Court Clarifies Residential Premises Test

Because rental income derived from residential premises and

sales of second hand residential premises are input taxed (ie no

GST payable), determining whether real estate qualifies as

'residential premises' is very important.

The Federal Court in South Steyne Hotels Pty Ltd v

Commissioner of Taxation [2009] FCA 13 considered the GST

characterisation of various supplies involving apartment rooms at

the Sebel Manly Beach Hotel complex.

Leasing the residential units

The court adopted the ATO's view that the GST categorisation

of a supply of individual strata titled apartments in a hotel

complex is determined by the nature of the individual apartments,

and the operation of the complex as a whole is not relevant. On

this basis, the grant by the former owner of 83 leases of 83

individual strata titled apartments to the incoming manager of the

hotel complex was characterised as 83 input taxed supplies

of 'residential premises'. The court accepted that the

apartments were to be used predominantly for 'residential

accommodation'.

The position is different where the supply consists of

accommodation provided by the operator of the...