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Edited version of your private ruling
Authorisation Number: 1012482870711
Ruling
Subject: Supply of renovated residential premises
Question
Are you required to be registered for goods and services tax (GST) under section 23-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
No; you are not required to be registered for GST.
Relevant facts and circumstances
You are not registered for GST.
You acquired a freehold title to an estate on X as an input taxed supply from an unrelated party.
The estate consists of residential premises
During your period of ownership, you have renovated the premises.
You have provided a detailed list of all renovations carried out.
The renovations include:
· repairing and replacing fixtures and fittings;
· replastering walls; and
· repainting the premises.
One non load-bearing wall has been added to provide a partition for a new en-suite for the main bedroom.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 7-1
A New Tax System (Goods and Services Tax) Act 1999 Division 9
A New Tax System (Goods and Services Tax) Act 1999 section 9-5
A New Tax System (Goods and Services Tax) Act 1999 section 23-5
A New Tax System (Goods and Services Tax) Act 1999 section 40-65
A New Tax System (Goods and Services Tax) Act 1999 section 40-70
A New Tax System (Goods and Services Tax) Act 1999 section 40-75
A New Tax System (Goods and Services Tax) Act 1999 Division 188
A New Tax System (Goods and Services Tax) Act 1999 section 188-10
A New Tax System (Goods and Services Tax) Act 1999 section 188-15
A New Tax System (Goods and Services Tax) Act 1999 section 188-20
A New Tax System (Goods and Services Tax) Act 1999 section 195-1
A New Tax System (Goods and Services Tax) Regulations 1999 Regulation 23-15.01
Reasons for decision
Required to be registered
You are required to be registered for GST under section 23-5 of the GST Act if your GST turnover meets the registration turnover threshold.
Regulation 23-15.01 of A New Tax System (Goods and Services Tax) Regulations 1999 specifies that the registration turnover threshold for entities such as you is the amount of $75 000.
Division 188 of the GST Act applies to determine whether your GST turnover meets the registration turnover threshold.
Your GST turnover will meet the registration turnover threshold if your current GST turnover and/or your projected GST turnover meet or exceed the registration turnover threshold (section 188-10 of the GST Act). In working out your current GST turnover (section 188-15 of the GST Act) or projected GST turnover (section 188-20 of the GST Act) you do not include supplies that are input taxed.
If your supply of the renovated residential premises is an input taxed supply, you will not be required to be registered.
The basic rules
Section 7-1 of the GST Act states that GST is payable on *taxable supplies
Division 9 of the GST Act defines taxable supplies, states who is liable for the GST, and describes how to work out the GST on supplies.
Taxable Supply
Section 9-5 of the GST Act states:
You make a taxable supply if:
(a) you make a supply for *consideration; and
(b) the supply is made in the course or furtherance of an *enterprise that you carry on; and
(c) the supply is *connected with Australia; and
(d) you are *registered or *required to be registered for GST.
However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed under the exemptions.
*Note: Definitions of asterisked terms are provided in the Dictionary under section 195-1 of the GST Act.
Sale of residential premises
Under section 40-65 of the GST Act a sale of real property is input taxed to the extent the property is residential premises to be used predominantly for residential accommodation. However, the sale is not input taxed to the extent the premises are 'new residential premises' (other than those used for residential accommodation before 2 December 1998).
Section 40-75 of the GST Act relevantly defines 'new residential premises' as residential premises that have been created through substantial renovations of a building.
A substantial renovation is defined under section 195-1 of the GST Act as:
substantial renovations of a building are renovations in which all, or substantially all, of a building is removed or replaced. However, the renovations need not involve removal or replacement of foundations, external walls, interior supporting walls, floors, roof or staircases.
The goods and services tax ruling that deals with the circumstances in which residential premises are new residential premises is GSTR 2003/3 Goods and services tax: when is a sale of real property a sale of new residential premises?
Paragraphs 60 to 62 of GSTR 2003/3 states:
Criteria for substantial renovations
60. Whether renovations are substantial is to be determined in the light of all the facts and circumstances.
61. We consider that for substantial renovations to occur for the purposes of the GST Act, the renovations need to satisfy the following criteria before it is necessary to make further inquiry to establish whether the renovations are substantial:
(i) the renovations need to affect the building as a whole; and
(ii) the renovations need to result in the removal or replacement of all or substantially all of the building.
62. Where one of the above criteria is not satisfied substantial renovations have not occurred and no further inquiry needs to be made.
While the renovations you have carried out have affected the building as a whole, you have not removed or replaced substantially all of the building. Your renovation of repairing and repainting walls and replacing fixtures does not constitute a substantial renovation. The premises are not 'new residential premises' as defined.
Conclusion
Your supply of the renovated premises will be an input taxed supply under section 40-65 of the GST Act. The supply is not a taxable supply and you are not required to be registered for GST.
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