Edited version of private advice

Authorisation Number: 1051769524575

Date of advice: 20 October 2020

Ruling

Subject: Goods and services tax and purchase and resale of moveable homes

Question 1

Are the Buy Back Homes you purchased from Departing Residents and sold later second-hand goods for the purposes of Division 66 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) at the time you purchased them from Departing Residents?

Answer

Yes.

Question 2

Are you entitled to input tax credits on your purchase of Buy Back Homes from the Departing Residents, which you sold later?

Answer

Yes.

Relevant facts and circumstances

You are registered for GST.

You carry on your business activity in Australia.

Your business activities are that of a sales agent for departing residents wishing to sell their manufactured home. You make sales of sales agent services in exchange for commission.

Purchase of Buy Back Home

In two instances to date, you purchased a manufactured home from a departing resident (the "Departing Residents" - DR). These acquisitions collectively are "Buy Back Homes".

You have provided us with a copy of the Home Purchase Agreement regarding your purchase of one of the Buy Back Homes from a DR. The terms in the Agreement include amongst other things that the DR agrees to sell to you a home constructed on the attached Site Plan.

In the Agreement, the DR does not confer a right to position a Buy Back Home on a site to you. Instead Company X, owner of the site would confer such a right to the incoming resident under a separate agreement.

The Buy Back Homes are manufactured homes. They are designed to be occupied as residences when placed on land and installed but are moveable/transportable and are not permanently affixed to the land. They can be detached from the land and moved to another location without causing damage to the homes.

You acquired the Buy Back Homes from the DR in order to maintain customer's satisfaction as the DR no longer wished to reside in the homes and were unable to sell their homes in their desired time-frame.

The DR originally acquired the Buy Back Homes as taxable supplies from another entity ("Homes Entity"). GST was remitted on the sale by the Homes Entity to the Australian Taxation Office.

The DR are not registered for GST and do not carry on an enterprise in relation to the homes. As such, there was not GST in the price you paid for them.

Prior to you acquiring the Buy Back Homes, the DR leased the sites on which the Buy Back Homes are situated from another entity ("Land Entity").

The sites on which the Buy Back Homes are currently situated are still owned by the Land Entity.

It is expected that going forward, you will purchase other manufactured homes from residents from time to time for the purpose of resale in the course of your business. You were established solely for this purpose in the group. The ability to buy back manufactured homes is part of a broader strategy to ensure resident satisfaction and confidence for both the DR and also the residents that remain.

You will not divide a Buy Back Home for re-supply.

You do not import the Buy Back Homes.

Sale of purchased Buy Back Homes

You purchased the two Buy Back Homes with the intention of selling them to future residents. You provided us with a copy of the Home Purchase Agreement for one of the Buy Back Homes you have sold.

The terms of the agreement for the sale of the Buy Back Home include:

(a)  You agreed to sell to a home buyer a home as constructed on the relevant site

(b)  The home buyer acknowledges that it is an essential term of this agreement that the home buyer enters into a site agreement with Company X (site owner) to position the home on the site.

You do not confer a right to position a Buy Back Home on a site to an incoming resident. Instead, Company X would confer such a right to an incoming resident under a Site Agreement.

Supply of site

The provisions in State or Territory legislation apply to the MHE.

That legislation defines manufactured home and a site agreement and it also provides that a home owner under site agreement has the right to sell the manufactured home positioned on the site.

The park owner and a home owner enter into a site agreement under that legislation.

You have provided us with a copy of a Site Agreement. The terms of the Site Agreement include the following amongst other things:

·         This site agreement made between the parties for the rental of the site permits the Home Owner/s to:

-        position a manufactured home on the site; or

-        reside in a manufactured home already positioned on the site

and to reside in that manufactured home as the person/s principal place of residence under the terms and conditions stated in this site agreement.

·         The Park Owner (Company X) does not reserve the right to reposition the manufactured home to a comparable site in the park.

·         The Home Owner may sell the manufactured home positioned on the site. The home may be sold personally by the Home Owner; by the Park Owner if they were appointed by the Home Owner as an agent to sell the manufactured home; or by a real estate agent engaged by the Home Owner to sell the manufactured home.

·         The Home Owner proposing to sell the manufactured home (the seller) may assign this site agreement to a buyer, ie transfer the agreement from being between the seller and the Park Owner, to be between the buyer and the Park Owner.

·         Where a Park Owner reasonably believes a manufactured home has been abandoned by the Home Owner, the Park Owner may apply to the Tribunal for an order to sell the manufactured home and any personal effects.

·         Unless the site agreement has already been terminated, the agreement is taken to be terminated when the Tribunal makes the abandonment order.

·         The proceeds of the sale will be distributed in accordance with the State or Territory legislation.

There is nothing in the site agreement that contractually prevents the manufactured home owner from removing a manufactured home from a site that it sits on.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 9-5

A New Tax System (Goods and Services Tax) Act 1999 section 11-5

A New Tax System (Goods and Services Tax) Act 1999 section 11-15

A New Tax System (Goods and Services Tax) Act 1999 section 11-20

A New Tax System (Goods and Services Tax) Act 1999 section 40-65

A New Tax System (Goods and Services Tax) Act 1999 section 66-5

A New Tax System (Goods and Services Tax) Act 1999 section 195-1

Reasons for decisions

Questions 1 and 2

Summary

The Buy Back Homes are second hand goods under Division 66 of the GST Act and you are entitled to input tax credits for your purchases of the Buy Back Homes under section 11-20 of the GST Act since based on the information provided you satisfy the requirements in paragraphs 11-5(a), 11-5(c) and 11-5(d) of the GST Act and section 66-5 of the GST Act.

Detailed reasoning

The Buy Back Home is a moveable home. In this instance, we first need to determine whether the supply of the Buy Back Home is a supply of real property or a supply of goods.

Regarding moveable homes, paragraph 49 to 51 in Goods and Services Tax Ruling GSTR 2012/5: residential premises provide the following:

49. A transportable building such as a demountable dwelling or moveable home that is designed as a residence, or to provide residential accommodation, is residential premises when placed on land and installed ready for occupation.

50. A supply of a transportable building before it is placed on land and installed ready for occupation is not an input taxed supply under section 40-35, 40-65 or 40-70. The supply is subject to the basic rules.

51. A transportable building that is not designed as a residence or to provide residential accommodation (for example, a transportable building that lacks basic living facilities) is not residential premises to be used predominantly for residential accommodation.

A building that is situated on land is not real property unless it is a fixture on the land.

Fixtures are chattels that become annexed to the land in such a way that the chattels lose their independent identity and become a part of the land. Once a chattel becomes a part of the land it belongs to the land. The fixture will pass with the land if the land is sold.

The Buy Back Home is a manufactured home under the State or Territory legislation as it has the character of a dwelling home, is designed to be removeable and not permanently affixed to land and can be removed without damage. The purchase and sale Agreements are specifically for the Buy Back Home itself and not the land on which the home is currently sitting. Further the Site Agreement with the land owner does not have a provision that prevents the owner of the Buy Back Home from removing their Buy Back Home from the site.

From the above we accept that the Buy Back Home is not real property since it is being sold as a moveable home and would be a tangible personal property, hence a good for GST purposes.

Since the Buy Back Home is a good that was previously owned when you bought and sold it later it is relevant to consider whether the Buy Back Home is a second hand good for GST purposes.

Division 66 of the GST Act is about second-hand goods and provides when an input tax credit can be claimed for the acquisition of second hand goods.

Section 66-5 of the GST Act states the following:

66-5      Creditable acquisitions of second-hand goods

(1)  If you acquire *second hand goods for the purpose of sale or exchange (but not for manufacture) in the ordinary course of *business, the fact that the supply of the goods to you is not a *taxable supply does not stop the acquisition being a *creditable acquisition.

(2)  However, this section does not apply, and is taken never to have applied, to the acquisition if:

(a)  The supply of the goods to you was a *taxable supply, or was *GST-free; or

(b)  You *imported the goods; or

(c)   The supply of the goods to you was a supply by way of hire; or

(d)  Subdivision 66-B applies to the acquisition; or

(e)  You make a supply of the goods that is not a taxable supply.

(3)  This section has effect despite section 11-5 (which is about what is a creditable acquisition)

Second-hand goods is defined in section 195-1 of the GST Act as follows:

second-hand goods does not include

a.    Goods (except *incidental valuable metal goods) to the extent they consist of *valuable metal

b.    (Repealed by No. 76 of 2017)

c.     animals or plants

In accordance with the fact sheet, GST and second hand goods, second hand means previously used or not new.

The Buy Back Homes were previously used when you bought and sold them later and you advised that you intend to carry on this buy and sell activity in the ordinary course of your business. Additionally, you will not acquire the Buy Back Homes for manufacture. The exclusions from the meaning of second-hand goods in section 195-1 of the GST Act do not apply to you. In this instance, you satisfy the requirements of subsection 66-5(1) of the GST Act.

Further, the exceptions in subsection 66-5(2) of the GST Act do not apply as:

·         The sale of the Buy Back Home to you was neither a taxable sale nor a GST-free sale

·         You do not import the Buy Back Home

·         There is no hiring of the Buy Back Home in place

·         You are not dividing the Buy Back Home for resupply

·         Your sale of the purchased Buy Back Home would be a taxable sale since you sell the home for consideration and in the course or furtherance of your enterprise and the sale is connected with Australia and you are registered for GST. The sale would neither be a GST-free sale nor an input taxed sale where the home is to stay in Australia.

Accordingly, based on the facts given, the Buy Back homes you have purchased and sold as part of your business activity are second hand goods under Division 66 of the GST Act and you meet the requirements of section 66-5 of the GST Act, with the result that the non-taxable status of the supply made to you does not prevent you from making a creditable acquisition.

You make a creditable acquisition where you meet the requirements of section 11-5 of the GST Act, which states:

You make a creditable acquisition if:

a)    you acquire anything solely or partly for a *creditable purpose

b)    the supply of the thing to you is a *taxable supply; and

c)    you provide, or are liable to provide, consideration for the supply; and

d)    you are *registered or *required to be registered.

However, where the requirements of section 66-5 of the GST Act (which deal with the purchase of second hand goods) are met, the requirement at paragraph 11-5(b) of the GST Act does not apply.

You have acquired the Buy Back Homes for a creditable purpose under section 11-15 of the GST Act, as you acquire the homes in carrying on your enterprise, your acquisition of the homes does not relate to the making of input taxed supplies and is not of a private or domestic nature. Additionally, you have provided consideration for the supply of the Buy Back Homes made to you and you are registered for GST.

In accordance with section 11-20 of the GST Act, you are entitled to input tax credits on your creditable acquisitions. Therefore, you are entitled to input tax credits under section 11-20 of the GST Act in respect of the two homes you have purchased so far.

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