Edited version of private advice

Authorisation Number: 1051836902929

Date of advice: 12 May 2021

Ruling

Subject: GST and residential property

Question 1

Is the sale of residential property in the course or furtherance of an enterprise pursuant to section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

All further legislative references are to the GST Act unless stated otherwise.

Answer

No, the sale is not in the course or furtherance of an enterprise and all the requirements of section 9-5 of the GST Act are not satisfied.

Miscellaneous Taxation Ruling MT 2006/1 The New Tax System: the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian Business Number (MT 2006/1) provides the Commissioner' view on the meaning of carrying on an enterprise.

MT 2006/1 provides that assets can change their character from investment which is capital in nature to trade and therefore revenue in nature (paragraphs 258 to 260). If the activities on an objective assessment have the characteristics of trade, the person's motive is not relevant (paragraph 254). The characteristics of trade are explained in paragraphs 243 to 261 and include the length of period of ownership and the frequency or number of similar transactions. In particular attention is drawn to paragraph 251 of MT 2006/1 which states:

251. The greater the frequency of similar transactions the greater the likelihood of trade.

Accordingly, if you continue to develop properties, those activities will need to be assessed to establish whether you are considered to be carrying on an enterprise of property development. As such any future property sales that you are likely to make are not covered by this ruling.

Question 2

Does the sale of the Property constitute an input taxed supply pursuant to section 40-65 of the GST Act?

Answer

Yes, the sale of the Property constitutes an input taxed supply pursuant to section 40-65 of the GST Act and should not include GST.

This ruling applies for the following period:

May 2021 to December 2021

Relevant facts and circumstances

You do not have an ABN or GST registration.

You purchased a property in 2008.

You moved into the property in 2008.

Due to the law change for dual occupancies and your family circumstances, you decided to demolish the property and build two duplexes: Duplex A and Duplex B.

The intention of demolishing the house and building two duplexes is so that you can live in Duplex A and your son can live in Duplex B.

You engaged a builder to build Duplex A and B.

Your son is currently studying and living in NSW. He was initially due to graduate in December 2020 and the plan was for him to live in Duplex B and get a job locally.

You do not have a profit-making intention.

Demolishment of the property started in September 2018.

The construction of Duplex A and B started in October 2018.

You have been living in Duplex A and treating it as your main residence since October 2020, which was as soon as practicable after it was built.

However, there have been offers for your child to work in a different state and the new expected completion of his studies is December 2022. As such, child has decided not to move into Duplex B.

You decided in December 2020 to sell Duplex A and move into Duplex B for a more comfortable living environment.

You sold Duplex A in early May 2021.

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 40-65

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