Edited version of private advice

Authorisation Number: 1051774925739

Date of advice: 18 November 2020

Ruling

Subject: GST and sale of residential premises with development approval

Question

When you, <name>, sell the property located at <address>, will you be making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act) and will GST be payable on the sale?"

Answer

No, you are not making a taxable supply under section 9-5 of the GST Act when you sell the property. This is because you are making an input taxed supply of residential premises (which includes the approved development application) under section 40-65 of the GST Act and GST will not be payable on the supply.

Relevant facts and circumstances

<Name> (you) are registered for GST from <ddmmyyyy>.

On <ddmmyyyy>, you purchased a property located at <address> (the Property) with an existing block of flats for residential use on one title. The block of flats has remained to current date.

•         <name> is recorded on the certificate of title.

•         The Property is described as Lot <number> on Registered Plan <number>and Title Reference <number>

•         The land area of the Property is <number>m2

•         Other than the building comprising <number> units, other structures on the Property include garages and laundry facilities.

•         The majority of the units are self-contained studios with kitchen, bathroom, lounge/bedroom and <number> or <number> of the units have shared bathrooms.

•         During the period of your ownership, you did not carry out any renovations to the building. You only carried out routine maintenance when required.

•         You obtained an investment property loan to complete the purchase.

•         Since the purchase, you have continued to rent out the units until the current date.

Prior to settlement of the purchase you were involved in an option on the Property with <number> other entities from <mmyyyy>.

•         During that time a development application (DA) was submitted to the council for demolition of the building and construction of<number> new residential units. The DA was approved in <mmyyyy>.

•         The mortgagee has asked you to refinance your loan but due to the current financial climate you have been unable to secure finance and you decided to sell the Property.

On <ddmmyyyy>, you entered into a Contract for Houses and Residential Land (the Contract) to sell the Property in its current state as a block of residential flats to the buyer (the Buyer).

•         Settlement is scheduled to take place on <ddmmyyyy>.

•         The Buyer received from you a copy of the DA prior to the date of the Contract.

•         The Buyer is a registered community housing provider and intends to make some minor amendments to the DA and develop the site into long-term affordable and social rental housing at a later date.

•         If the Buyer is not otherwise in material default, then you consent to the Buyer applying to the relevant authority for amendments to the DA.

•         You are not clear whether GST applies to the sale as, while it is a current block of units, it also has the benefit of a DA.

The Property will be sold as vacant possession without any tenancy in place. The Buyer has requested vacant possession the day before settlement as it is their intention to construct new affordable rental housing on the Property as they are a registered community housing provider.

Relevant legislative provisions

The A New Tax System (Goods and services Tax) Act 1999 section 9-5

The A New Tax System (Goods and services Tax) Act 1999 section 9-40

The A New Tax System (Goods and services Tax) Act 1999 division 38

The A New Tax System (Goods and services Tax) Act 1999 division 40

The A New Tax System (Goods and services Tax) Act 1999 subdivision 40-C

The A New Tax System (Goods and services Tax) Act 1999 subsection 40-65(1)

The A New Tax System (Goods and services Tax) Act 1999 section 195-1