A new tax bill introduced into federal parliament last week has resulted in amendments to the GST treatment of residential premises and the definition of “residential premises” in the GST Act.
In the explanation accompanying the bill, the government says it will restore its intended policy on the treatment of residential premises by ensuring that the following types of supplies are input taxed:
• short-term letting of strata title units such as serviced apartments by owners to guests; and
• leasing of strata title units to hotel operators or similar operators.
Pitcher Partners senior partner Mark Ceglinski said the amendments may confuse property investors and would lead to arbitrary distinctions between different types of investment structures.
He said property investors buying serviced apartments or strata title hotel units with the intention of letting the property to the public through a commercial operator may argue the intended use is “commercial” and not “residential”. Holiday makers may also be affected by the amendments, paying GST when staying at some serviced apartments and not others.
“Some hotels operate under an agency arrangement, where the operator of the complex lets the accommodation to guests as an agent of the owners. In these circumstances, the government believes that the supply to the guest should be input taxed and so no GST is payable,” Mr Ceglinski said.
However, guests would likely be charged GST if they choose to stay at accommodation where the operator lets an apartment to guests in its own right.
“There is no reason why GST should be payable on the accommodation in one case but not the other,” Mr Ceglinski said.
