Edited version of private advice

Authorisation number: 1052454544440

Date of advice: 12 January 2026

Ruling

Subject: GST - sale of new residential premises

Question

Will the sale of a new residential premises be a taxable supply in accordance with section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes

This ruling applies for the following Period:

1 July 20XX - 1 July 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

Individual name (You) is not registered for GST.

You are employed in a specific position at 2 entities.

You have relationships with several entities

In the relevant year, you purchased a residential property located in the indirect zone consisting of a number of lots, for a specified sum. You occupied the Property since your purchase.

You were employed by a development company at the time you purchased the Property.

You purchased the property to be your residence and for potential development.

After residing at the Property for a number of years, you identified the House had deteriorated as a result of its age. Issues included the presence of asbestos in the guttering, eaves, and fibro cladding.

You obtained property appraisals both pre-construction and during the design stage from three real-estate companies.

On the specified date your entity name engaged a planning Entity (Town Planner) to prepare and lodge an express development application with the Council. The application sought to reconfigure lot boundaries and establish access easements. It was submitted under your related entity name, as advised by the Town Planner, to ensure consideration by the Council under this entity.

On a specified date you lodged a planning/development approval by your Town Planner as an express development application with the relevant council (the Council) to construct two duplex premises (the Duplexes). The proposal was for:

•                     A development permit for a combined reconfiguration of a lot (Boundary realignment and access easements) and material changes of use (2 x dwelling houses on small lots).

The application for boundary re-alignment was approved by the Council on a specified date (Building approval reference number).

The House on the Property was demolished on a specified date.

You contracted the building entity (the Builder) on a specified date.

Construction of the Duplexes commenced with each Duplex consisting of three levels, with a kitchen, 4 bedrooms, 4 bathrooms, powder room, 3 car garage, and swimming pool.

The construction of the duplex premises was financed through a Residential Investment Property Loan, with two registered borrowers.

The certificate of occupancy was issued on a specified date.

You moved into Duplex A upon completion, and you continue to reside there.

Duplex A was listed with a real-estate entity. In mid-August 20xx, the property was withdrawn from the market as the offers received did not meet the asking price of over the specified amount.

Duplex B was leased under a lease agreement for a term of 12 months.

Duplex A is not currently on the market.

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 9-20

A New Tax System (Goods and Services Tax) Act 1999 - section 23-5

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

A New Tax System (Goods and Services Tax) Act 1999 - section 188-10

A New Tax System (Goods and Services Tax) Act 1999 - paragraph 188-20(1)(a)

A New Tax System (Goods and Services Tax) Act 1999 - section 188-25

Does IVA apply to this private ruling?

We have limited our private ruling to the questions raised in your application. There may be related issues that you should consider, including:

•                     Adjustments, and

•                     Creditable purpose.

Does IVA apply to this private ruling?

Part IVA of the Income Tax Assessment Act 1936 contains anti-avoidance rules that can apply in certain circumstances where you or another taxpayer obtains a tax benefit, imputation benefit or diverted profits tax benefit in connection with an arrangement.

If Part IVA applies, the tax benefit or imputation benefit can be cancelled (for example, by disallowing a deduction that was otherwise allowable) or you or another taxpayer could be liable to the diverted profits tax.

We have not fully considered the application of Part IVA to the arrangement you asked us to rule on, or to an associated or wider arrangement of which that arrangement is part.

If you want us to rule on whether Part IVA applies, we will need to obtain and consider all the facts about the arrangement which are relevant to determining whether Part IVA may apply.

For more information on Part IVA, go to our website ato.gov.au/gaar.

Issue

GST and new residential premises

Question

Will the sale of a new residential premises be a taxable supply in accordance with section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Detailed reasoning

Under section 9-5, an entity makes a taxable supply where the supply:

(a)          is made for consideration; and

(b)          is made in the furtherance of an enterprise that you carry on; and

(c)           is connected with the indirect tax zone; and

(d)          is made by a supplier who is registered, or required to be registered, for GST.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

In your case, the sale of Duplex A will be made for consideration. The sale will be connected with the indirect tax zone as the duplex is located in Australia. Therefore, the requirements in paragraphs 9-5(a) and 9-5(c) of the GST Act above will be satisfied.

What we need to determine is whether the proposed sale of Duplex A will be made in the course or furtherance of an enterprise that you carry on [paragraph 9-5(b)] and whether you are required to be registered when you sell the duplex [paragraph 9-5(d)].

Whether the sale will be made in the course or furtherance of an enterprise that you carry on

In accordance with section 9-20 of the GST Act, an enterprise includes, amongst other things:

•                     an activity or series of activities done in the form of a business

•                     an adventure or concern in the nature of trade

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 guidance on what activities will amount to an enterprise.

Goods and Services Tax Determination GSTD 2006/6 Goods and Services Tax: MT 2006/1 have equal application to the meaning of 'entity' and 'enterprise' for the purposes of the A New Tax System (Goods and Services Tax) Act 1999, provides that the discussion in MT 2006/1 applies equally to the term 'enterprise' as used in the GST Act and can be relied on the GST purposes.

Paragraph 234 of MT 2006/1 distinguishes between activities done in the form of a business and those done in the form of an adventure or concern in the nature of trade. A business encompasses trade engaged in on a regular basis. An adventure or concern in the nature of trade includes an isolated or one-off transaction that does not amount to a business, but which has the characteristics of a business deal.

In your case, your intention to demolish the existing house, subdivide the land and build a duplex and sell one are activities of an isolated transaction. We must determine if these activities are an adventure or concern in the nature of trade (profit -making undertaking or scheme), or whether they are the mere realisation of a capital asset.

In the form of an adventure or concern in the nature of trade

Paragraph 262 of MT 2006/1 acknowledges thatthe question of whether an entity is carrying on an enterprise often arises where there are 'one-offs' or isolated real property transactions. Paragraph 263 continues stating that the issue to be decided is whether the activities being conducted are an enterprise in that they are of a revenue nature as they are considered to be activities of carrying on a business or an adventure or concern in the nature of trade (profit making undertaking or scheme) as opposed to the mere realisation of a capital asset.

Paragraph 265 of MT 2006/1 lists a number of factors which can be used to determine whether activities in relation to a sale of property are done under a profit-making undertaking or scheme. If several of these factors are present it may be an indication that a business or an adventure or concern in the nature of trade is being carried on.

These factors are as follows:

•                     there is a change of purpose for which the land is held;

•                     additional land is acquired to be added to the original parcel of land;

•                     the parcel of land is brought into account as a business asset;

•                     there is a coherent plan for the subdivision of the land;

•                     there is a business organisation (for example, a manager, office and letterhead);

•                     borrowed funds financed the acquisition or subdivision;

•                     interest on money borrowed to defray subdivisional costs was claimed as a business expense;

•                     there is a level of development of the land beyond that necessary to secure council approval for the subdivision; and

•                     buildings have been erected on the land.

Paragraph 179 of MT 2006/1 states that there is no single test to determine whether a business is being carried on. Each case might turn on its own particular facts, and the determination of the question is generally the result of weighing all the relevant indicators. Where there is a change of purpose the tax treatment of a property sale can also change

When you purchased the Property, you were aware of its subdivision potential. Although you lived in the original house for approximately 2 years, you subsequently decided to redevelop the Property. Once the decision had been made to demolish the original dwelling, subdivide the block, construct 2 new premises, and rent one out, there was 'a change of purpose for which the land was held', Paragraph 265 of MT 2006/1 describes this as a factor indicative of an 'activity done in the form of a business...'.

A further 'change of purpose' occurred when you decided to sell a duplex in 20xx. You initially listed Duplex A for sale in July 20xx and withdrew the listing as you did not receive offers at your asking price of specified amount.

In determining whether activities relating to an isolated transaction constitute an enterprise or are the mere realisation of a capital asset, it is necessary to examine the facts and circumstances of each case. This involves considering the factors outlined in MT 2006/1 and any other relevant indicators. No single factor is determinative; rather, it is the combination of factors that leads to a conclusion about the character of the activities.

In your case, you purchased the property containing an existing house on a specific date for specified amount and used it as your residence for approximately 2 years. There was a change in purpose for which you held the property as you demolished the existing house, constructed the Duplexes and realigned the boundaries of the land. You worked with your town planner and architect to submit plans to the Council and appointed a builder to manage all trades. You obtained funding via a bank loan for the development. You intend to sell Duplex A to reduce your financial burden, and Duplex B will remain as a tenanted rental property. There was a level of development beyond what is necessary to secure council approval to subdivide the Property. The intention to sell Duplex A prior to the commencement of the enterprise, supports the view that the nature of Duplex A was a revenue asset.

These factors indicate a level of commercial activity consistent with an enterprise rather than a mere realisation of a capital asset.

Example 28 and 29 in MT 2006/1 provide examples of isolated property transactions:

Example 28

271. Stefan and Krysia discover that the local council has recently changed its by-laws to allow for smaller lots in the area. They decide to take advantage of the by-law change. They purchase a block of land with the intention to subdivide it into two lots and to sell the lots at a profit. They carry out their plan and sell both lots of land at a profit.

272. Stefan and Krysia are entitled to an ABN in respect of the subdivision on the basis that their activities are an enterprise being an adventure or concern in the nature of trade. Their activities are planned and carried out in a businesslike manner.

Example 29

273. Tobias finds an ocean front block of land for sale in a popular beachside town. He devises a plan to enable him to afford to live there. He decides to purchase the land and to build a duplex. He plans to sell one of the units and retain and live in the other. The object of his plan is to enable him to obtain private residential premises in an area that would otherwise be unaffordable for him.

274. Tobias carries out his plan. He purchases the land and lodges the necessary development application with the local council. The development application is approved by the council; Tobias engages a builder and has the duplex built. He sells one unit, and lives in the other.

275. Tobias is entitled to an ABN. His intentions and activities have the appearance of a business deal. They are an enterprise.

276. Further, there is a reasonable expectation of profit or gain (see paragraphs 378 to 405 of this Ruling) as his plan has enabled him to be able to keep and live in one of the units.

Based on the information that you provided, we consider that your activities that will lead to the sale of Duplex A amount to an adventure or concern in the nature of trade; thus, you will be carrying on an enterprise as defined in section 9-20 of the GST Act. The sale of the duplex will be in the course of an enterprise that you carry on thus the requirement in paragraph 9-5(b) will be satisfied.

As you are not currently registered for GST, it needs to be established whether or not you are required to be registered for GST in relation to your activities.

GST registration

Section 23-5 provides that you are required to be registered for GST if you are carrying on an enterprise and your GST turnover meets the registration turnover threshold, currently $75,000.

As discussed above your activities in constructing the Duplexes constitute the carrying on of an enterprise in the form of an adventure or concern in the nature of trade. The next step is to determine whether your turnover meets the GST registration threshold.

Turnover

The meaning of GST turnover is contained in Division 188. Section 188-10 provides that your GST turnover will meet the registration turnover threshold if:

a) your current GST turnover is at or above the threshold ($75,000) and the Commissioner is not satisfied that your projected GST turnover is below $75,000, or

b) your projected GST turnover is at or above $75,000.

Your 'current GST turnover' is the sum of the values of all your supplies made in the current month and the previous 11 months. However, supplies that are input taxed, not for consideration or not made in connection with an enterprise that you carry on are not included when calculating your current GST turnover.

Your 'projected GST turnover' is the sum of the values of all your supplies made for the current month and the next 11 months. Likewise, supplies that are input taxed, not for consideration or not made in connection with an enterprise that you carry on are not included when calculating your projected GST turnover.

Section 188-25 provides that in working out your projected GST turnover you should disregard certain transactions. We don't consider that the exclusions in section 188-25 apply to your circumstances.

In your case the proceeds from the sale of Duplex A will be included in the calculation of your projected GST turnover. Based on the expected selling price, the value of your supplies will exceed $75,000, consequently your projected turnover will exceed the registration turnover threshold, and you will be required to be registered for GST.

Under paragraph 188-20(1)(a) of the GST Act, input taxed supplies are also disregarded in calculating your projected GST turnover.

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 (regardless of the term of occupancy). However, the sale of 'new residential premises' is not input taxed.

Residential premises are 'new residential premises' if they:

(a)          have not been previously sold as residential premises (other than commercial residential premises) and have not previously been the subject of a long-term lease; or

(b)          have been created through substantial renovations of a building; or

(c)          have been built, or contain a building that has been built, to replace demolished premises on the same land.

As Duplex A has not previously been sold as residential premises and is not commercial residential premises the sale will not be input taxed. The sale will be included in calculating your projected turnover.

It is reasonable to assume that the sale of Duplex A will be more than $75,000, your projected GST turnover will be above the threshold; as such, your GST turnover will meet the registration turnover threshold. Paragraph 23-5(b) of the GST Act will be satisfied, and you will be required to register for GST.

The sale will not be an input taxed supply as determined above. There is no provision in the GST Act under which the sale will be GST-free. Therefore, as all the requirements in section 9-5 of the GST Act will be satisfied, the sale of the Duplex A unit will be a taxable supply. Accordingly, you will be liable to pay GST on the sale.

Conclusion

Therefore, you will be required to register for GST as your turnover will exceed the turnover threshold, and the sale of Duplex A will be a taxable supply in accordance with section 9-5 of the GST Act.

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