Edited version of private advice

Authorisation Number: 1051609490967

Date of advice: 15 November 2019

Ruling

Subject: GST and sale of residential premises.

Question

Will the sale of residential properties, be input taxed sales of residential premises?

Answer

Yes.

This ruling applies for the following periods:

Not applicable

The scheme commences on:

Not applicable

Relevant facts and circumstances

·        Applicant owns two residential properties

·        Both properties were acquired as residential premises and GST was not included in the purchased prices.

·        The applicant has entered into a contract for sale to sell both properties.

·        Both properties will be sold as residential premises and GST will not be included in the sale price.

·        Both properties have not changed their nature as residential premises and will be sold under the same condition as acquired under each title with the original house, pool and land.

·        The applicant will carry on internal repairs and renovation for the kitchen, bedroom, living rooms and painting to one of the properties. There will be no changes made to the other property.

·        The applicant has confirmed that there were no activities carried out on both properties since they were acquired.

·        There will be no improvements or development activities carried out by the applicant on both properties prior to the settlement.

·        The applicant is registered for GST.

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

Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that you make a taxable supply if:

a)               you make the supply for consideration;

b)               the supply is made in the course or furtherance of an enterprise that you carry on;

c)               the supply is connect with the indirect tax zone (Australia); and

d)               you are registered or required to be registered.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

The sale of the properties will be made for consideration; in the course or furtherance of the enterprise that carried on by the applicant; the sale is connected with the indirect tax zone and the applicant is registered for GST.

A sale of residential property is not GST-free under any provisions of the GST Act or any other legislation. Therefore, it should be determined whether the sale of the Properties by the applicant will be input-taxed.

Under section 40-65 of the GST Act, a sale of property is an input taxed supply if the property is residential premises to be used predominantly for residential accommodation unless the premises are:

a)               commercial residential premises, or

b)               new residential premises other than those used for residential accommodation before 2 December 1998.

The term "residential premises" is defined in section 195-1 of the GST Act as follows:

Residential premises means land or a building that:

a)               is occupied as a residence or for residential accommodation; or

b)               is intended to be occupied, and is capable of being occupied, as a residence or for residential accommodation;

(regardless of the term of the occupation or intended occupation) and includes a floating home.

The Applicant has confirmed the following in relation to acquiring and selling the Properties:

·                 both properties were acquired as residential premises and the purchased price did not include GST.

·                 some internal repairs and renovation will be carried on by the applicant to one of the properties.

·                 repairs and renovation will not be carried on to the other property.

·                 there have no improvements or development activities ever been carried out on both properties.

·                 both properties have not changed their nature as residential premises.

·                 properties will be sold as residential premises under the same terms and conditions as they were acquired.

Based on the facts provided, the properties have not changed their characteristics as residential premises except some repairs and renovation carried out to one of the properties. These repairs and renovations are not considered as substantial renovation. The applicant has acquired the properties as residential premises and will be selling them as residential premises.

Furthermore, the properties are neither a commercial residential premises nor a new residential premises.

Therefore, it is our view that the sale of the properties will be input taxed and not subject to GST.