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Edited version of your written advice
Authorisation Number: 1012715840085
Ruling
Subject: GST and sale of property
Question
Is the sale of properties a taxable supply?
Answer
Your supply of the property is a mixed supply as it includes both taxable and input taxed components.
GST is payable on taxable supplies that you make. A supply is not a taxable supply to the extent the supply is GST-free or input taxed. Input taxed means that GST is not payable on the supply and there is no entitlement to an input tax credit for anything acquired to make the supply
Given the facts provided it is considered that your supply of premises is a mixed supply being partly a taxable supply of commercial premises under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) and partly an input taxed supply of residential premises under section 40-65 of the GST Act. The residential premises component of the supply is considered to be neither a taxable supply of 'commercial residential premises' as defined in section 195-1 of the GST Act nor 'new residential premises' as defined in section 40-75 of the GST Act.
As your supply of the entire property will include both taxable and non-taxable parts, you will need to apportion the consideration you receive for the mixed supply between the taxable and non-taxable parts using a reasonable basis of apportionment.
Relevant facts and circumstances
You are registered for GST.
You purchased adjoining properties on a specified date.
Other than the purchase and sale of the properties you did not operate any other enterprise and did not earn any other income.
The properties were purchased as a mixed supply of residential premises and commercial properties.
The contract for the purchase included GST on the purchase price of the commercial premises only. All other properties were purchased as residential premises without GST in the purchase price.
You sold these properties to a developer who is registered for GST.
The sale was under a single contract covering the sale of both the residential and commercial premises.
You applied GST to the portion of the supply that was a taxable supply of commercial premises.
You sold the remaining portion of the supply as an input taxed supply of residential premises with no GST included in the price of the residential premises portion. You are seeking clarification as to the GST classification of the portion of your supply you have treated as an input taxed supply of residential premises.
From the date of purchase until the date of sale the premises were not occupied and no leases were in place.
The following information is in regard to the portion of your supply you treated as an input taxed supply of residential premises.
The properties have available sewer, water and power and are capable of being occupied as residential premises.
All properties contain rooms suitable to be used as bedrooms, bathrooms, kitchens, etc with fittings appropriate to access utilities such as water and electricity (i.e. taps, power points).
The properties have never been subject to a demolition order or similar due to the properties not being fit for human habitation.
You had been approached by the local council querying your intentions for the properties. You advised the council was that you were going to lease the properties. However every time you attempted to put leases in place you received an offer from a third party to purchase the properties.
As such, whilst the properties were in a fit condition to be leased to tenants, you actually never did lease them.
You applied for a submission for a rezoning with the relevant local Council which, at the time the properties were sold, had not been approved.
You did not apply to make any other alterations to the properties and have never applied for a development application.
You have not made any improvements to the properties.
You incurred the following expenditure whilst the properties were held:
• Installed temporary fencing around the properties for safety and security purposes.
• Incurred general maintenance expenses for the properties, such as lawn moving and rubbish removal.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999
Section 9-5
Section 9-80
Section 40-65
Section 40-75
Section 195-1