A successful objection has been allowed against an ATO decision to recover GST back payments plus penalties from a resident accommodation manager in a North Queensland holiday apartment building.   

The GST decision had the potential to be applied to up to 1500 holiday complexes in Queensland, with penalties forcing many operators out of business and increasing tariffs in the surviving complexes which provide holiday accommodation in strata titled apartments.  

Queensland’s holiday letting industry was faced with massive claims for GST payments back to 2000 when the ATO officer formed the view that a building manager was not acting as an agent for the unit owners, but was providing accommodation in the manager’s own right.  This view is contrary to the ATO's own ruling, as the objection process later showed. 

The Queensland Resident Accommodation Managers Association (QRAMA) backed the objection to the ATO decision because the initial decision had the potential to create significant uncertainty for operators who had abided by the ATO's own directions on the matter and due to the potentially substantial financial impact on the holiday accommodation industry.  

QRAMA President Kim Cox said QRAMA funded an objection after the ATO's initial decision had the potential for a similar approach to be taken against other holiday complexes operating under what would be considered typical management rights arrangements.  

“That would have exposed all managers operating short term or holiday let complexes to massive claims for GST since 2000, with penalties applied,” Mr Cox said.  

"The managers and not the owners would have been responsible for those costs.

"It would also mean GST would have to be imposed on all such accommodation in the future, raising the cost of holiday accommodation,” he said.  

Kim Cox said the resident manager in North Queensland runs a typical holiday complex, acting as agent for the owners who have chosen to use the manager as their letting agent.   The manager also supplies caretaking services to the body corporate as part of a separate contract, which is the ‘normal’ management rights model.  

He said in carrying out a GST audit, the ATO formed the opinion the manager was not acting as an agent for the unit owners, but was providing accommodation in the manager’s own right.  This conclusion was reached even though the manager had in  

place the required authorisation from the body corporate to operate a letting business and had an appointment, as required under Queensland legislation, to act as agent from each owner. 

The ATO then assessed GST and penalties on the accommodation charges for the past two years, totalling almost $300,000.  

Mr Cox said QRAMA was concerned that in original GST negotiations prior to the introduction of the scheme, resident managers were deemed to provide accommodation as an agent for the unit owners.  The tariff was not subject to GST but all supplies are input taxed.   

The industry does not enjoy the tax holiday implied by the ATO officer in the current case but pays tax in a manner deemed by ATO in 2000 as being most appropriate for an industry that operates under agency arrangements.     

“The ATO had reasoned that as owners had to pay for servicing costs to stay in their units when they use them, this indicated some form of control over the unit by the manager, which prevented him from being an agent,” Mr Cox said.  

“Further, as the manager had arranged for the optional supply to guests of food and beverage services through external suppliers and the manager owned furniture in the reception area which guests were able to use, the ATO claimed he was no longer acting as an agent. 

“A very lengthy and detailed submission formed the basis of our successful objection to the assessment and the claim for the GST was defeated.  QRAMA engaged industry experts who understand the operation and requirements of the industry to ensure the case was put correctly. 

“It was decided that the manager was not supplying accommodation in the manager’s own right but at all times was acting as agent for the various owners. 

“A vital argument had been the letting authorisation with the Body Corporate and the individual letting appointments with the owners that determined the outcome.  

“The manager was able to point to the specific terms of the Letting authorisation and the Letting Appointments to show beyond doubt the manager was truly acting as an agent and had no control or right of occupation over the units,” he said. 

Mr Cox said QRAMA had circulated to all members a reminder about the need to ensure the correct status of their agency agreements. 

For further information please contact:

Kim Cox

(07) 3891 9088

0417 611 561