Selling new residential property that has been rented within five years of construction

Mistakes can often be made in working out when new residential premises are actually 'new' and therefore, taxable.

Property is still considered new residential premises if you:

  • lease the premises, and
  • sell it within five years of leasing the new residential premises.

Residential premises are no longer new residential premises if they have been continuously rented for five years after first becoming new residential premises. However, they may still be considered new residential premises if they have been held for the dual purpose of sale and rent (even if they have been rented out continuously for five years). Dual purpose is where, for example, a premises is marketed for sale whilst being rented out as an input taxed supply. That is because they have not have been held 'solely' for making input taxed supplies for at least five consecutive years.

When accounting for GST on new residential premises, you must:

  • pay GST on the sale of new residential premises
  • account for any change of creditable purpose of the property in your business by working out if you have an increasing adjustment to repay some of the GST credits you claimed on purchases, such as construction costs and the cost of the property (for example, if you cannot sell a new residential property and decide to live in it or rent it out instead - see Change in use of new residential premises.
  • work out if you have under claimed GST credits - if this is the case, you may have a decreasing adjustment
  • work out the GST credits you have not originally claimed on the initial costs.

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    Last modified: 05 Jul 2016QC 21948