ACCOMMODATION COMMERCIAL AND NON-COMMERCIAL RESIDENTIAL Finance in Practice, Taxation Unit, GST Team

Transcription

1 ACCOMMODATION COMMERCIAL AND NON-COMMERCIAL RESIDENTIAL Finance in Practice, Taxation Unit, GST Team Custodian/Review Officer: Senior Finance Officer, GST Team Version no: 5.4 Applicable To: All QH staff Approval Date: 23/09/2010 Effective Date: 23/09/2010 Next Review Date: 01/03/2014 Authority: Approving Officer Manager GST Team Signature Supersedes: 5.3 Key Words: taxation, tax, code GST,, commercial, noncommercial, residential Accreditation References: EQuIP and other criteria and standards 1 Purpose This procedure describes the processes for treatment of GST for commercial and non-commercial residential undertaken on behalf of Queensland Health. 2 Scope This procedure relates to commercial and non-commercial residential. 3 Supporting Documents References ATO Ruling GSTR 2000/20 Commercial ATO Ruling GSTR 2001/1 Supplies that are GSTfree for tertiary education courses Private Ruling Staff Accommodation (Withdrawn) Private Ruling Staff Accommodation (current from 5 April 2005) Section of the GST Act Care Section of the GST Act Rent Section 87-5 of the GST Act Predominantly long term commercial residential Section of the GST Act Not predominantly long term commercial residential ATO Fact Sheet How to apply GST to supplies of commercial ATO Fact Sheet GST treatment of residential premises ATO ID 2001/686 GST and services supplied by a government funded residential care provider to disabled persons (Withdrawn as of 4 th May 2007) CCH Australian Master GST Guide 2009 Other Related Research TaxEd Question & Answer No. 21 Property Version No: 5.4; Effective From: 23/09/2010 Page 1 of 13

2 Related Business Procedures Patient Travel Subsidy Scheme Fund Raising Gift Deductibility Status & Charities Rule 4 Consultation Key stakeholders (position and business area) who reviewed this version are: Director, Taxation Unit Manager, GST Team Principal Finance Officer, GST Team Senior Finance Officer, GST Team Version Control Version Date Author/Reviewer Changes No 1 18/09/ /05/ /08/ /12/ /02/2007 Christine Mardon /03/2009 Shayari Singh 5.2 6/07/2009 Carol Geoghegan Addition of information on Input Taxed supply option for Long Term Accommodation /10/2009 Richard Baker Addition of Section on Deposits /09/2009 Malcolm Cope Minor changes Version No.: 5.4; Effective From: 23/09/2010 Page 2 of 13

3 Contents Introduction...4 Summary of Tax Codes...5 Accommodation...6 Rent...6 Definition of Premises...6 Characteristics of Premises & Tax Treatment...6 premises changed to commercial premises and Tax Treatment:...7 premises with commercial premises attached and Tax Treatment:...7 Individually owned / strata titled units...8 Care Facilities...8 Tertiary Student Accommodation...9 Commercial Accommodation...9 Definition of Commercial Accommodation...9 Information from ATO Fact Sheet How to apply GST to supplies of commercial...10 What is short term?...11 Long Term Accommodation - choice between Concessional treatment and Input taxed treatment...11 Supplier of Long Term Accommodation chooses to treat supply as Input Taxed...11 What is long term but not predominantly long term?...11 What is the Concessional GST treatment for this type of?...11 What is predominantly long term?...12 What is the Concessional GST treatment for this type of?...12 Commercial Accommodation and Charities Rule...13 Paying a Deposit to Secure Accommodation...13 Version No.: 5.4; Effective From: 23/09/2010 Page 3 of 13

4 Introduction Accommodation falls into different categor ies for the purpos e of deciding the GST treatment. The diagram on Page 3 demons trates the complexity that Queensland Health must consider as both the provider and the recipient of certain types of. Where Queensland Health is t he recipient of the supply, it will be important that the information provided on the supp lier s tax invoice is int erpreted correctly. The information in this Bus iness Procedure wil l assist staff i n understanding why there may be a differing GST treatment. Where Queensland Health is t he provider of the s upply, it is important to identify the correct GST treatment and how this may i mpact on other aspects of the department s transactions. For example, if any goods and/or services are purchased for a residential property and GST is included in the price, this will not be available as an Input Tax Credit. Version No.: 5.4; Effective From: 23/09/2010 Page 4 of 13

5 Summary of Tax Codes Description Type of Supply Tax Code QH recipient Houses, duplexes, home units Houses, duplexes, home units with business attached; eg doctor s surgery Individually owned resort / strata titled units not under management rights Individually owned resort / strata titled units under Management rights care facilities Tertiary student Accommodation for Patient Travel Hotels, motels, inns, hostels, boarding houses, caravan parks, camping grounds Short term Hotels, motels, inns, hostels, boarding houses, caravan parks, camping grounds 0% GST included in price Input Taxed supply 0% GST included in rent on residential property and 10% GST included in rent on commercial property (compliant tax invoice provided) 0% GST included in price Input Taxed Supply 10% GST included in price Taxable supply 0% GST included in price- GSTfree supply 0% GST included in price Input Taxed Supply See Business Procedure Patient Travel Subsidy Scheme for specific information 10% GST included in price - GST registered supplier (compliant tax invoice provided) Concessional rate of GST included in price Mixed supply (compliant tax invoice provided) Long term 0% GST included in price supplier has chosen to apply Input Taxed supply rules for long term Charitable organisation such as Ronald McDonald House 0% GST included in price as supply is GST-free in accordance with Charities Rule /P0 P0 P0 /P0 Tax Code QH provider S7 Rent from Non- Nursing staff, S5 Rent from Nurses S7/S0 Note: Tax Code P2 should be substituted for tax code P0 where a compliant tax invoice is not provided or held at the time of processing the payment. S5 S7 Version No.: 5.4; Effective From: 23/09/2010 Page 5 of 13

6 Accommodation Rent Section of the GST Legislation states: (1) A supply of premises that is by way of lease, hire or licence (including a renewal or extension of a lease, hire or licence) is input taxed if: (a) the supply is of residential premises (other than commercial residential premises); or (b) the supply is of commercial and Division 87 (which is about long term in commercial premises) would apply to the supply but for a choice made by the supplier under section Definition of Premises The term residential premises means land or a building that 1 : a) is occupied as a residence or for residential ; or b) is intended to be occupied and is capable of being occupied as a residence or for residential regardless of the term of the occupation or intended occupation and includes a floating home. Examples of residential premises are: A house A flat or similar tenement A home unit An apartment and Quarters that provide fully self contained facilities Characteristics of Premises & Tax Treatment premises must be capable of occupation as a residence. The premises should have such things as areas for sleeping, eati ng and bathing, but it is not n ecessary that these things be arranged in a similar manner to a conventional house or apartment. Input taxing only applies to t he extent that the premises ar e to be used predominantly f or residential. 2 To define this further, the building need only provide sleeping and t he basic f acilities for daily living to be classified as predominantly used. 3 1 A New Tax System (Goods and Services Tax) Act 1999, Sec & GSTR 2000/20 Para 16 2 GSTR 2000/20 Para 19 3 GSTR 2000/20 Para 20 Version No.: 5.4; Effective From: 23/09/2010 Page 6 of 13

7 Description Tax treatment Tax Code QH as Input Taxed recipient QH as provider Input Taxed S7 Non-Nursing Staff Purchase of taxable supplies for QH residential Input Tax Credits not claimable S5 - Nurses P1/C1 premises changed to commercial premises and Tax Treatment: It follows t hat premises must not be capable of occupation as resi dential premises for a subsequent supply, by way of lease, to be a taxable supply. Th is would require the premises to be modified such that they were not capable of exhibiting the characteristics of residential premises. 4 This situation can aris e where a property has been previously us ed as residential premises; the dwelling is modified and then used as, for exam ple, an office or doctor s surgery. This will change the supply from input taxed to taxable. Description Tax treatment Tax Code changed to Taxable from GST registered P0 commercial use QH as recipient supplier changed to commercial use QH as provider Taxable supply S0 premises with commercial premises attached and Tax Treatment: If a building consist s of a doctor s sur gery below and a flat above, the physical characteristics indicate that only part of the building is residential premises, that is, the flat. This portion of will be input taxed while the doctor s surgery portion will be taxable. 5 Description Tax treatment Tax Code Mix of Input Taxed and P0/ Taxable from GST registered supplier with commercial premises attached QH as recipient with commercial premises attached QH as provider Purchase of taxable supplies for the property Taxable supply & Input Taxed supply Claimable and non-claimable on an apportioned basis S0/S7 P1/P0 or C1/C0 4 Tax Ed Q&A 21 5 GSTR 2000/20 Para 21 Version No.: 5.4; Effective From: 23/09/2010 Page 7 of 13

8 Individually owned / strata titled units A strata titled unit or suite cannot, by itse lf, exhibit the characte ristics of commercial residential premises. 6 Therefore, if this type of accomm odation is provided direct by th e individual owner, it will be an input taxed suppl y and no GST will be in cluded in the price. This may also occur in resorts where this situation applies. This is why an individual unit only takes on the character of commercial reside ntial premises when it is aggregat ed with other s and run by an entity who has acquired t he interests necessary to let the rooms in its ow n right, rather than on behalf of the owners, in the same manner as a hotel, motel, inn or hostel. 7 Description Tax treatment Tax Code Individually owned strata titled units not Input Taxed under management rights Individually owned strata titled units under management rights Taxable P0 Care Facilities Section of the GST Act deals with supplies of residential care. Under subsection 38-25(2) of the GST Act, a supply of services is GST-free if: the services are provided to one or more aged or disabled people; and the Aged Care Minister has determined in writing that the services are of a kind covered by Schedule 1 to the Quality of Care Principles; and the supplier receives funding from the Commonwealth, a State or a Territory in connection with the supply. Description Tax treatment Tax Code care facilities provided by GST-free S5 Queensland Health 6 GSTR 2000/20 Para 51 7 GSTR 2000/20 Para 52 Version No.: 5.4; Effective From: 23/09/2010 Page 8 of 13

9 Tertiary Student Accommodation A supply of to tertiary students provided at university colleges and halls or university sponsored flats ar e a supply of non-commercial residential because it is specifically excluded from the definition of commercial residential premises. 8 Section states that the definition of commercial residential premises does not include premises to the extent that they are used to prov ide to students in connection with an educat ion institution t hat is not a school (i. e. primary, secondary or special schools). 9 Description Tax treatment Tax Code Tertiary student provided Input Taxed by others Commercial Accommodation Definition of Commercial Accommodation Commercial is accommodati on in commercial residential premises. Commercial residential premises include 10 : Hotels, motels, inns Hostels, boarding houses and Caravan parks and camping grounds The main characteristics (not all required to be satisfied in order to qualify) are: Commercial intention. The establishment must be op erated on a commercial basis. It must possess the characteristics of a busi ness, but may be operated by a non-profit body. 11 Multiple occupancy. The establishment provides s leeping ac commodation on a multiple occupancy basis. Consequently, premises limited to a single occ upancy, even where they are regularly let (for example, a cottage let as a week ender), do not have the characteristics of a hotel, motel, inn, hostel or boarding-house. 12 Holding out to public. The establishment must hold itse lf out as premises that will receive travellers who are wi lling and able to pay for and/or accept reservations or contracts to let to guests or lodgers GSTR 2001/1 Para GSTR 2001/1 Para A New Tax System (Goods and Services Tax) Act 1999, Sec GSTR 2000/20 Para 85(i) 12 GSTR 2000/20 Para GSTR 2000/20 Para 91(iii) Version No.: 5.4; Effective From: 23/09/2010 Page 9 of 13

10 Accommodation is the main purpose. The provis ion of acc ommodation in the premises must be the establishment's primary purpose or one of its main purposes. 14 Central management. The establishment has central management to accept reservations, allocate rooms, receive payments and arrange the services provided throughout the premises. 15 Control. The management must have contr ol of t he premises as a whole, whether or not they own the property or an y part of it, and let them in its own right rather than as agent. 16 Services. Services are provided to guests. These may include periodic cleaning, provision of food, laundering serv ices, telephone and minor services. 17 Other services include replacing linen and laundry. Where guests are required to supply items such as towels, linen, or anything else to make the premises fit fo r, the premises are less likely to be commercial residential. 18 Status of guests. Those being provided with are guests, boarders or lodgers who can expect a reasonable amount of privacy from management, their staff and other guests, but not to the same level expected by a tenant. 19 Information from ATO Fact Sheet How to apply GST to supplies of commercial Certain rules apply to the providers of commercial residential : Description Tax treatment Tax Codes Short term commercial residential Taxable P0 Not predominantly long term commercial Short terms guests Taxable P0 residential. No choice for short term but choice for long term. Long term guests Concessional GST Mix of P0/ Long term guests Input only Taxed Predominantly long term commercial residential choice : Concessional GST Mix of P0/ Input Taxed only It should be noted that the provider of long term acco mmodation dec ides the G ST treatment applicable to the in ac cordance with Sec and this decision will apply for 12 months. 14 GSTR 2000/20 Para 96(iv) 15 GSTR 2000/20 Para 101(v) 16 GSTR 2000/20 Para 103(vi) 17 GSTR 2000/20 Para 105(vii) 18 GSTR 2000/20 Para GSTR 2000/20 Para 107(viii) Version No.: 5.4; Effective From: 23/09/2010 Page 10 of 13

11 What is short term? Short term is provided to an indiv idual when that individual stays in the above mentioned type of for less than 28 continuous days 20. Suppliers of short term commercial acco mmodation must include GST in the pric e, provided that they are registered for GST. Long Term Accommodation - choice between Concessional treatment and Input taxed treatment. If the supplier also provides long t erm, a choice can be made to apply the GST conc essional rate or tr eat the long term accommodati on supplies as input taxe d supplies 21. Supplier of Long Term Accommodation chooses to treat supply as Input Taxed If the supplier chooses to treat long term ac commodation as an input taxed supply then no GST will apply to the supply and the supplier cannot claim input tax (GST) credits for acquisitions relating to the supply. What is long term but not predominantly long term? Long term is pr ovided when an indiv idual stays in c ommercial premises for 28 continuous day s or more but does not fit in the description for predominantly long term. What is the Concessional GST treatment for this type of? The first 27 days are taxable at 10% of the GST exclusive price From the 28 th day onwards, GST is 10% of half the GST inclusive price Example: CONCESSIONAL GST TREATMENT FOR ACCOMMODATION WHICH IS NOT PREDOMINANTLY LONG-TERM Daily rate GST GST incl. Total Total GST GST excl GST incl. 27 days $ $20.00 $ $5, $ Next 14 days $ $11.00 $ $2, $ $8, $ GSTR 2000/20 F14 21 CCH Australian Master GST Guide 2009, Para P 312 Version No.: 5.4; Effective From: 23/09/2010 Page 11 of 13

12 To Process payment: Amount Tax code Amount of GST Multiply total GST * 11 to calculate total GST incl. price Subtract this amount from the total amount of $8, $ P0 $ $ $0.00 $8, $ What is predominantly long term 22? When at least 70% of the clients to whom commercial was provided have stayed for 28 or more continuous days, then the supplier is providing predominantly long term. What is the Concessional GST treatment for this type of? GST is calculated as 10% on half the ov ernight rate. Ho wever, it shou ld b e noted that Queensland Health can request that the supplier charge GST at the full rate as this entails less administrative work and QH can claim the ITC s. Example: CONCESSIONAL GST TREATMENT FOR ACCOMMODATION WHICH IS PREDOMINANTLY LONG-TERM Daily rate GST GST incl. Total 36 days Total GST GST excl GST incl. $ $11.00 $ $7, $ $7, $ To Process payment: Amount Tax code Amount of GST Multiply total GST x 11 to calculate total GST incl. price Subtract this amount from the total amount of $7, $4, P0 $ $ $0.00 $7, $ CCH Australian Master GST Guide 2009, Para P 434 Version No.: 5.4; Effective From: 23/09/2010 Page 12 of 13

13 Commercial Accommodation and Charities Rule Under Section of the GST Act, supplied by a charity is GST-free if 23 : the consideration for it is less than 75% of the market value including GST or the consideration for it is less than 75% of the cost of providing the. This rule will apply to provided by organisations such as Ronald McDonald House. Any payments for this type of will be processed using tax code. Paying a Deposit to Secure Accommodation Often when Short Term Accommodation is booked the purchaser will pay a deposit to secure the booking. The deposit is not part of the supply and the transaction should be dealt with accordingly. The following example illustrates how a deposit transaction should be handled. Example Deposit Applied as Part of Payment QH contacts ABC Hotels to purchase for an up coming conference at a cost of $1,500 plus GST of $150. ABC Hotels request a deposit of $100. A month later, QH completes the purchase, paying the remaining $1,550. On payment of the security deposit: PK31 Vendor Account ** $100 PK40 Expense Account P9 $100 On payment of balance: PK31 Vendor Account ** $1,550 PK40 Expense Account P0 $1,650 PK50 Expense Account P9 $100 Please refer to the Business Procedure on Deposits for more information. DISCLAIMER: This procedure is written in accordance with A New Tax System (Goods and Services Tax) Act For further information regarding Queensland Health policies and procedures, the appropriate resources should be researched and/or contacted. For the latest version of this GST Business Procedure, check the GST site on QHEPS: 23 CCH Australian Master GST Guide 2009, Para P 434 Version No.: 5.4; Effective From: 23/09/2010 Page 13 of 13