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Edited version of your written advice
Authorisation Number: 1051290416660
Date of advice: 4 October 2017
Ruling
Subject: GST
Questions
1. Will the sale of the new buildings be a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
2. If GST is payable on the sale, who is liable for the GST?
3. Do you need to register for GST?
4. If the sale is a taxable supply, can the margin scheme be used?
5. If the margin scheme can be used, what steps must be taken by the relevant parties?
Answers
1. No.
2. Not applicable, as GST is not payable on the sale.
3. No.
4. Not applicable, as GST is not payable on the sale.
5. Not applicable, as GST is not payable on the sale.
Relevant facts and circumstances
● You and X own a Property as joint tenants.
● The Property was zoned low density residential.
● You and X obtained an Investment Home Loan from the bank to fund the purchasing of the Property. The loan was for a 30 year term.
● The premises are not part of a resort, serviced apartment or hotel type setting.
● The Property was never occupied by either you or X.
● At the time of purchase, there was an existing old house on the Property. The intention was to get rental income from the Property and to hold it long term.
● The old house was made available for rent after settlement. A rental agreement with tenants was signed for the specified period.
● The Property ceased being available for rent after a period of leasing and the old house was demolished.
● You and X entered into a contract with the Builder in relation to the construction of two buildings on the Property. The intention was to occupy one side as the family home and to rent the other side out for long term rental income.
● The construction of the buildings was financed by jointly borrowed funds from the bank.
● Due to the specified circumstances, you and X have been forced to sell the Property.
● Neither of you are in a financial position to keep the buildings.
● The buildings have remained vacant since their construction was completed until the present time.
Neither you nor X have undertaken any similar activities in the past and do not intend undertaking any similar activity in the future.
● You did not have a business or financial plan for the demolition of the existing dwelling and the construction of the buildings.
● Neither you nor X is registered for the goods and services tax (GST).
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 section 9-5,
A New Tax System (Goods and Services Tax) Act 1999 section 9-20,
A New Tax System (Goods and Services Tax) Act 1999 section 23-5, and
A New Tax System (Goods and Services Tax) Act 1999 section 188-25.
Reasons for decision
Summary
The sale of the new buildings will not be a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) because on the facts provided, you are not registered and will not be required to register for GST at the time of sale. As the supply will not be a taxable supply, GST will not be payable on the sale.
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