Edited version of private advice

Authorisation Number: 1052035480758

Date of advice: 19 September 2022

Ruling

Subject:GST property

Question

Is the sale of the property located in the indirect tax zone, known as X (the Property), an input taxed supply of residential premises under section 40-65 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes. The sale of the Property will be an input taxed supply of residential premises pursuant to section 40-65. Therefore, GST will not be payable on the sale.

This ruling applies for the following periods:

1 July 20XX to 30 June 20XX

1 July 20XX to 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

Entity B is the corporate trustee of Entity A.

Entity A (You) have been registered for GST since DD/MM/YYYY.

You are carrying on a leasing enterprise of residential property.

You acquired the property located in the indirect tax zone (the Property) on DD/MM/YYYY.

The Property was not acquired as a taxable supply.

The Property is a residential dwelling that contains X bedrooms, X bathrooms, a kitchen, living room and dining room on Xm² of land.

Since acquiring the Property, it has been leased as residential premises.

A Residential Tenancy Agreement was entered into for a fixed term of X months starting DD/MM/YYYY and ending DD/MM/YYYY, for rent payable of $X per week. The agreement continued as a periodic agreement once the fixed term ended.

You are in the process of selling the Property to X (the Purchaser).

On DD/MM/YYYY you entered into a Sales Contract with the Purchaser for the sale of the Property. The Sales Contract provides that:

•         the supply to the Purchaser is subject to vacant possession

•         the sale is not a taxable supply

•         the margin scheme will not apply

•         the sale is input taxed because the sale is of eligible residential premises (sections 40-65, 40-75(2) and 195-1)

•         the supply of the property will be for consideration of $X

•         the date for completion is X months after the contract date.

Despite the terms included in the Sales Contract that the sale of the Property is subject to vacant possession, you have clarified that this was an inadvertent error and the sale will be subject to existing tenancies.

The Development Application

On DD/MM/YYYY, a Development Application (DA) was lodged with the Local Council for demolition works and construction of a mixed use multi storey development. The DA includes all properties referred to in Schedule 2 (the Adjoining Properties), which includes the Property. See Appendix A.

You and the other landowners of the Adjoining Properties subject to the DA engaged a town planner, X, who prepared, compiled, lodged and negotiated the DA on the landowner's behalf.

The DA was the subject of an extensive Pre-DA process with Council which commenced in YYYY.

The DA was approved in MM/YYYY.

The primary purpose for lodging the DA was to enhance and improve the sale prospects of the land and increase the realisable value of all lots.

You and the other landowners of the Adjoining Properties subject to the DA considered undertaking the development as per the DA; however, this did not eventuate.

The Contract of Sale

In MM/YYYY, a representative of the Purchaser made contact with a local Real Estate Agent to enquire about purchasing the Adjoining Properties.

The Vendors in Schedule 2 and the Purchaser proceeded to negotiate their respective sales of property.

The Purchaser has been registered for GST since DD/MM/YYYY with ABN.

You and the Purchaser are not associates.

The completion of the Sales Contracts is subject to and conditional upon the simultaneous completion of the sale of the Adjoining Properties. Clauses X - X in the Sales Contracts provide:

X Simultaneous Completion of Contracts

X.X Completion of this Contract is subject to and conditional upon the simultaneous completion of the sale of the properties referred to in Schedule 2 hereto.

X.X Should completion of any one or more of the properties in Schedule 2 not be completed simultaneously with the completion with the sale and purchase of the other properties referred to in Schedule 2 hereto the Vendor will be entitled to delay completion of this Contract until simultaneous completion of all of the sale and purchase Contracts of all of the properties in Schedule 2 is able to be effected.

X Assignment of Rights, Title and Interest

X.X Upon completion the Vendor will assign all of its right, title and interest in Development Application X together with any and all copyright and all documentation relating to the property including, without limitation, plans, drawings and reports obtained by or commission by the Vendor or anyone on the Vendor's behalf to the Purchaser.

...

You will not demolish or develop anything on the Properties prior to settlement.

APPENDIX A

Schedule 2 to Contract for Sale and Purchase of Land Between Entity B, Entity A and the Purchaser.

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

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