| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your written advice
Authorisation Number: 1012913269279
Date of advice: 17 November 2015
Ruling
Subject: GST and sale of property
Question
Will goods and services tax (GST) be payable on your sale of the Australian residential property?
Advice
No. GST will not be payable on your sale of the Australian residential property because the supply of the residential property will be an input taxed supply under section 40-65 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).
Relevant fact
You are an Australian entity and registered for GST. Your business activity is property rental.
You own a property in Australia. The property is currently listed as a rural residential property and has always been used privately as a holiday house from the date of its purchase.
The property is recorded as an asset in your balance sheets since its acquisition. It has never been leased, never been used for business trading purposes or to generate profit. You pay all expenses related to the property (for example, water, electricity, rates and so on) from your bank account, in which rental income received from other properties are paid in. No renovations, improvement or addition has been done to the house since its acquisition.
You are considering selling the property and have provided us with a copy of the sale contract.
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
Reasons for decision
Note: Where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act.
GST is payable on a taxable supply. Under section 9-5 of the GST Act, an entity makes a taxable supply if:
(a) the supply is made for consideration; and
(b) the supply is made in the course or furtherance of an enterprise that the entity carries on; and
(c) the supply is connected with Australia; and
(d) the entity is registered for GST.
However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.
Your supply of the property will satisfy paragraphs 9-5(a) to 9-5(d) of the GST Act as:
(a) you make the supply for consideration; and
(b) the property is recorded as an asset in your balance sheet since its acquisition and you pay all the expenses related to the property from your business account. In this instance, the supply of the property will be made in the course of an enterprise that you carry on in Australia; and
(c) your supply is connected with Australia as the property is located in Australia; and
(d) you are registered for GST.
However, your supply of the property is not a taxable supply to the extent that it is GST-free or input taxed.
There is no provision under the GST Act that makes your supply of the Australian property GST-free.
Input taxed supply
Your property is a residential property. Relevant to the sale of the property is section 40-65 of the GST Act.
Under subsection 40-65(1) 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 (regardless of the term of occupation).
However, under subsection 40-65(2) of the GST Act, the sale is not input taxed to the extent that the residential premises are:
a) commercial residential premises; or
b) new residential premises other than those used for residential accommodation (regardless of the term of occupation) before 2 December 1998.
Under subsection 40-75(1) of the GST Act, 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.
The property was previously sold as residential premises to you and you have not undertaken substantial renovation to the property. In this instance the supply of the property will be an input taxed supply under subsection 40-65(1) of the GST Act. Accordingly, no GST will be payable on the sale.