Court Decisions
GST: hotel rooms
16.01.2009
The Federal Court (Stone J) has considered the characterisation of a number of categories of supply made in connection with individual lots in a strata plan used, together, as rooms in a hotel (South Steyne Hotel Pty Ltd v FCT [2009] FCA 13).
South Steyne Hotel Pty Ltd (“South Steyne”), which owned the Sebel Manly Beach Hotel, strata titled each room. It sold the management lot (reception area, offices, car parking spaces) to Mirvac Hotels Pty Ltd (“Mirvac Hotels”) and leased the other lots (rooms) to Mirvac Management Pty Ltd (“Mirvac Management”) under individual lease agreements. Each lease obliged Mirvac Management to operate a scheme whereby the room was, together with the other rooms, operated as part of a serviced apartment business. Mirvac Hotels had exclusive control of the operation of the serviced apartment business pursuant to an agreement with Mirvac Management, which also conferred on Mirvac Hotels the benefit of Mirvac Management’s rights under the lease agreements.
Between 29 September 2006 and 31 October 2007, South Steyne sold 15 apartments to various investors (including Morgan & Banks Investments Pty Ltd (“MBI”)), subject to the applicable lease to Mirvac Management. Each contract for sale permitted the purchaser to participate in a “management rights scheme”, which mirrored the scheme provided for under the lease agreements. The GST treatment of various supplies as a result of these transactions and also of supplies of a room was before the court. The following table lists the various supplies in issue and the conclusions reached by Stone J.
|
Supply |
GST treatment |
|
Lease by South Steyne of each hotel room to Mirvac Management |
Supply of residential premises to be used predominantly for residential accommodation and an input taxed supply under sec 40-35 GSTA. |
|
Sale of hotel rooms to investors |
Supply of new residential premises and neither GST-free nor input taxed. |
|
Supply by MBI under existing leases |
Input taxed supply of residential premises. |
|
Supply of accommodation to guests |
Taxable supply. |
Among the issues of interest considered by Stone J was the decision of the Full Federal Court in Marana Holdings Pty Ltd v FCT [2004] FCAFC 307 and the legislative amendments made to overcome that decision, the operation of the going concern concession and the nature of a supply made by the assignee of a reversionary interest who takes subject to an existing lease.
