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Edited version of your written advice
Authorisation Number: 1051241227564
Date of advice: 26 June 2017
Ruling
Subject: GST and sale of a property
Question 1
To what extent is the sale of the property an input taxed supply of residential premises falling within subdivision 40-C of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
The sale of the property is not an input taxed supply of residential premises. The sale of the property will be taxable.
This ruling applies for the following periods:
NA
The scheme commences on:
NA
Relevant facts and circumstances
You acquired a property thirty years ago.
You used the property to carry on your enterprise.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 sections 40-35, 40-35, 40-70, 195.
Reasons for decision
Section 195-1 of the GST Act provides that residential premises mean land or a building that:
● is occupied as a residence or for residential accommodation; or
● is intended to be occupied and is capable of being occupied, as a residence or for residential accommodation.
Goods and Services Tax Ruling GSTR 2012/5 considers how Subdivision 40-B and Subdivision 40-C of the GST Act apply to supplies of residential premises.
Paragraph 9 of GSTR 2012/5 has been reproduced below:
9. The requirement in sections 40-35, 40-65 and 40-70 that premises be 'residential premises to be used predominantly for residential accommodation (regardless of the term of occupation)' is to be interpreted as a single test that looks to the physical characteristics of the property to determine the premises' suitability and capability for residential accommodation
Paragraphs 25-27 of GSTR 2012/5 state the following:
25. Not all premises that possess basic living facilities are residential premises to be used predominantly for residential accommodation. If it is clear from the physical characteristics of the premises that their suitability for living accommodation is ancillary to the premises' prevailing function, the premises are not residential premises to be used predominantly for residential accommodation.
Example 4 - office building
26. Commercial Place is a five storey building. The ground floor has a foyer and reception area. All floors have been constructed with large open spaces for staff cubicles and desks, smaller office spaces, meeting rooms and areas for storage of documents. Each floor also contains a kitchen, amenities area and toilets. The ground floor also has showers provided with the toilet facilities.
27. While the office building provides shelter and basic living facilities including kitchens, toilets and shower facilities, the physical characteristics of the premises indicate that they are not residential premises to be used predominantly for residential accommodation. The physical characteristics indicate that the premises are a place for office workers to undertake tasks associated with a business. A supply of the premises would not be input taxed under Division 40.
Premises that do not display physical characteristics demonstrating that they are suitable for, and capable of, being occupied as a residence or for residential accommodation are not residential premises to be used predominantly for residential accommodation.
Paragraph 37 of GSTR 2015/5 provides that although the physical characteristics of a building may be considered similar to characteristics found in a house or apartment, the physical characteristics of the building together with the design plans can objectively show that the premises are not residential premises to be used predominantly for residential accommodation.
In this case we are of the view that while the office building provides shelter and basic living facilities including kitchenette and toilets, the physical characteristics of the premises and the floor plan provided show that the building is designed to facilitate the pursuit of your enterprise indicating that they are not residential premises to be used predominantly for residential accommodation.