The Property Council welcomes the opportunity to comment on the draft ruling GSTR 2012/D1 on residential premises and commercial residential premises (the “draft ruling”).
We are concerned that there are two new key changes to the ATO view in this draft ruling. The ruling needs to explain how this change in view affects taxpayers.
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Strata title hotel and apartment rooms are no longer taxable commercial residential premises - they are now input taxed residential premises.
The ATO‟s view on separately titled rooms and apartments is confusing and conflicts with the Explanatory Memorandum.
The ATO view gives a different result for what is essentially the same supply under a single lease depending on whether the commercial residential premises are on one title or separately strata titled.
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Short term mining accommodation is no longer always taxable – they are now, depending on the factual circumstances, either input taxed residential premises or taxable commercial residential premises.
Taxpayers who acted in line with the previous ATO view are potentially faced with a substantially increased GST bill for projects purchased long ago or that are still being constructed.
Adopting the following three recommendations will reduce confusion and ensure that taxpayers understand how the changed view affects them.
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It is critical that the ATO’s new view applies prospectively to projects commenced or commercially committed to after the date that the final ruling is published.
This will avoid unfairly penalising taxpayers who have followed the ATO‟s previous view.
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The ruling needs to provide transitional provisions that give taxpayers adequate time to adopt the ATO‟s new views into their business processes, project feasibilities and contract negotiations.
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The ruling should state that strata title premises supplied under one lease agreement are taxable commercial residential premises.
This would remove the absurd situation in the draft ruling where two identical premises are treated differently for GST purposes depending on whether they are strata titled or on one title.
The current draft ruling conflicts with Example 15.3 in the Explanatory Memorandum to Tax Laws Amendment (2006 Measures No. 3) Bill 2006.
The Example specifically states that:
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the supply of serviced apartments “is similar to the supply of a hotel and is a supply of commercial residential premises”; and
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it is irrelevant whether the “apartments may or may not be strata titled”.
The attached submission contains:
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an example to provide more detail on how the changed view affects short term mining accommodation. The principles apply equally to strata title hotel and apartment rooms. The example makes it clear that our recommendations above need to be adopted or that the ATO needs to re-consider its view.
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details on why strata titled premises supplied under one lease agreement are taxable commercial residential premises.
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some detailed suggestions to clarify the draft ruling and ensure that it operates as intended.
We have also attached our submission on GSTR 2011/D2. The draft ruling (GSTR 2012/D1) would be enhanced by:
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examples - include 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;
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student accommodation – include examples on student accommodation to reduce confusion in this sector. Taxpayers currently have no guidance on whether the ATO views student accommodation as commercial residential premises. The eight factors are not easily interpreted for this type of accommodation;
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garage/car parking – include a binding example where a garage/car park is on separate title to the premises to clarify the ATO‟s view; and
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change of character/owner raises complex issues regarding how character/owner changes affect GST liability – the ruling should specifically deal with these issues to head off potential future disputes.
