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Edited version of your written advice
Authorisation Number: 1012900595566
Date of advice: 26 October 2015
Ruling
Subject: Goods and services tax and residential premises
Question
Was entity B's and entity C's sale of specified property (the property) a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
No. The sale of the property is an input taxed supply of residential premises. It is not a taxable supply under section 9-5 of the GST Act.
Relevant facts and circumstances
Entity B and entity C are married and not registered for GST as a partnership. They acquired the property, a house, in specified year and did not renovate it in any way.
The previous owner (Entity A), from whom entity B and entity C acquired the property, used the house in order to carry on their enterprise. There were no significant physical modifications made to any areas, including the removal and alteration of walls, and the addition of lighting, hygiene facilities and security to meet industry standards.
There are X bedrooms in the house.
One bedroom was left intact as a bedroom.
Entity A built some cabinets around the wall of one bedroom.
The next bedroom was used as an office by entity B. They placed a table and a chair in this bedroom.
There are two bathrooms in the house.
The living room was used as the waiting room by entity B.
In addition, entity A put in benches and drawers around two sides of the kitchen. There is a basin in the kitchen. All the kitchen needs now is a stove for it to be fully functional as a kitchen.
In specified year entity B and entity C allowed entity B to use the premises at no charge. Entity B used the premises in order to conduct his enterprise. Entity B is registered for GST as a result of their enterprise.
Entity B and entity C sold the property to entity D on specified date. The property was sold for specified sum (excluding GST) and it settled on specified date. GST was collected on the sale and placed into a trust account.
Entity B and entity C are not together involved in any other enterprises.
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
A New Tax System (Goods and Services Tax) Act 1999 section 195-1