GST and residential property

Residential property

GST only applies to the sale of certain property types if the seller (vendor) is registered or required to be registered for GST purposes.

A residential property includes houses, units, flats and more. It refers to residential property that provides shelter and contains basic living facilities. It doesn't include vacant land.

A property is a residential property if it:

• can be occupied
• is occupied or is intended to be occupied as a residence
• is for residential accommodation, regardless of the length of occupation.

New residential property

Most purchasers are required to pay a withholding amount from the contract price at the date of settlement.

This applies to:

• new residential property
• land that could be used to build new residential property (potential residential land).

The purchaser pays the withholding amount directly to us rather than to the property supplier.

If you're selling a new residential property or potential residential land, you have to work out if you are carrying on an enterprise. This may be the case, even for one-off transactions.

If this happens, you:

• can claim GST credits for purchases made in constructing the property for sale
• will need to account for GST on the sale of your property.

If you are not carrying on an enterprise for GST purposes, ensure that you meet your income tax obligations, including CGT.

Meaning of new residential property

A new residential property is a property where any of the following apply:

• it hasn't been sold as residential property before
• it's been created through substantial renovations
• new buildings replace demolished buildings on the same land
• one of the properties above that has been rented out for
  • less than 5 years
  • more than 5 years but it has been actively marketed for sale while it is rented.

Buying and selling off the plan

An off-the-plan purchase occurs when you enter into a contract to purchase new residential property before construction is completed.

At this stage, you're purchasing a contractual right to have the property built. Generally, you pay a deposit and sign a contract with a developer. You pay the balance of the purchase price on settlement.

On settlement, you're purchasing new residential property and the purchase price will include GST. You may be required to pay this GST amount directly to us under GST at settlement.

Selling a property you are buying off the plan

If you sell the contractual right to have the property built, before settlement:

• the activities involved in selling an off-the-plan property may constitute an enterprise
• you may need to register for GST
• GST may apply to that sale.

For more information about GST and property, see:

• Change in use of your property
• GST at settlement
• Property and capital gains tax
• Property and registering for GST

Existing residential property

Existing residential property is residential property that is not new residential property.

You can't claim GST credits for anything you purchase when selling existing residential property and you're not liable for GST on the sale.

If you sell existing property and part of the building contains residential property and part is commercial property (mixed supply), GST may apply proportionately to the commercial part on the sale.

If you purchase existing residential property, the sale from the vendor to you is input taxed, so you can't claim a GST credit on the purchase.

Rent and bonds from residential property

Rent and bonds aren't subject to GST. If you lease residential property, or receive a bond or security deposit for leased residential property, you:

• aren't liable for GST on the rent you charge, or on the bond or security received
• can't claim GST credits for anything you purchase or import to lease the property.

The GST treatment of property also varies depending on the type, whether it’s residential (new or existing) or commercial property.

Build to rent property developments

The term ‘build to rent’ (BTR) is a broad concept and includes all premises that have been built with the intention of renting or leasing. Different GST treatments apply depending on what type of premises is supplied.

How BTR applies

If you rent out residential premises for residential accommodation, your rent is input taxed.

Build to rent property developments (also referred to as multi-family developments) provide residential rental accommodation. If you are an endorsed charity, gift deductible entity or government school making non-commercial of residential accommodation, your rent is GST-free.

The lease of commercial residential premises is subject to GST.

Commercial residential premises include:

• hotels, motels, inns
• hostels, boarding houses
• caravan parks, camping grounds
• other establishments that provide similar services to the above.

The lease of commercial property subject to GST. Developments may include a mix of build to rent and build to sell, or a mix of different build to rent properties with different GST treatments.

If you are unsure of the correct GST treatment for your build to rent property development, we recommend you seek advice from your tax adviser or contact us.

For more information on build to rent property developments, see:

• Build to rent development tax incentives
• Goods and Services Tax Ruling GSTR 2012/5 Goods and services tax: residential premises
• Goods and Services Tax Ruling GSTR 2012/6 Goods and services tax: commercial residential premises
• Goods and Services Tax Ruling GSTR 2012/7 Goods and services tax: long-term accommodation in commercial residential premises

Retirement villages

Meaning of retirement village

The term ‘retirement village’ may be used to describe accommodation:

• operated by charitable bodies, government, or commercial businesses
• consisting of different types of property, such as independent living units, serviced apartments, care facilities or a combination of these
• offering different occupancy arrangements (for example, lease-hold ownership, free-hold ownership)
• providing a range of facilities and services to residents.

When we discuss retirement villages and GST, we mean a retirement village that meets all the following:

• the property is residential property
• the accommodation is intended for people 55 years or older
• there are communal facilities for the residents to use.

Retirement villages don't include:

• property used, or intended to be used, to provide residential care (within the meaning of the Aged Care Act 1997) by an approved provider
• commercial residential property.

How GST applies

How GST is applied to supplies made by a retirement village operator depends on the type of living arrangement offered or who is operating it (for example, a charity or a commercial operator).

Leasing out an independent living unit

If you lease out an independent living unit to a resident of a retirement village, GST isn't included in the price. You can't claim GST credits.

If you charge residents ongoing maintenance fees as part of the lease, generally GST isn't included in the price. You can't claim GST credits. However, if the fee covers the maintenance and upkeep of the whole village (for example, including the commercial kitchen, hairdressing salon and medical suite) then a portion of the fee may be treated as consideration for a taxable or GST-free supply.

Selling an independent living unit

If you sell the free-hold title of an independent living unit for the first time since it was constructed, and it's not been used solely and continuously for leasing for at least five years, you are selling a new residential property. This means you are liable for GST and can claim GST credits on acquisitions relating to the sale. For example, if you are an operator and you sell a newly constructed unit to a resident, GST is included in the price and you can claim GST credits.

If it's a later sale of the unit (usually made by an existing resident to an incoming resident), GST isn't included in the price. You can't claim GST credits.

For more information about retirement village premises, see GSTR 2007/1 Goods and services tax: when retirement village premises include communal facilities for use by residents of the premises.

Serviced apartments

A serviced apartment in a retirement village is different to a serviced apartment providing short-term rental accommodation. It isn't a detached house, row or terrace house, town house or villa unit.

If you sell an apartment classed as a serviced apartment in a retirement village, GST isn't included in the price. You can claim GST credits when all of the following apply:

• It's designed to be occupied by aged residents who need either assistance in daily living activities or nursing services (irrespective of the needs of individual residents).
• At least one responsible person in reasonable proximity to the apartment is continuously on call to provide emergency assistance to the residents, such as first aid or arranging other mobility, nursing or medical assistance.
• It's part of a single complex of apartments and is accessible from a common corridor linking the apartment to the other apartments in the complex.
• There's a communal dining facility in the retirement village for the residents to use.

Requirements to be GST-free

If you supply a serviced apartment in a retirement village by lease, hire, licence or freehold, GST isn't included in the price. You can claim GST credits if:

• you supply it to a resident who needs help with daily living activities or nursing services
• it provides necessary care services and other services, such as meals, laundry and cleaning, that meet the GST-free requirements.

GST isn't included in the price, and you can claim GST credits for care services if they are:

• provided to an aged or disabled person in a residential setting
• covered by Schedule 1 to the Quality of Care PrinciplesExternal Link (made under section 96-1 of the Aged Care Act 1997)
• daily living activities assistance or nursing services that are only provided to people who require them.

Charitable retirement villages

If an endorsed charity operates a village that supplies accommodation, services related to the supply of accommodation, or meals to residents of the village, the supply is GST-free.

The charity is entitled to claim GST credits for any creditable purchases it makes relating to these supplies.