Edited version of private advice

Authorisation Number: 4140087957367

Date of advice: 12 April 2021

Ruling

Subject: GST and residential premises

Question 1

Will the supply by Entity A of the Property to the specialist disability accommodation (SDA) Provider under the head lease be a taxable supply pursuant to section 9-5 of the A New Tax System (Goods and Service Tax) Act 1999 (GST Act) and subject to GST?

Answer

No. The Property will be an input taxed supply of residential premises.

Question 2

Will the acquisition of the goods and services by Entity A from the building company for the building of the Property be a creditable acquisition for which Entity A is entitled to claim an input tax credit?

Answer

No.

Relevant facts and circumstances

Entity A proposes to construct and develop a 3-bedroom home (the Property) to be used as specialist disability accommodation (SDA).

Entity A will enter into a building contract for the Property with a building company to build the Property. The Property will be used for the purposes of SDA for up to two tenants with Robust support needs (as defined under the National Disability Insurance Scheme Act 2013 (NDIS Act)) and will include:

1. a bedroom for each tenant;

2. a bedroom for one support person / carer to reside in the Property (Support Room) and

who will provide overnight on-site care assistance to the tenant.

Upon completion of the Property under the building contract, Entity A will lease the Property to a SDA Provider under a head lease. The SDA Provider will sub-lease the various tenant rooms to a National Disability Insurance Scheme (NDIS) participant who has specialist disability accommodation support approved under their NDIS plan (Participant) under a sublease and will licence the Support Room to a supported independent living provider within the meaning of the NDIS Act (SIL Provider).

Both the Participants and the SIL Provider will have access to shared common areas of the Property which contain a communal kitchen, laundry and living area. Each bedroom has its own bathroom and is securely lockable by the applicable tenant.

Relevant legislative provisions

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 11-5

A New Tax System (Goods and Services Tax) Act 1999 Section 11-20

A New Tax System (Goods and Services Tax) Act 1999 Section 40-35

Reasons for decision

Question 1

Based on the physical characteristics of the Property we consider the prevailing function is residential premises to be used predominantly for residential accommodation. The Property is not a care facility. The additional design features support the resident to live in the residential premises independently while also being supported with any required care.

Entity A's supply of the Property by way of the Lease will be input taxed pursuant to section 40-35.

As the supply is not a taxable supply pursuant to section 9-5 the supply is not subject to GST.

Question 2

You are entitled to an input tax credit for any creditable acquisition that you make.

Section 11-5 provides that you make a creditable acquisition if all of the following criteria are satisfied:

(a)  you acquire anything solely or partly for a creditable purpose (i.e. to the extent you acquire the thing in carrying on your enterprise except to the extent the acquisition relates to making input taxed supplies or is of a private or domestic nature)

(b)  the supply to you was a taxable supply

(c)   you provide, or are liable to provide, consideration for the supply

(d)  you are registered or required to be registered.

The relevant issue here is whether Entity A's acquisition of the construction services (goods and services) from the building company is for a creditable purpose.

As outlined in question 1 Entity A has acquired the construction services in relation to making input taxed supplies. Therefore, Entity A is not making a creditable acquisition.

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