KARMEL & CO PTY LTD (AS TRUSTEE FOR URBANSKI PROPERTY TRUST) v FC of T

Members:
MD Allen SM

Tribunal:
Administrative Appeals Tribunal

MEDIA NEUTRAL CITATION: [2004] AATA 481

Decision date: 14 May 2004

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MD Allen (Senior Member)

Mr Andrew Urbanski is the sole director of Karmel & Co Pty Ltd, the trustee for the Urbanski Property Trust.

2. Pursuant to an application made the 21st day of November 2002, the company made an application to the Tribunal on behalf of the Trust seeking review of a decision by the Respondent to disallow objections lodged by the Applicant against assessment of the net amount in relation to GST returns lodged for the quarters ending 30 September 2000, 31 December 2000, 31 March 2001, 30 June 2001 and 30 September 2001.

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ATC 2076

3. The primary issue in the objection decision and upon review by this Tribunal was whether the Applicant was entitled to claim input tax credits in relation to its costs of supplying accommodation at premises located at 55 Birdwood Avenue, Umina.

Section 11-20 of A New Tax System (Goods and Services Tax) Act 1999 (``GST Act'') provides that an entity is entitled to an input tax credit for credible acquisitions that it makes. Section 40-35 of the GST Act provides that a supply of residential premises by way of lease, hire or licence is input taxed. Residential premises are defined in section 195-1 to mean land or a building that:

``(a) is occupied as a residence, or

(b) is intended to be occupied, and is capable of being occupied, as a residence;''

4. Commercial residential premises are specifically excluded from being input taxed under subsection 40-35 (1)(a) of the GST Act. The definition of commercial residential premises is in section 195-1 namely:

``commercial residential premises means:

• (a) a hotel, motel, inn, hostel or boarding house; or
• (b)...
• (c)...
• (d)...
• (e)...
• (f) anything similar to residential premises described in paragraphs (a) to (e).''

5. Originally, the premises at 55 Birdwood Avenue, Umina consisted of a single freestanding weatherboard dwelling which was available for lease to tenants subject to residential tenancy agreements.

6. On 27 March 1995, Gosford City Council had granted development consent for the erection of an ``attached dual occupancy'' on the premises. In June 2000, work commenced on the property and a certificate of completion was obtained on 22 March 2001.

7. The Applicant at this time attempted to convert the structure at 55 Birdwood Avenue into an accommodation block containing four units by converting the garages attached to the two dwellings into accommodation units. This use continued until September 2001 when the Gosford City Council served a notice upon the Applicant directing that the unauthorised use cease.

8. During the period in which the two garages were used as accommodation units, tenants were obtained. One garage was occupied by two Japanese students for a period of eight months and the other garage by a single male whose occupancy was terminated in November 2001 by reason of the direction by Gosford City Council.

9. More recently, the Applicant has leased the two approved residential units under residential tenancy agreements.

10. The two garage units were let out under what was termed a ``licence agreement''. An example of the agreement is found at document T12 page 28 of the documents prepared for the Tribunal pursuant to section 37 of the Administrative Appeals Tribunal Act 1975. It is to be noted that the licence agreement refers to so called ``house rules'' and goes on to state in clause 8:

``Occupation as licensee

I/We acknowledge that I/We occupy the rooms in accordance with this Agreement and the House Rules on Licence as lodger/s and that I/we acquire no estate, right or interest in it other than as licensee/s and that we have a non-exclusive right to occupy the rooms. You may exercise a right of entry at all times for any purpose and to exercise the right you may hold keys to the said rooms.''

11. The Applicant, through Mr Urbanski, also pointed out that the premises had a common area and shared laundry. In his statement (Exhibit A2), Mr Urbanski said:

``10. The Applicant provides clothes drier, electricity & water and other services.

11. The Applicant did not provide meals, linen or towels to boarders.

12. To be price competitive the Applicant offered boarders the choice of hiring furnishings from the Applicant for a fee or using their own furniture.''

12. In the Statement of Facts and Contentions lodged by the Applicant (Exhibit A1), it was stated:

``12. The Applicant provides clothes dryer, electricity & water and arranges for the provision of cleaning services and gardening services once a month.

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ATC 2077

13. The Applicant did not provide meals, linen or towels to boarders. However, the Applicant did provide plates and crockery to boarders.

...

16. There is no management office located on the property. However, a manager (being Mr Andrew Urbanski) is available on a daily basis to the boarders in relation to any issues which may arise from their lodgings.''

13. Mr Urbanski maintained in his evidence that in the period from 1 July 2000 to 13 September 2001, when the Gosford City Council served its notice to desist, the said premises were a boarding house or if not, were similar to hotel, motel, inn, hostel or boarding house as per section 195-1 (f) of the GST Act.

14. The actual agreement signed by the two Japanese students contained some amendments but to my mind nothing turns upon this.

15. The term ``boarding house'' is not defined in the GST Act but section 195-1 of that Act appears to be influenced by the definition of ``commercial dwelling'' in the New Zealand GST legislation (see Case L75 (1989) 11 NZTC 1, 435) and the British Value Added Tax (VAT) Legislation (see
Lord Mayor and Citizens of the City of Westminster (1988) 3 BVC 847).

16. What is clear is that the words hotel, motel, inn, hostel or boarding house are used in their ordinary meaning and thus regard must first be had to the dictionary meaning of such words.

17. The Macquarie Dictionary, 2nd Edition states:

``Boarding House - a place, usually a home, at which board is furnished, often with lodging.''

The term ``board'' is defined as follows in meaning 11:

``Daily meals, especially as provided for pay, often as part of accommodation.''

The above meanings can be compared to the meanings in the Oxford English Dictionary (1970 reprint):

```Boarding' - meaning 7 - boarding house, a house in which persons board;

`Board' - meaning 8 - To provide (a lodger etc) with daily meals; now generally to supply with both food and lodging at a fixed rate;

meaning 9 - To have stated meals as a lodger at another person's house; to be supplied with food and lodging at a fixed rate; to live with a family as one of its members for a stipulated charge.''

18. I do not believe that it is necessary to go further than the dictionary definitions of what constitutes a ``boarding house'' to show whatever the two garage premises converted to accommodation at 55 Birdwood Avenue, Umina were; they were not a boarding house.

19. Reference to cases makes the point even more. For example, in
Roberts v Waverley Municipal Council (1988) 14 NSWLR 423 at 430, Hope JA (with whom Samuels and McHugh JJA agreed) said:

``In ordinary parlance a boarding-house is a place where a business is carried on of providing food and lodging to the boarders, and the food comprises meals. It is a place where the boarders pay for their board and lodging, and the concept of a place where the boarders are not required to pay anything and do their own cooking is inconsistent with the natural meaning.''

20. In Case L75 (supra), the New Zealand Taxation Review Agency quoted Lord Goddard C J in
Honig v Redfern [1949] 2 All ER 15 at 17, namely:

``The general test, which has been laid down for many years, is that if the owner of a house who allows other people to live in it lives on the premises and it manages (sic) the premises himself, or if the owner has a servant resident on the premises to manage them on his behalf, the other people living in the house are lodgers, whereas if he does not live in the house but lets the whole house out to various people it is a letting out of the house in tenements and the persons occupying the tenements are not lodgers but tenants.''

21. Compare
Scarborough and Wife v Cosgrove [1905] 2 KB 805 per Collins MR (with whom Mathew J agreed) that there was a duty on the part of a boarding house keeper to take reasonable care for the safety of property brought by a guest into his house. At no time has it been suggested by the Applicant that it regarded itself as having any responsibility for

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ATC 2078

the goods and possessions of the persons who occupied the accommodation units.

22. On the material before me, I am satisfied that at no time were the premises a boarding house.

23. In The Lord Mayor and Citizens of the City of Westminster (supra), the VAT Tribunal said, after quoting Lawton J in a case not particularised:

``Applying that explanation of the meaning of the word `similar' to the problem with which we are faced it seems to us that we should asked ourselves this question `is Bruce House, so it would no normally be regarded as an hotel, inn or boarding house, an establishment which has some of the characteristics of an hotel, inn or boarding house?'.''

24. This Tribunal in
Re E.S. & G Asplin and Department of Industry Technology and Commerce (1986) 9 ALN N246 said:

``The word `similar' in the context of the relevant sections required the Tribunal to consider the common or dominant feature of the specific thing enumerated;''

25. As pointed out by the Administrative Appeals Tribunal in
Re Adelaide Caravan Park Pty Ltd and Department of Industry Technology and Commerce (1985) 7 ALD 756 at 766, with hotels, motels and boarding houses, there can be a great variation in the type of accommodation and amenities which may be provided at such establishments.

26. When one has regard to the nature of the premises in this matter, it can be seen that they have none of the characteristics of a hotel or motel. There is no signage and no proprietor or caretaker lives on the premises. The units do not purport to offer short-term or overnight accommodation and there is no suggestion that any form of meals will be provided. I am also satisfied that the premises are not similar to a boarding house as essentially the element of board is missing. Also, the proprietor or his nominee did not reside on the premises and services offered were minimal. As pointed out in submissions, the premises resembled a normal suburban dwelling (see particularly Exhibit R2 and photographs annexed).

27. The only other matter I need refer to is that I did not derive any assistance from definitions contained in various New South Wales statutes referred to by the Applicant. Those statutes must be considered in their own particular context.

28. Notwithstanding the attempt by the Applicant to bypass the New South Wales Residential Tenancies Act 1987, I am satisfied that the premises were not a boarding house or similar to a boarding house and thus the decision under review is affirmed.