responsibilities that include but are not limited to: General conduct

­        Respect other residents' privacy, property, and peace ­        Avoid violence, abuse, loud noise (especially after 11 PM), and illegal activities ­        Follow reasonable standards of behaviour, dress, language, and noise. Property Care ­        Keep rooms and common areas clean and tidy ­        Wash and put away dishes immediately after use ­        Report maintenance issues promptly ­        Avoid damaging premises or common areas; pay for any damage caused. Guests ­        No overnight guests or visitors after 11 PM ­        Management can ask non-residents to leave at any time. Safety ­        No cooking in rooms; use exhaust fans when cooking ­        No smoking, naked flames, or tampering with fire safety equipment ­        Keep emergency exits clear. Payment and leases ­        Pay rent monthly in advance, at least 3 days before due date ­        Inform management if payment will be late ­        Fees apply for lease breaks, transfers, and room changes ­        Provide required notice for lease changes or check-out. Shared facilities ­        Use laundry, fridges, and utilities responsibly

­        Label items in communal fridges; management may discard unlabelled or spoiled items ­        Keep laundry and kitchen areas clean and not leave personal items in common areas. Other ­        No subletting or assigning the lease ­        Not use the premises for any other use than its place of residence. All prospective tenants are required to provide proof of enrolment with an education institution at the time of application. There is no arrangement with any particular education institution for its students to occupy either of the premises.

A New Tax System (Goods and Services Tax) Act 1999 section 9-5 A New Tax System (Goods and Services Tax) Act 1999 section 9-40 A New Tax System (Goods and Services Tax) Act 1999 section 40-35 A New Tax System (Goods and Services Tax) Act 1999 Division 87 A New Tax System (Goods and Services Tax) Act 1999 section 195-1

In this ruling, unless otherwise stated, •                all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) •                all reference materials cited are available on the ATO website www.ato.gov.au Section 9-5 states that you make a taxable supply if: (a)            you make the supply for consideration; and (b)            the supply is made in the course or furtherance of an enterprise that you carry on; and (c)            the supply is connected with the indirect tax zone; and (d)            you are registered, or required to be registered. However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. Your supply of student accommodation will satisfy the requirements under section 9-5 because of the following: •                the supply will be for monetary consideration; •                you will be making the supply in the course of your property enterprise that you carry on; •                as the property is located in Australia, supply of student accommodation at the premises will be connected with the indirect tax zone (Australia); and •                you are registered for GST.

Division 38 and 40 provide for certain supplies to be GST-free and input taxed respectively. In your circumstances, the supply of student accommodation will not be GST-free under Division 38. Therefore, it remains to be determined if, by providing student accommodation, you will be making input taxed supplies. Subsection 40-35(1) states: (1)           A supply of premises that is by way of lease, hire or licence (including a renewal or extension of a lease, hire or licence) is input taxed if: (a)           the supply is of residential premises (other than a supply of commercial residential premises or a supply of accommodation in commercial residential premises provided to an individual by the entity that owns or controls the commercial residential premises); or (b)           the supply is of commercial accommodation and Division 87 (which is about long-term accommodation in commercial premises) would apply to the supply but for a choice made by the supplier under section 87-25. Residential premises The term 'residential premises' is defined in section 195-1 to mean land or a building that: (a)           is occupied as a residence or for residential accommodation; or

(b)           is intended to be occupied, and is capable of being occupied, as a residence or for residential accommodation. (regardless of the term of occupation or intended occupation) and includes a floating home. The Commissioner's view on whether premises are considered residential premises is provided in Goods and Services Tax Ruling GSTR 2012/5 Goods and services tax: residential premises (GSTR 2012/5). To satisfy the definition of residential premises, premises must provide shelter and basic living facilities. The premises must be fit for human habitation in order to be suitable for, and capable of, being occupied as a residence or for residential accommodation. In your case, the Properties are residential premises as they are occupied for residential accommodation and provide shelter and basic living facilities. Based on the information provided, you are the entity that: •                controls the Properties as the owner of each •                makes the supply of accommodation to guests through entry into the accommodation agreements.

The Manager acts as your manager in respect of marketing and managing the Properties but does not have the degree of control over the Properties necessary to be making the supply of accommodation to students in their own right. Based on the management and lease agreements you offer accommodation to students in your own right. The Manager enters into the leasing contracts with the individuals as your agent. Commercial residential premises 'Commercial residential premises' under section 195-1 is defined to mean: (a)           a hotel, motel, inn, hostel or boarding house; or ... (f) anything similar to residential premises described in paragraphs (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. While paragraph (f) extends the scope of the definition, its operation is limited to premises that have some, or all of the characteristics of both residential premises and one of the classes of premises listed in paragraphs (a) to (e) of the definition. 'Hotel, motel, inn, hostel or boarding house' Goods and Services Tax Ruling GSTR 2012/6

Goods and services Tax: commercial residential premises (GSTR 2012/6) provides guidance on commercial residential premises. Paragraph 8 of GSTR 2012/6 states that a supply by way of sale or lease of commercial residential premises is a taxable supply. A supply of accommodation in commercial residential premises provided to an individual by the entity that owns or controls the commercial residential premises is also a taxable supply. Paragraph 9 of GSTR 2012/6 provides that the terms hotel, motel, inn, hostel or boarding house in paragraph (a) of the definition are not defined in the GST Act and take their ordinary meanings in context. Paragraph 141 of GSTR 2012/6 outlines the following definitions sourced from the Macquarie Dictionary 5 th Edition : 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 their vehicles. Inn a small hotel that provides lodging, food, etc., for travellers and others.

Hostel a supervised place of accommodation, usually supplying 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 a kitchen, laundry, living room, etc. a dwelling, usually a private house, in which board and lodging are provided for payment. Premises that are 'similar' to establishments that are commercial residential premises must have sufficient characteristics in common with the class of premises described. Paragraph 11 of GSTR 2012/6 states: 11. The test to be applied are whether the premises are a hotel, motel, inn, hostel or boarding house for the purposes of paragraph (a), or whether the premises are similar to these types of premises, in the sense that they have a sufficient likeness or resemblance to any of these types of establishments for the purposes of paragraph (f). These tests necessarily raise questions of fact involving matters of impression and degree.

Paragraph 12 of GSTR 2012/6 lists the following common characteristics of operating hotels, motels, inns, hostels and boarding houses that are relevant, though not necessarily determinative, to characterising premises as commercial residential premises: •                Commercial intention The premises are operated on a commercial basis or in a business-like manner even if they are operated by a non-profit body. •                Multiple occupancy The premises have the capacity to provide accommodation to multiple, unrelated guests or residents at once in separate rooms, or in a dormitory. •                Holding out to the public The premises offer accommodation to the public or a segment of the public. •                Accommodation is the main purpose Providing accommodation is the main purpose of the premises. •                Central management The premises have central management to accept reservations, allocate rooms, receive payments and perform or arrange services. This can be provided through facilities on-site or off-site. •                Management offers accommodation in its own right

The entity operating the premises supplies accommodation in its own right rather than as an agent. •                Provision of, or arrangement for, services Management provides guests and residents with some services and facilities or arranges for third parties to provide them. •                Occupants have the status of guests Predominantly, the occupants are travellers who have their principal place of residence elsewhere. The occupants do not usually enjoy an exclusive right to occupy any particular part of the premises in the same way as a tenant. Paragraph 95 of GSTR 2012/6 provides that in addition to providing living accommodation areas, premises that are commercial residential premises include commercial infrastructure to support the commercial operation of the premises. This infrastructure may include (but is not limited to) reception areas, dining and bar areas, meeting/function areas, kitchens, laundry facilities, storage areas and car parks. This infrastructure is used to provide services to occupants. Premises described in paragraph (a) and similar premises under paragraph (f) of the definition contain some or all of these areas to some degree.

Hotels, motels and inns Paragraphs 13 to 24 of GSTR 2012/6 discuss the features of hotels, motels and inns. While sharing some characteristics of the features of hostels, the general characteristics described largely relate to establishments that primarily cater to the needs of travellers or other guests who require accommodation while away for business or pleasure. Hostels The features of hostels are discussed in paragraphs 26 to 35 and 169 to 180 of GSTR 2012/6. In relation to hostels, we consider the relevant ordinary meaning is a supervised place of accommodation usually supplying board and lodging provided at comparatively low cost. In terms of physical and design characteristics, hostels are designed to supply accommodation at a comparatively low cost to the occupants. Physical characteristics may include: •                a commercial kitchen where meals are prepared •                a communal area suitable for a dining area for occupants, and •                a communal laundry.

In relation to operating characteristics, in addition to the common factors that apply to commercial residential premises, paragraphs 29 to 35 of GSTR 2012/6 provide the following characteristics, specific to hostels: •                they are typically centrally managed by an on-site manager who manages the accommodation and arranges or provides services - that is, it is a supervised place of accommodation - occupants can raise queries and concerns pertaining to the management of the premises with an on-site manager, •                accommodation may be provided either in a dormitory environment or in separate bedrooms, •                accommodation in the premises may be supplied as the occupant's principal place of residence, •                provision of meals by the operator of the premises; however, this is not an essential feature of a hostel. Examples 6 and 7 in GSTR 2012/6 provide guidance when considering premises to be used for student accommodation and have some relevance to your situation. Example 6 - supply of whole premises to be used for student accommodation 58. King Accommodation constructs premises that have been designed to provide low cost accommodation

to students (occupants ). The premises predominantly consist of shared accommodation rooms configured so that occupants share kitchenettes and living facilities. The premises also include studio apartments which include self-contained kitchenettes and living facilities. The premises have a reception desk. The premises contain facilities for a coin operated laundry, and recreational areas. The premises do not contain a kitchen, restaurant or dining room for the preparation or service of meals to occupants. The premises have been built on land that is zoned for student accommodation by the local planning authority . 59. King Accommodation leases the premises to King Operator. Under the terms of the lease, King Operator will operate the premises by supplying accommodation to students. In supplying accommodation to students, King Operator will have on-site management to centrally manage the premises through which occupants can raise queries and concerns pertaining to the management of the premises . 60.

In characterising the supply made by way of lease of the premises made by King Accommodation to King Operator, it is relevant to consider the physical characteristics of the premises. These demonstrate that the premises were designed to provide low cost accommodation to students. Further, the contractual documentation and the local planning authority permissions objectively show that King Operator will operate the premises to supply low-cost accommodation to students . 61. The physical characteristics together with the contractual documentation and planning permissions show that the premises are, or are at least sufficiently similar to, a hostel. King Accommodation therefore makes a taxable supply of commercial residential premises to King Operator . Example 7 - student accommodation 62. Following on from Example 6, King Operator uses the premises to carry on an enterprise of supplying relatively low cost accommodation to students. The premises will not be used to provide accommodation to students in connection with an education institution that is not a school for the purposes of the definition of commercial residential premises . 63.

King Operator, through the on-site management staff, provides various services to occupants. Supervised accommodation is provided to occupants in the sense that occupants are able to raise complaints and concerns about the management and operation of the premises with the reception staff . 64. King Operator and the occupants enter into agreements, which set out the following conditions : • the occupant pays a bond, and • the occupants have quiet enjoyment of their rooms and associated living areas . 65. The operation of the premises and the premises' physical characteristics show that the premises are, or are sufficiently similar to, a hostel. While the occupants obtain certain rights under the agreements entered into with King Operator, including the right to have quiet enjoyment of their rooms and associated living areas, these rights are not inconsistent with the premises being characterised as, or similar to, a hostel . 66.

The supply of accommodation by King Operator to an occupant is a supply of accommodation in commercial residential premises provided to an individual by the entity that owns or controls the commercial residential premises. The supply of accommodation to the occupant is therefore not an input taxed supply for the purposes of paragraph 40-35(1 )( a) and is a taxable supply . Application to your case In your case the Properties share the following physical characteristics and manner in which they are operated in common with hotels, motels, inns, hostels and boarding houses: •                Commercial intention - the Properties are operated by you (and the manager) on a commercial basis and in a business-like manner with the primary purpose of earning a profit by providing student accommodation. •                Multiple occupancy - each property has a number of rooms so that the Properties are able to provide occupancy to a number of unrelated people at once in separate rooms. •                Holding out to the public - accommodation at each property is available to the public and is marketed to a significant segment of the public, namely secondary or tertiary students.

•                Accommodation is the main purpose - the main purpose of the Properties is to provide student accommodation. •                Central management - the manager, acting on your behalf, provides central management for each property. The onsite manager operates a reception, organises maintenance, cleaning, security for the Properties and organises for an onsite manager to handle after hour requests. •                Supervised accommodation is provided to occupants in the sense that occupants have access to and are able to raise their concerns about the management or operation of the Properties with the onsite manager.

•                Management offers accommodation in its own right - in your case the entity responsible for the day-to-day operation and management of the Properties is the Manager. While the Manager is marketing, leasing and managing the Properties on your behalf they do not have the degree of control over the premises necessary to be supplying the accommodation to students in their own right. Based on the management and accommodation agreements you ultimately control the Properties and offer the accommodation to students in your own right. The Manager enters into the contracts with the individuals as your agent. •                Provision of, or arrangement for, services - the Manager, acting on your behalf, arranges services for the individuals such as reception, cleaning, maintenance, pastoral care etc. An emergency hotline is also available for non-on call hours. •                The Properties provide commercial infrastructure such as reception areas and shared facilities, such as communal kitchens, lounge areas, dining room, laundry and TV rooms to support the commercial operation of the Properties.

•                Occupants have the status as guests - the students may or may not have their principal place of residence elsewhere and this would depend on their own personal circumstances. A student who stays for a semester may (or may not) maintain their principal place of resident elsewhere during that period. Conversely, a student may stay for a longer duration and not maintain any other principal place of residence during that period. While the Properties may serve as the student's principal place of residence for a period of time, the occupancy is generally non-permanent or transient in nature. •                Additionally, the accommodation you provide is comparatively low cost considering the location and facilities provided. However, the Properties do not have the following characteristics in common with hotels, motels, inns, hostels and boarding houses: •                The Properties do not include a commercial kitchen where meals are prepared for the students •                Students are not provided with room service or meals. As stated above, determining whether premises are commercial residential premises is a matter of overall

impression and degree involving weighing up all relevant factors. On application of the guidance from GSTR 2012/6, we consider that the property demonstrates the characteristics of 'commercial residential premises,' being premises that closely resembles those of a hostel, such that it is within paragraph (f) of the definition of commercial residential premises. Commercial accommodation Commercial accommodation' is defined in section 87-15 to mean the right to occupy the whole or any part of commercial residential premises, including, if it is provided as part of the right so to occupy, the supply of: (a)           cleaning and maintenance; or (b)           electricity, gas, air-conditioning or heating; or (c)            telephone, television, radio or any other similar thing The accommodation agreement includes electricity, water, air-conditioning and heating, broadband internet, cleaning of common areas and on-site management. Accordingly, the student accommodation you provide will be commercial accommodation pursuant to section 87-15. Premises used to provide accommodation to students in connection with an education institution that is not a school

In order to be 'commercial residential premises', the premises must not be used to provide accommodation to students in connection with an education institution that is not a 'school.' For GST purposes, 'school' is specifically defined in section 195-1 to mean an institution that supplies pre-school, primary, secondary and special education courses but does not include other education courses such as tertiary education courses. Paragraph 150 of the Goods and Services Tax Ruling GSTR 2001/1 Goods and services tax: supplies that are GST-free for tertiary education courses contains a list of factors that are considered in determining whether a supply is in connection with an education institution that is not a school. The Properties are not physically located on a particular education institution's land. Furthermore, the Properties do not have an exclusive arrangement with any education institution (i.e. university or TAFE) for its students to occupy the premises. No education institution has any input into running the student accommodation premises (either directly or through a third party). Conclusion

The Commissioner considers the student accommodation you provide at the Properties are supplies of commercial accommodation provided in commercial residential premises. Accordingly, the supplies will not be input taxed supplies under section 40-35. The supplies will be taxable supplies pursuant to section 9-5. Question 3 Summary Under Division 87 the value of your supplies of accommodation provided to individuals at the Properties for a continuous period of 28 days of more will be reduced to 50% of the price of the supply provided that at least 70% of these individuals are provided with long-term commercial accommodation and provided that you do not make a choice under section 87-25 of the GST Act not to apply Division 87 to your supplies of long-term accommodation. Detailed reasoning Application of Division 87 to long-term commercial accommodation Subsection 87-5(1) provides that: The value of a taxable supply of commercial accommodation that: (a)        is provided in commercial residential premises that are predominantly for long-term accommodation; and (b)        is provided to an individual as long-term accommodation;

is 50%, or such other percentage as is specified in the regulations, of what would be the price of the supply if this Division did not apply. It has been determined above under questions one and two that the student accommodation you provide will be commercial accommodation in commercial residential premises pursuant to 87-15. Subsection 87-20(1) provides the meaning of 'long-term accommodation': Long-term accommodation is provided to an individual if *commercial accommodation is provided, for a continuous period of 28 days or more, in the same premises: (a)        to that individual alone; or (b)        to that individual, together with one or more other individuals who: (i)         are also provided with that commercial accommodation; and (ii)        are not provided with it at their own expense (whether incurred directly or indirectly). Further subsection 87-20(3) states that commercial residential premises are predominately for long-term accommodation if at least 70% of the individuals who are provided with commercial accommodation in the premises are provided with long-term accommodation.

The Commissioner provides guidance in relation to commercial accommodation in Goods and Services Tax Ruling GSTR 2012/7 Goods and services tax: long-term accommodation in commercial residential premises (GSTR 2012/7). The following paragraphs in GSTR 2012/7 explain: 10. For commercial accommodation to be provided to an individual as long-term accommodation, it is only necessary for the supply of commercial accommodation to be made to an entity for 28 days or more, and for the accommodation, under the terms of the agreement, to be able to be taken up by an individual. It is not necessary for the commercial accommodation to be actually taken up by an individual. Predominantly for long-term accommodation 15. Commercial residential premises are predominantly for long-term accommodation under subsection 87-20(3) where at least 70% of the supplies of accommodation in the commercial residential premises is for a continuous period of 28 days or more, and may, under the terms of the agreement, be taken up by an individual. 16. Any fair and reasonable method may be used to determine whether the 70% requirement is satisfied.

Guidance on the methods that are considered fair and reasonable in terms of 'predominantly for long-term accommodation' is provided in paragraphs 53 to 56 of GSTR 2012/7: 53. Based on the observation of Greenwood J in Meridien Marinas referred to above,commercial residential premises are predominantly for long-term accommodation under subsection 87-20(3) where at least 70% of the supplies of accommodation in the commercial residential premises is for a continuous period of 28 days or more, and may, under the terms of the agreement, be taken up by an individual.54. Any fair and reasonable method may be used to determine whether the 70% requirement is satisfied. The Commissioner accepts that one of the following methods or a combination of both can be used: (a)   the actual occupancy of the premises for the twelve months preceding the month for which the booking is made; or (b)   the projected occupancy for the twelve months following the month in which the booking is made. 55. If it is inappropriate to use either of these methods, a reasonable alternative may be adopted.

56. When looking at actual or projected occupancy, the number of supplies of accommodation, or the number of bookings that are for 28 days or more, rather than the number of people in each room, should be calculated. Bookings made by corporate entities for individuals can be included provided each booking is for a period of 28 or more days. Conclusion In your case you expect: •                the typical length of occupancy to be from 6 to 12 months dependent on the student's study requirements, and •                100% of the students will be provided with accommodation that satisfies as 'predominantly for long-term accommodation' as how this term is defined in subsection 87-20(3). In view of the above guidelines and considering all the relevant factors including that you will be making taxable supplies of commercial accommodation in commercial residential premises, the value of the taxable supplies will be 50% of the price of the supplies pursuant to section 87-5, provided that: •                you will not be making a choice pursuant to section 87-25 to treat the supplies of the accommodation as input taxed under section 40-35, and

•                at least 70% of the students are provided with long-term accommodation in each of the Properties as defined in section 87-20. Question 4 Summary Where you make a choice under section 87-25 of the GST Act not to apply Division 87 to the supplies of commercial accommodation in respect of the Properties, the supplies will be input taxed under subsection 40-35(b). Choice made by the supplier under section 87-25 Section 87-25 provides that Division 87 does not apply to a supply of commercial accommodation if the supplier chooses not to apply this Division to any supplies of commercial accommodation that the supplier makes. If a supplier does choose not to apply Division 87 to its supplies of long-term accommodation in commercial residential premises, the supplies will be input taxed under paragraph 40-35(1)(b). This is explained in paragraph 17 of GSTR 2012/7: Option to input tax supplies of long-term accommodation

17. If a choice is made under section 87-25 to not apply Division 87 to supplies of long-term accommodation in commercial residential premises (other than a berth at a marina), paragraph 40-35(1)(b) applies, resulting in the supply of long-term accommodation being input taxed. Paragraph 87-25(2) further provides that the choice applies to all supplies of commercial accommodation that the supplier makes after the choice is made before the choice is revoked. However, under paragraph 87-25(3), the supplier cannot revoke the choice within 12 months after the day on which the supplier made the choice, and cannot make a further choice within 12 months after the day on which the supplier revoked a previous choice. Paragraph 60 of GSTR 2012/7 explains:

60. If the choice is made to input tax supplies of long-term accommodation, all supplies of commercial accommodation for 28 or more days must be input taxed where the requirements in section 40-35 are satisfied. The choice remains in force for at least 12 months after the day on which the choice was first made. However, the choice may be revoked after 12 months or more. All supplies of long-term accommodation must then be taxed under the special rules for at least the next 12 months after the day the choice was revoked. That is, a further choice cannot be made within 12 months of the revocation of the previous choice. Conclusion Therefore, should you make a choice under section 87-25 of the GST Act not to apply Division 87 to the supplies of commercial accommodation in respect of the Properties, the supplies will be input taxed under subsection 40-35(b). The choice applies to all supplies of long-term commercial accommodation you make.