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Edited version of your written advice
Authorisation Number: 1012746894866
Ruling
Subject: GST and property
Question 1
Are you making a taxable supply under A New Tax System (Goods and Services Tax) Act 1999, when you sell the residence on your property?
Answer
No.
Section 9-40 of the GST Act provides that you must pay the GST payable on any taxable supply that you make. Under section 9-5 of the GST Act a supply is not a taxable supply to the extent that it is input taxed.
Under section 40-65 of the GST Act 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; providing that it is not commercial residential premises or new residential premises. The house meets the definition of residential premises and is not commercial residential premises nor is it considered to be new residential premises as defined in the GST Act. Therefore the supply of the house will be input taxed and not a taxable supply.
Question 2
Are you making a taxable supply under A New Tax System (Goods and Services Tax) Act 1999, when you sell the newly constructed residence on your property?
Answer
No.
Section 9-40 of the GST Act states you must pay the GST payable on any taxable supply that you make. Under section 9-5 of the GST Act; a supply is relevantly not a taxable supply to the extent that it is not made in the course or furtherance of an enterprise that you carry on.
Enterprise is defined to include an activity or series of activities done in the form of a business or in the form or an adventure or concern in the nature of trade. You have advised that it is your intention to reside in the newly constructed house for a period of at least ten years whilst your children complete their schooling. As such, we consider the use and sale of the premises to be of a private nature and not an activity or series of activities done in the form of a business or in the form or an adventure or concern in the nature of trade. As such, given the facts provided, the sale of the premises will not meet the definition of an enterprise and therefore not a taxable supply.
Relevant facts and circumstances
You are not registered for GST.
You purchased a property. The property consists of a large home on X square metre block. You and your family moved into the dwelling on the property.
The property will be subdivided into two blocks and a new dwelling will be constructed at the rear of the property.
Your spouse was involved in the design of the new dwelling X has been engaged to construct the new dwelling.
You may spend up to five hours per week on activities related to the development; however this is dependent on the builder requirements. These activities will include choosing finishes for the dwelling and fortnightly site meetings.
The development will be funded by loans from financial institutions.
Your family will reside in the existing dwelling on the property while construction is underway.
Following the completion of the construction of the new dwelling, you will move into the newly constructed house at the back of the property and the existing dwelling on the property will be sold. No major renovations will occur prior to the sale.
You have no intention of carrying out any similar developments in the near future, as it is your intention that you and your family will live in the new dwelling on the t property for the next ten years.
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 9-40 and
A New Tax System (Goods and Services Tax) Act 1999 Section 40-65.