ATO Interpretative Decision

ATO ID 2001/506 (Withdrawn)

Goods and Services Tax

GST and the sale of townhouses
FOI status: may be released

Withdrawn. Information on this issue is found in Goods and Services Tax Ruling GSTR 2003/3.

This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

Is the entity, a property developer, making an input taxed supply under section 40-65 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells townhouses that have been constructed on two vacant blocks of residential land?

Decision

No, the entity is not making an input taxed supply under section 40-65 of the GST Act when it sells townhouses that have been constructed on two vacant blocks of residential land. The entity is making a taxable supply under section 9-5 of the GST Act.

Facts

The entity is a property developer that owned two vacant blocks of residential land. The entity constructed townhouses on these blocks of residential land after 2 December 1998. The townhouses are strata titled. The townhouses are capable of being occupied as a residence.

The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.

Reasons for Decision

Section 40-65 of the GST Act provides that a sale of residential premises may be input taxed.

Under subsection 40-65(1) of the GST Act, a sale of real property is input taxed but only to the extent that the property is residential premises to be used predominantly for residential accommodation.

Real property is defined under section 195-1 of the GST Act to include any interest in or right over land. The sale of the townhouses is the sale of real property.

Residential premises are defined under section 195-1 of the GST Act to mean land or a building that is occupied or is intended to be occupied as a residence and which is capable of being occupied as a residence. The townhouses are capable of being occupied as a residence and therefore, are residential premises.

Under paragraph 40-65(2)(b) of the GST Act, the sale of residential premises is not input taxed if the residential premises are new residential premises, other than those used for residential accommodation before 2 December 1998.

Under paragraph 40-75(1)(a) of the GST Act, new residential premises are defined to include residential premises that have not previously been sold as residential premises and have not previously been the subject of a long-term lease.

The construction of strata titled townhouses has created a new title of real property that has not previously been sold as residential premises. Therefore, the townhouses are new residential premises under paragraph 40-75(1)(a) of the GST Act. In addition, the townhouses were not used for residential accommodation before 2 December 1998 and as such, the sale of the townhouses is not an input taxed supply under section 40-65 of the GST Act.

The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under any other section of Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it sells the townhouses.

[Note: Where an entity is making a taxable supply of real property, it will be liable for one-eleventh of the GST-inclusive sale price. However, the entity may be able to apply the margin scheme where the requirements of Division 75 of the GST Act are met.]

Date of decision: 24 August 2001

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 9-5
   Division 38
   Division 40
   section 40-65
   subsection 40-65(1)
   paragraph 40-65(2)(b)
   section 40-75
   paragraph 40-75(1)(a)
   Division 75
   section 195-1

Keywords
Goods and services tax
GST property & construction
GST margin scheme
GST new residential premises
GST residential premises
GST sale of real property
GST supplies & acquisitions
Taxable supply
Input taxed supplies

Business Line: GST

Date of publication: 22 October 2001

ISSN: 1445-2782

history

	Date:	Version:
	24 August 2001	Original statement
You are here	9 December 2005	Archived

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