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Edited version of your written advice
Authorisation Number: 1051482181185
Date of advice: 12 February 2019
Ruling
Subject: GST and the sale of real property
Question
Is the sale by (you) of real property, “The property” an input taxed sale of a residential premises pursuant to section 40-65 of A New Tax System (Goods and services Tax Act) 1999 (GST Act)?
Answer
Yes, the sale of the property is an input taxed sale of residential premises in accordance with section 40-65 of the GST Act.
Relevant facts and circumstances
You are registered for goods and services tax (GST).
You acquired a property with settlement occurring on dd/mm/yy for a purchase price of $xx. The property was purchased as a residential property and not as a taxable supply or a going concern.
A tax invoice was not issued.
The property which was approximately x acres in size and consisted of:
● A brick home (that was not a new residence) with X bedrooms, X bathrooms
● A large shed
● One fence surrounding the whole property
You entered a contract of sale with a purchaser with settlement occurring on dd/mm/yy for a sale price of $xx.
You stated the following:
● You carry on an enterprise in land development and subdivision.
● No improvements were done to the property.
● You incurred expenditure in relation to consulting fees charged for preliminary survey work, planning and urban design work, traffic impact assessment and environmental investigations.
● The development never moved beyond this preliminary stage and as a result the property was never subdivided or developed.
The property has remained vacant since purchase.
You confirmed that at the time of sale the brick home was still standing on the property and no substantial renovations had been done and the property remained unchanged from the date of purchase.
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 Service Tax) Act 1999 section 195-1
Reasons for decision
In this ruling:
● unless otherwise stated, all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act),
● all terms marked by an *asterisk are defined terms in the GST Act, and
● all reference materials, published by the Australian Taxation Office (ATO), that are referred to are available on the ATO website ato.gov.au
Section 9-5 provides you make a taxable supply if:
● you make the supply for consideration
● the supply is made in course or furtherance of an enterprise that you carry on
● the supply is connected with the indirect tax zone, and
● you are registered or required to be registered for GST.
However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.
Subsection 40-65 (1) provides that a sale of *real property is input taxed, but only to the extent that the property is a *residential premises to be used predominately for residential accommodation (regardless of the term occupation).
The Goods and Services Tax Ruling Goods and services tax: residential premises (GSTR 2012/5) provides the Australian Tax Office’s view of the factors to consider and the characteristics of residential premises.
Paragraph 15 of GSTR 2012/5 provides the definition to satisfy residential premises:
● The premises must provide shelter and basic living facilities. Premises that do not have the physical characteristics to provide these are not residential premises to be used predominately for residential accommodation
Intention to subdivide and develop is not a relevant factor in determining the characteristics of the premise. This can be substantiated in Paragraph 10 of GSTR 2012/5, which provides that the requirement for residential accommodation does not require an examination of the subjective intention of, or use by any particular person.
Although the size of the land is large (approximately x acres) there is no specific restriction on the area of land that can be included with a building. Paragraph 46 of GSTR 2012/5 states a relevant factor in determining this is the extent to which the physical characteristics of the land and building as a whole indicate the land is to be enjoyed in conjunction with the residential building. The use of the land is not a determining factor in deciding if the land forms part of the residential premises. The one boundary fence surrounding the property supports the fact that the residence and land are to be enjoyed together.
In conclusion
Based on the facts of this case the house on the property satisfies the definition of a residential premise as provided in subsection 40-65(1) of the GST Act.