ATO Interpretative Decision

ATO ID 2001/702 (Withdrawn)

Goods and Services Tax

GST and input tax credits for cost of constructing residential premises
FOI status: may be released

This ATO ID is withdrawn as it is a simple restatement of the law and does not contain an interpretative decision.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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, an owner builder, entitled to claim input tax credits for the construction costs of duplex units under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it occupies one unit and rents out the other unit after the construction is complete?

Decision

No, the entity is not entitled to claim input tax credits for the construction costs of the duplex units under section 11-20 of the GST Act, when it occupies one unit and rents out the other unit after the construction is completed.

Facts

The entity is an owner builder. The entity purchased a block of land with an existing residential premise.

The entity demolished the existing residential premise and constructed a duplex on the land.

The entity acquired a range of goods and services in demolishing the existing residential premise and constructing the duplex. The supply of these goods and services to the entity are taxable supplies under section 9-5 of the GST Act.

The entity occupies one of the units and leases the other unit for the purpose of residential accommodation to tenants. The entity is registered for goods and services tax (GST).

Reasons for Decision

Section 11-20 of the GST Act provides that an entity is entitled to the input tax credit for any creditable acquisition that it makes.

Section 11-5 of the GST Act lists the requirements that must be satisfied for an entity to make a creditable acquisition. One of those requirements is that the entity must acquire the thing solely or partly for a creditable purpose (paragraph 11-5(a) of the GST Act).

Section 11-15 of the GST Act defines the meaning of creditable purpose. An entity does not acquire a thing for a creditable purpose to the extent that:

•: the acquisition relates to making supplies that would be input taxed (paragraph 11-15(2)(a) of the GST Act); or
•: the acquisition is of a private or domestic nature (paragraph 11-15(2)(b) of the GST Act).

The entity occupies one of the units and rents out the other unit for the purpose of residential accommodation to tenants. With regards to the acquisitions relating to the construction of the unit occupied by the owner, the entity is making acquisitions that are of a private or domestic nature. As such, the entity is not making the acquisitions for a creditable purpose ( paragraph 11-15(2)(b) of the GST Act). Therefore, the requirements of section 11-5 of the GST Act are not satisfied.

The supply of the duplex unit by way of lease for the purpose of residential accommodation is an input taxed supply under section 40-35 of the GST Act. With regard to the acquisitions relating to the leased unit, the entity is making acquisitions that relate to making supplies that would be input taxed. As such, the entity is not making the acquisitions for a creditable purpose (paragraph 11-15(2)(a) of the GST Act). Therefore, the requirements of section 11-5 of the GST Act are not satisfied.

As the entity is not making any creditable acquisitions, the entity is not entitled to claim input tax credits for the construction costs of the duplex units under section 11-20 of the GST Act.

Date of decision: 29 August 2001

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 9-5
   section 11-5
   paragraph 11-5(a)
   section 11-15
   paragraph 11-15(2)(a)
   paragraph 11-15(2)(b)
   section 11-20
   section 40-35

Keywords
Goods & services tax
GST property & construction
GST residential premises
GST residential rents
GST supplies & acquisitions
Creditable acquisition
Creditable purpose
Input taxed supplies

Business Line: GST

Date of publication: 30 November 2001

ISSN: 1445-2782

history

	Date:	Version:
	29 August 2001	Original statement
You are here	28 March 2008	Archived

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