Edited version of your written advice

Authorisation Number: 1012987786292

Date of advice: 23 March 2016

Ruling

Subject: GST and the sale of real estate

Questions

(1) Is the sale of the property by an agent of a mortgagee pursuant to a mortgage held by the mortgagee a taxable supply?

(2) If the answer to the above question is 'no', would the agents be justified in selling the property, as agents for the mortgagee on an input taxed basis?

(3) If the answer to question 1 is 'yes', can the margin scheme be utilised for the sale of the Property?

Answers

1 & 2

Given that the agent sold the property in their capacity as the agent of the mortgagee (pursuant to the mortgage over the property), the relevant section to consider here is section 105-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) which states the following:

(1) You make a taxable supply if:

(a) you supply the property of another entity (the debtor) to a third entity in or towards the satisfaction of a debt that the debtor owes to you; and

(b) had the debtor made the supply, the supply would have been a *taxable supply.

(2) It does not matter whether:

(a) you made the supply in the course or furtherance of an *enterprise that you *carry on; or

(b) you are *registered, or *required to be registered.

(3) However, the supply is not a *taxable supply if:

(a) the debtor has given you a written notice stating that the supply would not be a taxable supply if the debtor were to make it, and stating fully the reasons why the supply would not be a taxable supply; or

(b) if you cannot obtain such a notice - you believe on the basis of reasonable information that the supply would not be a taxable supply if the debtor were to make it.

(4) This section has effect despite section 9-5 (which is about what is a taxable supply).

(terms marked with asterisks are defined in section 195-1 of the GST Act).

Pursuant to section 9-5 of the GST Act, a supply that is an input taxed supply is not a taxable supply. A supply of used residential premises is input taxed under section 40-65 of the GST Act. Given that the house which was located on the Property has been occupied as a primary place of residence and at the time of sale was only in need of minor repairs for it to be suitable for and capable of being occupied as a residence or for residential accommodation, we are of the view that the Property can be considered as residential premises in accordance with the Commissioner's views in Goods and Services Tax Ruling, Goods and Services Tax: Residential Premises (GSTR 2012/5).

Accordingly, the sale of the Property is an input taxed supply of residential premises. In this scenario, it is the character of what has been supplied that determines whether the supply is a taxable supply or an input taxed supply. Therefore, the sale of the property by the agents in their capacity as the agent of a mortgagee pursuant to a mortgage held by the mortgagee is not a taxable supply. No GST is payable on the sale of the Property.

3

As the sale of the Property is not a taxable supply, the margin scheme will not be applicable.

Relevant facts and circumstances

A property which has a house has been sold by the agents of a mortgagee.

The house which was on the Property:

• was used by an individual as their primary place of residence until they moved out,

• was supposed to be demolished, to effect the works under a development approval to be carried out,

• has been broken into by trespassers after it was left vacant after the individuals who were occupying the house moved out and some items have been removed from it,

• was, at the time of its' sale, in need of minor repair in order for it to be converted to being in a livable condition.

Relevant legislative provisions

Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999

Section 40-65 of the A New Tax System (Goods and Services Tax) Act 1999