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Edited version of your written advice
Authorisation Number: 1051479475225
Date of advice: 6 February 2019
Ruling
Subject: GST and sale of real property
Question
Does the sale of the Property by Entity A constitute the sale of existing residential premises which is input taxed?
Answer
Yes
This ruling applies for the specified period.
The scheme commences on the specified date.
Relevant facts and circumstances
● Entity A is registered for the goods and services tax (GST).
● Entity A owned the Property, which it had purchased several years ago.
● The Property had a single storey brick house attached to the land at the time settlement.
● The house was constructed in the 1970’s/80’s and was a typical residential house with basic amenities including a kitchen and bathroom.
● Under a contract for sale of real property, Entity A recently sold the Property to a purchaser for the specified price.
● The following was situated on the Property at settlement date:
● the original single storey brick house
● multiple metal buildings of varying sizes used as sheds
● multiple silos
● grazing land/pasture paddocks
● Entity A has not carried out any development or renovations works on the house during its ownership.
● The house was capable of being occupied as a residence and suitable for residential accommodation at the time of settlement.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 40-65
A New Tax System (Goods and Services Tax) Act 1999 section 40-75
A New Tax System (Goods and Services Tax) Act 1999 section 195-1
Reasons for decision
In this case, the Property was not vacant land. The Property was sold with a house and other fixtures and buildings attached to the land.
Section 40-65 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that 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, regardless of the term of occupation.
However, the sale is not input taxed to the extent that the residential premises are
● ‘commercial residential premises’ or
● ‘new residential premises’ other than those used for residential accommodation before 2 December 1998.
The term ‘commercial residential premises’ is defined in section 195-1 of the GST Act to include, amongst other things, a hotel, motel, inn, hostel or boarding house; or a caravan park or a camping ground; or anything similar to the residential premises described.
The ATO view on how GST applies to supplies of commercial residential premises and supplies of accommodation in commercial residential premises is set out in Goods and Services Tax Ruling GSTR 2012/6 Goods and services tax: commercial residential premises.
In this case, the Property is not considered ‘commercial residential premises’ for GST purposes.
The term ‘new residential premises’ is defined under section 40-75 of the GST Act, and it includes residential premises that have not previously been sold as residential premises; premises that have been created through substantial renovations of a building; and premises that have been built, or contain a building that has been built, to replace demolished premises on the same land.
The term 'residential premises' is defined in section 195-1 of the GST Act to mean land or a building that:
(a) is occupied as a residence or for residential accommodation; or
(b) is intended to be occupied, and is capable of being occupied, as a residence or for residential accommodation;
(regardless of the term of the occupation or intended occupation) and includes a *floating home.
In this case, on the facts provided, the house on the Property would satisfy the definition of residential premises. The premises are residential premises to be used predominantly for residential accommodation. They were not new residential premises as they have previously been sold as residential premises and have not been subject to any renovations.
A sale of residential premises that are not 'new residential premises' as defined in section 40-75 of the GST Act at the time of sale is an input taxed supply under section 40-65 of the GST Act. Therefore, the sale of the Property is a supply of residential premises that is input taxed pursuant to section 40-65 of the GST Act. Where a supply is input taxed, no GST is payable on the supply. As a result, no GST is payable by the vendor on the sale of the Property.
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