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Edited version of your written advice

Authorisation Number: 1051515983795

Date of advice: 13 May 2019

Ruling

Subject: the sale of real property

Question

Is GST payable by you on the sale of a property in Australia?

Answer

No.

This ruling applies for the following period:

1 July 2017 to 30 June 2019.

Relevant facts and circumstances

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 (GST Act)

Section 9-5

Section 40-65

Section 40-75

Section 195-1

Reasons for decision

Summary

As your property in Australia, at the time of sale, was residential premises to be used predominantly for residential accommodation, you made an input taxed supply for the purposes of the GST Act when you sold the property. As such, no GST is payable by you on the sale.

Detailed reasoning

Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that you make a taxable supply if:

Thus, regardless of whether or not all of the abovementioned paragraphs are met, you will not make a taxable supply to the extent that the supply is GST-free or input taxed.

Given the circumstances surrounding the supply, none of the provisions in the GST Act would operate to make the supply GST-free.

However, section 40-65 of the 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 and the residential premises are not commercial residential premises or new residential premises other than those used for residential accommodation (regardless of the term of occupation) before 2 December 1998.

Section 195-1 of the GST Act provides that the term ‘real property’ includes any interest in or right over land, which would include your ownership of the property prior to its sale.

The term ‘residential premises’ is also defined in section 195-1 of the GST Act, which provides that the term means 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.

Goods and Services Tax Ruling GSTR 2012/5 Goods and services tax: residential premises (GSTR 2012/5) discusses the definition of residential premises in the following paragraphs:

Further, paragraph 9 of GSTR 2012/5 provides that the requirement in section 40-65 of the GST Act that premises be ‘residential premises to be used predominantly for residential accommodation’ is to be interpreted as a single test that looks to the physical characteristics of the property to determine the premises’ suitability and capability for residential accommodation.

An examination of the subjective intention of, or use by, any particular person is not required. Premises that display physical characteristics evidencing their suitability and capability to provide residential accommodation are residential premises even if they are used for a purpose other than to provide residential accommodation; for example, where the premises are used as a business office (refer to paragraph 10 of GSTR 2012/5).

Your property was clearly residential premises, to be used predominantly for residential accommodation, at the time of sale by you.

The property had the same ‘residential’ zoning when acquired and also when it was sold by you. This was the case during the entire period that it was used for business purposes, and is also still the case currently.

The premises on the property at the time of sale satisfy the definition of residential premises as the premises provide shelter and basic living facilities, including a kitchen, bathroom and toilets.

The people who had owned the property previously had used the premises on the property as their residence.

The only modifications of any significance made to the property were ones that reinforced the premises’ suitability and capability for residential accommodation and were ones that people occupying a house as a residence might do anyway.

Your sale of the property is therefore a composite supply of residential premises to be used predominantly for residential accommodation.

The modifications and alterations made to the house on the property did not amount to ‘substantial renovations’, which would have made the sale of your property a supply of ‘new residential premises’ as defined in section 40-75 of the GST Act and thus not an input taxed supply under section 40-65 of the GST Act.

The property is also not ‘commercial residential premises’ as the term is defined in section 195-1 of the GST Act. Commercial residential premises are premises such as a hotel, motel, inn, hostel or boarding house, etc. or anything similar to those.

Your supply of the property is thus an input taxed supply and no GST is payable by you on its sale.

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