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In what was described as a "test case", the Federal Court (Stone J) has considered the GST liability applicable to 4 different types of supply of 83 strata titled, serviced apartments in a hotel complex.

First, the Court held that the supply by way of separate lease of each apartment to a management company was a supply of residential premises to be used predominantly for residential accommodation within the meaning of s 40-35 of the GST Act and therefore that each such supply is input taxed. The Court rejected the taxpayer's arguments that the premises were not "residential premises" or, alternatively, were "commercial residential premises".

Secondly, the Court held that the sale of the apartments to investors, subject to the leases to the management company, did not attract the "going concern" provisions of the GST Act because of the terms of the contract between vendor and purchaser.

Thirdly, the Court held that the supply by the purchaser of apartments as a consequence of it taking title subject to the ongoing lease to the management company was a supply by way of lease that was also input taxed.

Finally, the Court held that the supply of accommodation services to a guest of the hotel was not input taxed but a taxable supply.

South Steyne Hotel Pty Ltd v FCT [2009] FCA 13 (Federal Court, Stone J, 16 January 2009).

For a copy of the decision, go here.

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