Ruling Compendium

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.

The Ruling sets out more detailed characteristics of a hotel, motel, and hostel consistent with the decision in ECC Southbank Pty Ltd as trustee for Nest Southbank Unit Trust & Anor v. Commissioner of Taxation [2012] FCA 795 (ECC Southbank).

The Ruling however does not provide a definitive checklist of physical characteristics or design features for premises referred to in paragraph (a) of the definition of commercial residential premises. It is necessary to consider the specific facts in each case.

Paragraph 87 considers types of evidence that may be relevant where the premises have been newly constructed and not yet operated. It makes reference, by way of example, to premises that have been constructed to be used as a retirement village.

Example 14 (formerly Example 10) has been modified. However, the way the premises are operated is relevant to characterising the supplies made by the operator of the premises.

Commercial residential premises are essentially defined by their function: commercial residential premises (as defined) are not only structures capable of human occupation but they must also function in an enterprise to provide human occupation. Only by examining their functioning on supply can it be determined if they are in fact commercial residential premises or merely residential premises. Commercial residential premises are defined by their use as the definition in the Act emphasises: a hotel operator who sells the real estate component of her enterprise while retaining the hotel function makes a supply of residential premises and not commercial residential premises. If she sells the hotel along with the real estate she is supplying commercial residential premises. If she sells the hotel business with a lease in place for the real estate she is supplying commercial residential premises.

It was submitted that the inconsistency contained within the draft Ruling made it difficult to apply to other types of premises not discussed in the draft Ruling - for example student accommodation, army barracks, nurses' quarters and convents. While acknowledging that it would be difficult for the ATO to provide guidance on all the different kinds of premises occupied, it was suggested that the ruling contain an example on student accommodation. It was submitted that the physical characteristics of student accommodation would not differ substantially from many hotels or boarding houses and may be similar to camp style accommodation. Reference was made to ATO Interpretive Decision ATO ID 2010/194 GST and supply by way of lease of a building designed to provide tertiary student accommodation and the ECC Southbank litigation.

Examples 6 and 7 at paragraphs 58 to 66 on student accommodation have been added. The principles from ECC Southbank have been incorporated into the Ruling.

ATO ID 2010/194 was withdrawn on 11 October 2012 following the decision of the Federal Court in ECC Southbank.

It was submitted that the approach taken in Example 12 that supplies under a single arrangement made by multiple leases of premises can be characterised as a supply of commercial residential premises was not consistent with the South Steyne decision. The ruling should address this inconsistency and provide detail as to what the Commissioner considers to be an 'arrangement'.

It was observed that under the view set out in the draft Ruling, a tenant (that is, operator) of a serviced apartment complex could have GST on some apartments it acquires under a lease and not on others. This was a matter that needs to be escalated through Tax Issues Entry System (TIES).

We agree that the GST treatment of individual supplies of accommodation may differ depending upon how the arrangements are structured.

The submission referred to the term 'arrangement' which is used in the context of multiple leases in paragraphs 44, 71 and 164 of the draft Ruling. Similarly, paragraph 72 refers to 'single agreement' in an example on multiple leases. The Tax Office should include in the binding section of the draft Ruling an explanation as to what is an 'arrangement'. It was submitted that it should not necessarily be a written document or one that is legally binding between the parties with the exception of the leases themselves.

Paragraph 43

Insert the word 'supplied' after the word 'premises' in the third line. That is:

... A supply of residential premises is only a supply of commercial residential premises under paragraphs (a) or (f) of the definition where the premises supplied include infrastructure or other features ...

Insert the word 'two' between 'the' and 'parties' in the second line; and Change the word 'with' to 'within' in line four. That is:

An entity that enters into an arrangement with a single recipient - under which multiple leases are executed between the two parties over individually strata titled rooms and the infrastructure or other features located with within the premises, which collectively comprise commercial residential premises - supplies commercial residential premises to the recipient..

Can the 'one-lease' scenario be referred to as well in these two paragraphs as being the supply of commercial residential premises? That is, where there is only one lease (rather than multiple leases) governing the supply of some or all of the apartments together with the infrastructure or other features located within the premises.

In respect to paragraph 156, it was submitted that all commercial residential premises can be viewed as being residential premises, but the residential premises that are not taxable on sale must have specific attributes, for example real property, used predominantly for residential accommodation, not defined as commercial residential premises, etcetera. Some things that look like commercial residential premises are excluded from the definition, for example residential schools and colleges.

It was submitted that the ruling should clarify the importance of 'status as a guest' as an indicator of when premises are commercial residential premises. It would also be useful for the ruling to set out exactly what features of a tenancy arrangement other than exclusive possession are determinative of the status of the occupant. The ATO was also asked to explain precisely what it means when it refers to 'similar rights akin to a tenant'. It was observed that the laws with respect to residential tenancies are State and Territory based, and therefore may differ resulting in different GST outcomes. It was suggested that this matter needs to be brought to the attention of Treasury.

Paragraph 50 of the draft Ruling refers to the characteristic that the premises provide accommodation to a transient or floating, though not necessarily short-stay, class of occupants as their primary purpose. The draft Ruling does not make it clear what is meant by the term 'transient'. On the basis that the legislation deals with scenarios where 'long term accommodation' can be provided to an individual in commercial residential premises (see Division 87), it was submitted that the term 'transient' cannot be intended to relate to the term of occupation. Therefore, the draft Ruling should explain what is meant by this term. Is it intended to refer to persons who are away from their home?

In respect to paragraphs 242 - 244, it was submitted that on the basis of the discussion in the draft Ruling regarding multiple occupancy, the supply of more than one apartment together with the infrastructure of other features to support the operation of the premises commercially should be sufficient to treat the supply as commercial residential premises.

Alternatively, how many apartments would be necessary to classify them as commercial residential premises provided the same entity supplies the infrastructure/other features as well?

The Ruling is therefore not able to specify a minimum number of rooms or apartments necessary to classify premises as commercial residential premises.

Can the ATO provide additional guidance on the characteristics of home parks that make them similar to a caravan park? (Refer to paragraphs 54 and 227 of the draft Ruling).

In respect to paragraphs 53 and 54, if the residential premises function as marinas or caravan parks or camping grounds then they are commercial residential premises when sold regardless of the term of their occupation.

The draft Ruling sets out that separately titled adjacent cottages or villas that are combined and operated similar to a hotel, motel, inn, hostel or boarding house to provide accommodation can form commercial residential premises. If the test to be applied predominantly focuses on the physical characteristics of the premises, it was submitted that the scenario set out in paragraph 45 is similar to that of a retirement village. This example highlights the apparent inconsistency in the ATO's approach in determining whether a property is commercial residential premises.

It was submitted that retirement villages could be considered commercial residential premises. Retirement villages usually meet seven of the ATO's eight factors for determining if premises are commercial residential premises (that is, the same number that mining employee accommodation meets). Purely on physical characteristics, some are practically the same as motels which are commercial residential premises. In this regard, it is very unclear when physical characteristics or operational characteristics or tenure will be determinative, except in the case of vacant premises. Potentially, that means the sale of vacant retirement villages could have a different treatment to the sale of leased retirement villages. It is important that the approach to retirement villages is simple and consistent. This is particularly critical given the natural progression between independent living and arrangements (typical aged care) where residents require more care within the one retirement village facility.

We do not consider that a retirement village falls within the definition of commercial residential premises - see paragraphs 41 - 47, and 242 - 245 of the Ruling. This position is supported by Wynnum Holdings No. 1 Pty Ltd & Anor v. Commissioner of Taxation [2012] AATA 616 (Wynnum Holding).

Scenarios concerning separate buildings that are located on separate sites will need to be considered on a case by case basis.

In considering paragraph 45 of the draft Ruling, it was submitted that there may be scenarios where holiday cottages may be combined and operated similar to a hotel (if that is a relevant factor) but the cottages are not adjacent. If it is necessary to only consider the physical characteristics of a property, then the need to have cottages next to each other might be relevant (that is, similar to a hotel because of the location of rooms next to each other) but as it appears that further considerations such as the way a property is operated also need to be considered, it would seem that separately titled cottages can form commercial residential premises even in circumstances where they are not adjacent, for example a developer has retained a cottage within a complex for its own use.

This issue can apply equally to the serviced apartment examples contained at Examples 11 and 12 where a developer sells 30 apartments on the top three levels of a building. Does the conclusion regarding the remaining apartments and the management lot depend on whether the apartments that form the commercial residential premises are all located on the same levels? Would the premises still be commercial residential premises if the 30 apartments that were sold were situated on the lower three floors (near the management lot) or disbursed throughout the building with the result that the apartments that potentially form the commercial residential premises are not next to each other?

Example 16 of the Ruling (at paragraphs 102 - 107) does not stipulate that the 90 strata titled rooms that form part of the commercial residential premises need to be segregated from the 30 strata titled rooms that do not form part of the commercial residential premises. The characterisation of the premises would not be altered if any of the 30 strata titled rooms were located on floors within the building that contained a number of the 90 strata titled rooms.

Retirement village verses serviced apartments

The Submission considered that there was an inconsistency in approach between paragraphs 259 and 72. The draft Ruling requires that the 'commercial premises' of a retirement village should be apportioned when sold and treated as taxable. (Query whether this should be in the binding part of the draft Ruling). However, there is no requirement to separate the commercial areas of a serviced apartment complex which would necessarily result in a supply of commercial premises and probably (on the ATO's view) a supply of residential premises.

Employee accommodation

It was submitted that from a policy perspective, it was agreed with the outcome that mining accommodation is taxable. However, the submission did not agree with the reasoning contained in the draft Ruling to reach the conclusion that this type of accommodation is commercial residential premises.

In particular, it was submitted that in Example 19, the Commissioner dispensed with the requirement that the premises needs to be offered to the public. This criterion is significant and is considered to be of importance by the ATO in GSTR 2000/20. It is implicit, after all, in the very words of 'commercial residential premises' and all of the premises described in paragraphs (a) to (e) of that definition that residential premises constitute commercial residential premises when they are marketed to the public. Also, if the Commissioner is applying tests involving physical characteristics and how premises are operated, it would seem critical that for something to be similar to a hotel, it needs to be held out to the public. The importance placed on the mode of operation (usage) in these examples was noted.

While the availability of input tax credits is outside of the scope of the Ruling, footnote 86 to paragraph 239 of the Ruling refers to paragraph 123 of Goods and Services Tax Ruling GSTR 2008/1 Goods and services tax: when do you acquire anything or import goods solely or partly for a creditable purpose, which states that acquisitions made in constructing or maintaining residential premises that are supplied by way of an input taxed supply of a lease or licence relate to making that supply and consequently are not for a creditable purpose.

In respect to paragraphs 88 to 95: The premises fail half of the tests listed in your paragraph 50 - there is no commercial intent, accommodation is provided only to secure workers, there is single accommodation only, and there is no holding out to the public that casual accommodation is available for travellers.

The submission queried the position taken in footnote 11 to paragraph 95 of the draft Ruling that accommodation provided to employees and contractors on an offshore mobile drilling unit in similar circumstances to that set out in Example 19 is also a supply of accommodation in commercial residential premises.

It was noted that the definition of floating home as contained in section 195-1 of the GST Act means a structure that is composed of a floating platform and a building designed to be occupied as a residence. However, it was queried whether an offshore mobile drilling unit could ever be a 'building designed to be occupied...as a residence.' Presumably the accommodation forms part of the larger commercial structure and, therefore, would not meet the definition of floating home.

If so, it is difficult to see how these structures can constitute residential premises as under the definition of residential premises in section 195-1 of the GST Act, it is necessary to be land or a building. The ATO is referred to the definition of "land" in section 22(1) (c) of the Acts Interpretation Act 1901. It was noted that the definition of 'building' in The Macquarie Dictionary is 'a substantial structure with a roof and walls, as a shed, house, department, store, etc.' It is difficult to see how a mobile drilling unit can be described as either residential premises or commercial residential premises (it is plainly not a hotel etcetera). Rather, it would be more practical to view any residential accommodation that takes place on such a unit as ancillary and incidental to the commercial use of the unit.

Applying the views expressed in Examples 19 and 20, if the property also contained shearers' quarters how would this be treated? The shearers are not charged to live in the quarters but the building may exhibit the physical characteristics similar to other examples contained in the draft Ruling such as camp-style accommodation or even a bed and breakfast. When vacant, should these areas also be apportioned as part of the sale of the farmland? Would these be commercial residential premises and require apportionment? What about manager's quarters (for example a two bedroom house where two employees stay while they are working)? If the manager's quarters have been used in a way similar to a bed and breakfast, applying the draft Ruling, if this was supplied vacant, would this be commercial residential premises and also need to be apportioned?

It is necessary to consider the facts and circumstances of each case to determine whether the premises are commercial residential premises.

If the premises are not being operated at the time of supply, it is necessary to consider whether there is objective evidence to characterise the premises as commercial residential premises - see paragraphs 86 - 88 of the Ruling. The Commissioner's views on mixed supplies are set out in Goods and Services Tax Ruling GSTR 2001/8 Goods and services tax: apportioning the consideration for a supply that includes taxable and non-taxable parts.

The submission welcomed the use of examples and in particular welcomed the inclusion of all the examples within the binding section of the draft Ruling. However, there are inherent difficulties in applying examples rather than statements of principle.

In paragraph 251 of the draft Ruling, it states that the supply of accommodation in bed and breakfasts, farm stays and home stays will be an input taxed supply of residential premises unless the premises are operated in a similar manner to a hotel, motel, inn, hostel or boarding house (query whether this statement should be contained in the binding part of the ruling). However, in Examples 15 and 17 a bed and breakfast and a farm stay are respectively considered to be commercial residential premises and it is not clearly stated why. These examples appear to be inconsistent with the statement in paragraph 251. Example 17, in particular, does not clearly state that it is operated like a hotel. In Example 17, the determining factors appear to be that the accommodation is being operated on a commercial basis aimed at transient guests who are temporarily away from their usual homes. However, these factors are also present in Example 16 which the draft Ruling states is not commercial residential premises.

Further, the distinguishing features of Example 15 and 16 of the draft Ruling are not addressed. One can glean that the key distinguishing feature is the multiple occupancy point, but this is not stated. If Harrison in Example 16 had two rooms available in his house would the outcome be different? It seems an odd outcome if this was the case. Paragraph 194 indicates that accommodation provided to one person or a small group living or travelling together do not demonstrate the characteristic of multiple occupancy. The ATO is asked to consider whether this is a statement of principle that should be included in the binding part of the draft Ruling. An explanation as to the ATO's view on the key differences between the two examples is needed. It was further noted that arguably Example 15 is not similar to a hotel in that the accommodation is only available on the weekends. It was considered that the premises contained in Examples 15 and 16 are likely to be physically the same. Therefore, again, the test that is being applied must be more than just the physical characteristics but this is not clearly stated.

The draft Ruling should explain more clearly why in Examples 15 and 17 the premises are operated in a similar manner to a hotel and in Example 16 the premises are not operated in a similar manner to a hotel.

The Ruling has been restructured to reflect the ECC Southbank and Wynnum Holdings decisions as well as discussing the common characteristics of an operating hotel, motel, inn, hostel, or boarding house.

a. Paragraph 62 (Example 10)

The word 'large' in 'large reception area' is unclear. What is 'large' and is this adjective really necessary?

Delete the only sentence in this paragraph and replace with: The fact that the building may be strata titled or supplied in its entirety by Developer to Sky via separate strata-titled leases will not alter the conclusion in this example.

This example should also include a similar conclusion as in paragraph 66 (as amended above). That is:

The conclusion in this example will not alter if Developer supplies the living areas and infrastructure to Sky via individual strata-titled leases.

Paragraph 71 refers to Developer and Sky under one arrangement entered into 90 leases and a lease for the management lot and in paragraph 72 refers to the single agreement entered into.

71. 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.

72. 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.

This example is confusing as it initially draws on some of the facts from Example 10 but it is not made clear in this latest example:

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who Developer is leasing the 80 apartments to; and

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who is leasing (or not leasing) the reception area, management offices, restaurant and conference facilities.

Currently, Examples 10 and 11 consider the one-line lease of the entire premises required by the accommodation provider (Sky). Example 12 considers the alternative where the entire premises required by Sky are supplied by Developer by way of strata lease.

73. 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.

74. 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.

75. 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.

You may also want to expand on new paragraph 75 above by indicating:

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that if Developer sells the management lot then its remaining supply of the 80 apartments by way of lease to Sky will become an input taxed supply of residential premises; and

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that each investor's supply of the apartment by way of lease to Sky is an input taxed supply of residential premises.

Would your conclusion differ if most or all of the other apartments in the complex are also made available to guests by the on-site manager as agent for each apartment owner?

In respect to paragraph 69, the lease of empty residential premises is not a taxable supply. The lease of non-residential premises is a taxable supply. I believe that Developer makes a fully-taxable mixed supply here as there is no operating hotel in the sale and therefore no commercial residential premises. Prospective use is not relevant - refer to Sunchen Pty Ltd v. FC of T [2010] FCAFC 138 (Sunchen).

It was submitted that there are potentially complex issues regarding whether a change in the physical characteristics of premises and the change in ownership of premises gives rise to different GST outcomes. For example: ?

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does a lease of vacant land become input taxed after residential premises are constructed on them?

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does a sale of residential premises become taxable if they are demolished before settlement? and

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is the supply by a purchaser of leased residential premises still a lease and therefore input taxed?

It was noted that these issues are not covered by the draft Ruling. They are critical questions and clear answers will head off potential disputes in the future. If it is not possible to incorporate them in the Ruling, it was recommended that a further separate ruling or determination be issued on these matters.

This comment raised the anomaly that different outcomes may arise for what is essentially the same supply where camp style accommodation and associated services are provided by the same entity compared to situations where the accommodation and services are provided by different entities.

It is not possible to classify all forms of 'camp style accommodation' as commercial residential premises, as the correct classification depends upon the specific facts and circumstances of the arrangement.

Consistent with the Commissioner's views on commercial residential premises, we consider that a supply of accommodation without any services is unlikely to be a supply of accommodation in commercial residential premises.

The submission stated that the ATO should maintain its view from GSTR 2000/20 that supplies made by operator in leasing/licensing a site within a home park is a supply of commercial residential premises or supplies of accommodation in commercial residential premises.

It was submitted that if the ATO's view on this did change, then transitional relief should be provided.

The comment was made that it can be deduced by the removal of paragraphs 166-167 in the draft Ruling that the physical characteristics of premises are not relevant in determining whether operating premises are commercial residential premises. The submission supported such a conclusion and sought ATO confirmation of this view in the final ruling or compendium.

Example 17 is a vacant motel example where no mention is made of the owner/manager's residence, which is present in virtually every motel. Is it to be assumed that the residence is ignored and the supply of the vacant motel is to be treated as a composite supply? This extremely common example should be addressed in the ruling.

Also, some high rise office complexes have a caretaker's residence on the top floor or in the basement. Should these be apportioned or ignored?

The comment submits that the ATO should accept all objective evidence to determine if premises are residential or commercial residential, rather than accepting some evidence but not others.

When premises are not operating yet the 'physical characteristics' could be that of either residential or commercial residential premises, the ATO should expand the criteria that it will accept to include evidence existing in common commercial practice, such as minutes, business plans, offer to lease, agreement for lease and finance applications.

These additional objective factors include, but are not limited to , the overall physical character of the premises as well as government zoning and planning permissions.

A similar amendment should be considered in paragraphs 81-83, 184 and 224-226.

The submission states that paragraphs 61, 68, 280 and 282 change the ATO's view of the essential test for determining whether premises are similar to the commercial residential premises found in paragraph (a) of the definition of that expression. Now the test appears to be whether the occupants have the status of 'guests'. That is determined by whether they are granted overall control over at least a part of the premises including the right to restrict the entry by management of that part of the premises. The submission was inclined to agree with the conclusion and suggested that the ATO's support for it, by way of overseas precedent or otherwise be included in the final ruling.

The submission raised the concern that inconsistencies in the ruling will create uncertainty.

It raises the question of how a block of residential apartments operating as commercial residential premises until shortly before sale with vacant possession would be treated in the light of the following sentences in the paragraphs indicated below:

"143 .... However, the actual use of such premises for a purpose other than residential accommodation does not prevent the premises from being residential premises to be used predominantly for residential accommodation. ...

and

225. A supply of premises that were previously operated as a hotel, motel, inn or hostel and have not been subject to any physical modifications that changed the character of the premises is a supply of commercial residential premises. ....

These paragraphs refer to the overall physical character of the premises and how the premises are operated. Where these objective factors do not give a clear characterisation, the following may also be considered:

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contractual documentation that provides evidence of current or future use, and

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government zoning and planning permissions.

Determining whether premises fall within either paragraph (a) or (f) of the definition of commercial residential premises raises questions of fact involving matters of impression and degree.

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a former hotel that is used as a business centre/serviced office complex;

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a vacant building or building complex to be purchased by a residential property developer; and

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a holiday hotel complex that ceases to be used as a hotel and may be operated as a retirement village.

It was submitted that premises can be commercial residential premises only when operating, because premises that have ceased to operate do not have any of the characteristics of commercial residential premises and are, therefore residential premises.

This point was made with particular reference to disused motel premises, and questions the draft Ruling's approach to classifying premises that have ceased to operate. It was submitted that when commercial residential premises cease being used as a motel, the building reverts to being residential premises. To be a motel an enterprise operating the motel must offer accommodation. If there is no offer of accommodation, residential premises cannot be a motel. If a motel has ceased to operate, and the building is empty, the building does not exhibit any of the characteristics of commercial residential premises.

The submission provided that GST is payable (and reclaimable) on each sale of a motel business. On the last sale after ceasing the commercial residential business, when only the residential premises remain, GST is payable on the sale, but the buyer cannot claim the input tax credits. This parallels exactly the situation with a domestic residence as was apparently intended by the legislation - only the first sale of non-commercial residential premises is a taxable supply.

Submissions were received that commented on paragraphs 91-94, 228-236 and example 20 of the draft Ruling.

These submissions called attention to the draft Ruling's use of the term 'overarching agreement' to describe the conditions where commercial residential premises are strata tilted and under an arrangement whereby one supplier individually supplies all the strata titled lots that together make up the commercial residential premises to a single recipient.

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the lack of precision in the term 'over arching' agreement,

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concerns that the approach taken is not consistent with the South Steyne decision and the Revised Explanatory Memorandum to the Tax Laws Amendment (2006 Measures No.3) Bill 2006,

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the inconsistencies of treatment of substantially the same transaction and the uncertainties created when applying the principles in the paragraphs.

It was submitted that supply of strata titled apartments with the commercial infrastructure and other separately parts of the hotel complex should be considered for GST purposes to be a composite supply of commercial residential premises and therefore fully taxable.

The submission stated that the ATO's policy for GST on retirement villages remains commercially unsustainable. The inability to obtain input tax credits on the massive construction spending required for a typical village renders village financing and viability as problematic. More than any other premises or establishment type, retirement villages do not fall neatly within the residential premises versus commercial residential premises divide. It was suggested that the ATO bear in mind the continuing difficulties in this area when next requested by Treasury to suggest legislative fixes required for GST.

The submission suggested the following:

Paragraph 102

This paragraph highlights that the sale of rooms by Developer to investors are taxable supplies of new residential premises.

Suggested Change: expand the paragraph to include:

If an individual leases their room to Cloud this lease will be an input taxed supply of residential premises.

It was submitted that the draft ruling would be enhanced by:

1. 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;

2. include examples on student accommodation to reduce confusion in this sector; and

3. specifically deal with issues that arise from a change in character or owner of the premises.

Agreed - examples on student accommodation have been included at Example 6 and Example 7 - see paragraphs 58 to 66 of the Ruling.

These issues fall outside of the scope of the Ruling.

It was submitted that, in paragraph 63 at Example 12, the supply by JKL to a corporate customer is a supply of commercial residential premises. The corporate customer on-supplies the accommodation, probably for free.

The comment was made that the ruling is over 82 pages, it is complex and difficult to understand.

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GSTR 2012/5 Goods and services tax: residential premises;

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GSTR 2012/6 Goods and services tax: commercial residential premises;

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GSTR 2012/7 Goods and services tax: long-term accommodation in commercial residential premises; and

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GSTD 2012/11 Goods and services tax: have new residential premises been used for residential accommodation before 2 December 1998 for the purposes of paragraph 40-65(2)(b) of the A New Tax System (Goods and Services Tax) Act 1999 where the premises were only operated as commercial residential premises before that date?

It was submitted that there is a need for transitional arrangements, particularly relating to the prospective application of the views expressed in the ruling for various arrangements, particularly short term mining accommodation and for strata title hotel and apartment rooms.

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employee accommodation,

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boarding houses and rooming houses,

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supplies of accommodation to managers and caretakers of commercial residential premises, and

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home parks.

Detailed suggestions for transitional arrangements were submitted for circumstances where an entity grants a separate lease over each strata titled room and infrastructure to a single recipient that collectively forms commercial residential premises.

It is not considered appropriate to grant transitional relief to taxpayers who relied upon the preliminary view expressed in Draft GSTR 2011/D2 at paragraphs 44 and 164.