Edited version of private advice

Authorisation Number: 1051777262859

Date of advice: 09 November 2020

Ruling

Subject: GST and sale of real property

Question

Will the sales of the specified properties be input taxed supplies of residential premises under section 40-65 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes.

This ruling applies for the specified period.

The scheme commences on the specified date.

Relevant facts and circumstances

•         You are an entity.

•         You have an ABN and you are registered for the goods and services tax (GST).

•         You own and will sell the specified properties located in Australia.

•         When you purchased the properties, the sales to you were input taxed supplies of residential premises.

•         For each specified property:

o   The property comprises land and house on one title.

o   The house was constructed several decades ago.

o   The house has previously been occupied as a residence.

o   You have not carried out any renovations or made any changes/modifications to the property since your acquisition.

o   You intend to sell the property in the near future. There is no buyer yet.

o   At the time of settlement, the property sold will comprise of land with the house attached to the land.

o   The property will be sold in the same condition as it was acquired, with the original land and house on one title.

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 Division 40

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

An entity makes a taxable supply under section 9-5 of the GST Act if all of the following requirements are satisfied:

•         the entity makes the supply for consideration; and

•         the supply is made in the course or furtherance of the entity's enterprise; and

•         the supply is connected with the indirect tax zone (that is, Australia); and

•         the entity is registered or required to be registered; and

•         the supply is neither GST-free nor input taxed.

A sale of residential premises that is 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.

Section 40-65 of the GST Act provides that a sale of real property is input taxed to the extent that the property is residential premises to be used predominantly for residential accommodation.

The term 'residential premises' is defined in section 195-1 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 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) provides guidance on how GST applies to supplies of residential premises.

Goods and Services Tax Ruling GSTR 2003/3: Goods and services tax: when is a sale of real property a sale of new residential premises? (GSTR 2003/3) provides guidance on when real property is new residential premises pursuant to section 40-75 of the GST Act.

Residential premises that have not previously been sold as residential premises and residential premises that have been created through substantial renovations of a building are new residential premises as defined in section 40-75 of the GST Act.

Where residential premises have been used only for the purpose of making input taxed supplies (i.e. residential rental) because of paragraph 40-35(1)(a) of the GST Act for a continuous period of at least 5 years since the premises would otherwise have become new residential premises, they are no longer new residential premises.

On the facts provided, the specified properties are residential premises. These residential premises are not new residential premises. Consequently, the sales of these properties by you will be input taxed supplies of residential premises under section 40-65 of the GST Act.

Note:

If a supply is input taxed, no GST is payable on the supply; and there is no entitlement to an input tax credit for anything acquired or imported to make the supply.

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