GST Implications for Holiday Houses, Stayz (HomeAway), Booking.com & Air BnB style Properties
Harold and Mage, who live in Ramsay Street Ballarat, currently rent 2 short term stay Holiday 3 Bedroom houses in Torquay through AirBnB that they have operated since 2010. They are increasing their investment in this area by adding another 2 x short term stay, newly constructed 3 Bedroom units to their portfolio in Ballarat available for booking from January 2019. In the future, they may also expand their operation to offering (yet to be constructed) a short term stay 2 Bedroom accommodation in Daylesford on land they own through the same business structure.
Other considerations to note:
- They lease an entire house/unit when booked. i.e. they do not sell accommodation by the room.
- They generally use external cleaners for the Torquay property and will clean the Ballarat / Daylesford units themselves after a stay
- All units/houses are fully furnished, linen and towels are provided, TV’s, DVD’s, Washing Machines, Dryers, fully equipped kitchens, cooking utensils and pots/pans etc.
- They monitor customer reviews and use AirBnB Manager software features to keep track of which properties are more popular, changes in customer ratings and summarising sales by house/units.
- They will generally attend to any property maintenance themselves
- They will make any improvements suggested and required to increase their customer rating on the AirBnB, to attract new clientele and remain competitive in the market.
Hence, a reasonably sophisticated operation of a network of short term stay properties and as a clear alternative to motel/hotel accommodation in their respective locations.
Q – Should the Accommodation Sales attract GST as a Taxable Supply OR be treated like any other rental property as input taxed supplies ie. Rental income?
A – Generally, Accommodation sales for the above example are input taxed and will not attract GST.
Q – Can we claim the GST on the cost of construction of the Ballarat and future Daylesford properties?
A – No, given that the actual and intended use of the property is for accommodation sales that are input taxed sales, the construction costs associated will also be input taxed.
The ATO provides guidance with the two following rulings
- GSTR 2012/5 Goods and services tax: residential premises (NO GST APPLIES)
where the premises are occupied as a residence OR for residential accommodation, regardless of the term of occupation.
- GSTR 2012/6 Goods and services tax: commercial residential premises (GST APPLIES)
Which includes the following seven paragraphs:
- a hotel, motel, inn, hostel or boarding house;
- premises used to provide accommodation in connection with a school;
- a ship that is mainly let out on hire in the ordinary course of a business of letting ships out on hire;
- a ship that is mainly used for entertainment or transport in the ordinary course of a business of providing ships for entertainment or transport;
- da) a marina at which one or more of the berths are occupied, or are to be occupied, by ships used as residences;
- a caravan park or a camping ground; or
- anything similar to residential premises described in paragraphs (a) to (e).
Several factors also come into play as to whether the operation is a supply of Commercial Residential Accommodation such as those listed at paragraph 41 of GSTR 2012/6, but not limited to the following:
- Commercial intention
- Multiple occupancy (unrelated guest stays in the one unit)
- Holding out to the public
- Accommodation is the main purpose
- Central management
- Management offers accommodation in its own right.
- Provision of, or arrangement for, services (Concierge type services)
- Occupants have status as guests
Harold and Mage can tick many of these boxes, but they lack multiple occupancy and concierge type services like a Bed and Breakfast offers. It is the lack of these type of factors that would likely deem it the provision of Residential Accommodation only as opposed to Commercial Residential Accommodation.
If you are unsure of how your circumstances please contact us at Watts Price Accountants
Laurie Liston, Senior Accountant
Certified Practising Accountant
Watts Price Accountants
This piece was prepared and published as at 14 March 2019
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