Introduction

The world of GST can be very complex for business owners and consumers alike.Any changes to the way the GST law operates can potentially reduce business profits or increase customer costs, often with unhappy consequences all around.

Proposal to change the GST treatment of mobile home park site rents

The Australian Taxation Office (ATO) recently put forward a proposal to change the GST treatment of mobile home park site rents. If implemented, this change could have increased operational costs and directly impacted residents of mobile home parks.

The proposa1 meant that the ATO’s long-held view that mobile home parks were to be treated the same as caravan parks for GST purposes would change.  For the reasons explained below, that change would mean that the GST paid by residents of mobile home parks on site rents would increase.

In face of a national grassroots community campaign and strong representations by the public to the Commissioner against the proposal, the ATO has withdrawn its draft GST Ruling. 

Perhaps this outcome proves that there is some truth to John Lennon’s “Power to the People”.

Background

Section 195-1 of the GST Act2 provides the following definition for “commercial residential premises”:

(a)        a hotel, motel, inn, hostel or boarding house; or

(b)       premises used to provide accommodation in connection with a * school; or

(c)       a * ship that is mainly let out on hire in the ordinary course of a * business of letting ships out on hire; or

(d)       a ship that is mainly used for * entertainment or transport in the ordinary course of a * business of providing ships for entertainment or transport; or

(da)     a marina at which one or more of the berths are occupied, or are to be occupied, by * ships used as residences; or

(e)        a caravan park or a camping ground; or

(f)        anything similar to * residential premises described in paragraphs (a) to (e).

However, it does not include premises to the extent that they are used to provide accommodation to students in connection with an * education institution that is not a * school.  (emphasis added)

Prior to the release of its draft GST Ruling, the ATO had considered mobile home parks (also known as moveable home estates or relocatable home parks) to be sufficiently similar in nature to caravan parks and, accordingly, they were considered to be “commercial residential premises” for the purposes of the GST Act.

This interpretation was important because, pursuant to Division 87, taxable supplies of “commercial accommodation” are treated differently under the GST Act

Section 87-25 of the GST Act provides that suppliers of “commercial accommodation” may choose not to apply Division 87 to supplies of “commercial accommodation”.  The effect of this election is that supplies of “commercial accommodation” will either attract a 5.5% concessional GST rate (pursuant to section 87-5 of the GST Act)3 or be GST-exempt (if the election is made under section 87-25 of the GST Act).

Proposed GST Ruling

In draft GST Ruling GSTR 2013/D2, the ATO indicated that its long-held view that mobile home parks were sufficiently similar to caravan parks had changed so that mobile home parks were not therefore “commercial residential premises” for the purposes of the GST Act.

The effect of GSTR 2013/D2 was to remove the application of Division 87 of the GST Act in relation to mobile home park site rents paid by mobile home owners to mobile home park operators.

Accordingly, those rent payments would not attract the 5.5% concessional GST rate or be GST-exempt.  In other words, mobile home owners would have to pay 10% GST on their site rents.

Community Action

Following the release of GSTR 2013/D2 on 30 October 2013, the ATO received numerous submissions from the community and key stakeholders opposing the proposed change.

Mobile home owners (many of whom are pensioners and/or retirees on fixed incomes) argued that the ATO’s proposal would make living in a mobile home park unaffordable.

GST Ruling Withdrawn

Following a grassroots community campaign involving petitions and public rallies around Australia, the ATO withdrew GSTR 2013/D2 on 19 December 2013. 

The ATO’s decision means that the treatment of mobile home park site rents for the purposes of the GST Act will now not change.

Power to the People

In announcing its decision, the ATO acknowledged that its view (that mobile home parks were in fact “similar enough” to caravan parks and were therefore “commercial residential premises” for the purposes of the GST Act) had been influenced by the numerous public submissions received during the public consultation period. 

This acknowledgment suggests that “people power” can (sometimes) influence the outcome of public consultative processes of government.

What the decision means

While this decision means that mobile home park operators can continue to apply Division 87 of the GST Act to supplies of “commercial accommodation”, mobile home park operators should take this opportunity to remind themselves that these GST provisions are complex and need to be carefully worked through to ensure that the expected GST outcomes are actually achieved.  It is important that the facts and circumstances of each particular arrangement are carefully reviewed to ensure that the correct GST position is adopted.