P&C - History of Issue 12.6

This issue was updated 29 October 2003

See current view

12.6 For GST purposes, what is transferred by way of a mirror contract in the context of real estate sales?

Tax Office position

One other way in which 'off the plan' interests are transferred is by way of a mirror contract. Under this method the vendor will enter into the same contract with the new purchaser. This contract is exactly the same as the contract with the developer, except the names are changed. The original purchaser acquires the property and then immediately transfers it to the second purchaser. For a brief moment in time the original purchaser owns the property.

If the property being sold is residential premises it will not be subject to GST when the original purchaser sells it to the second purchaser. The real estate will not be 'new residential premises' as defined in section 195 of the GST Act, at this point of time, as they have previously been sold as residential premises to the original purchaser. The supply by the developer to the original purchaser would be the supply of new residential premises.

Whether the disposal of non residential real estate (eg warehouse, strata office) by the original purchaser to the new purchaser constitutes a taxable supply will again principally depend upon whether that supply is made in the course or furtherance of an enterprise. The above comments in relation to assignments are also applicable to mirror contract sales of non residential real estate in determining whether the original vendor is required to account for GST.