Residential property
A property is a residential property if it is suitable for and capable of being occupied as a residence or for residential accommodation. A residential property includes houses, units, flats and more. It refers to residential property that provides shelter and contains basic living facilities.
It is not limited to premises suited to extended or permanent occupation. It includes lodging, sleeping or overnight accommodation. It doesn't include vacant land.
A property that displays the physical characteristics to provide residential accommodation is a residential property even if it is used for a different purpose. For example, where a residential property is used as a business office.
A property that does not display physical characteristics to be suitable or capable of being occupied as a residence or for residential accommodation is not a residential property. This includes when the property is being used as a residence or used for residential accommodation. For example, a disused factory may not display the physical characteristics to be a residential property, despite being used as a living space by an occupant.
GST only applies to the sale of certain property types if the seller (vendor) is registered or required to be registered for GST purposes.
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 these properties listed 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:
- Property and registering for GST
- Commercial residential property
- GST at settlement
- Property and capital gains tax
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’ 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 it 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 (or similar)
- hostels, boarding houses (or similar)
caravan parks, camping grounds (or similar).
The lease of commercial property is 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 2012/5Opens in a new window Goods and services tax: residential premises
- Goods and Services Tax Ruling GSTR 2012/6Opens in a new window Goods and services tax: commercial residential premises
- Goods and Services Tax Ruling GSTR 2012/7Opens in a new window Goods and services tax: long-term accommodation in commercial residential premises
Retirement villages
A retirement village is a form of residential property. It may be used to describe accommodation:
- intended for people over 55
- 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.
We have guidance on retirement villages and occupancy arrangements that may apply.
How GST applies
How GST applies depends on the type of living arrangement offered or who is operating it (for example, a charity or a commercial operator).
Learn about how GST and income tax apply when:
- acquiring or constructing a retirement village
- operating a retirement village, including selling individual units or apartments
- selling a retirement village.
Independent living units
If you lease out or sell the free-hold title of an independent living unit, different GST obligations may apply.
For more information about GST applies when you lease or sell, visit operating a retirement village.
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.
We have additional guidance about GST on serviced apartments, to help you understand when you can claim GST credits when supplying a serviced apartment, necessary care services and other services.
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.
For more information visit, GST if you're a charitable retirement village.
More detailed guidance
For more information, visit our online guide about retirement villages and tax. Discover how income tax and GST apply if you're a retirement village operator.