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Edited version of your written advice
Authorisation Number: 1012852122955
Date of advice: 6 August 2015
Ruling
Subject: GST and input tax credits
Question
Are you entitled to an input tax credit (ITC) in regard to the specified property?
Answer
No.
Relevant facts and circumstances
You are registered for GST and carry on an enterprise of providing site preparation services.
You owned property located at a specified location (the Property).
A financial institution took possession of the Property and subsequently sold the Property.
The sale price included a GST component.
At the time of sale the Property was vacant land.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999
Section 11-5
Section 11-20
Reasons for decision
Note: In this reasoning, unless otherwise stated,
• all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)
• reference material(s) referred to are available on the Australian Taxation Office (ATO) website www.ato.gov.au
Section 11-20 states that you are entitled to an input tax credit (ITC) for any creditable acquisition that you make.
Section 11-5 provides that you will make a creditable acquisition if, amongst other things, you acquire anything solely or partly for a creditable purpose.
In this case you have not acquired the Property in question. The Property was sold to (or acquired by) a third party. If entitled, it will be the third party purchaser that is entitled to an ITC in respect to the purchase of the Property.
Other relevant comments
In addressing your query as to whether GST should have been applied to the sale of the Property as the Property was vacant residential premises, Goods and Services Tax Ruling GSTR 2012/5 Goods and services tax: residential premises (GSTR 2012/5) outlines the characteristics of residential premises.
Paragraph 47 of GSTR 2012/5 states:
Vacant land is not capable of being occupied as a residence or for residential accommodation as it does not provide shelter and basic living facilities. Vacant land is not residential premises.
As such, the sale of vacant residential land will not be fall within the definition of 'residential premises' for GST purposes and will be a taxable supply where the criteria of section 9-5 are satisfied.
Division 105 contains provisions imposing a GST liability on a creditor (for example, mortgagee in possession) where a creditor:
• supplies the property of a debtor to a third party in or towards the satisfaction of a debt the debtor owes to the creditor; and
• had the debtor made the supply, the supply would have been a taxable supply.
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