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Edited version of private advice
Authorisation Number: 1051887827099
Date of advice: 19 August 2021
Ruling
Subject: GST and the sale of residential premises
Question
Will your sale of the residential premises be a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
No, your sale of the residential premises will not be a taxable supply under section 9-5 of the GST Act.
The sale of the residential premises is a sale of a capital asset which will be disregarded when calculating your projected GST annual turnover in accordance with section 188-25 for the GST Act. You currently derive from another capital asset residential rental income which is disregarded from the calculation of your GST annual turnover since the residential rental income is consideration for an input taxed supply under section 40-35 of the GST Act. As such you will not be required to be registered for GST for the purposes of paragraph 9-5(d) of the GST Act as your expected annual turnover will not meet the registration turnover threshold.
Your sale will therefore not be a taxable supply under section 9-5 of the GST Act and will not be subject to GST. The sale is outside the scope of GST and no GST is to be collected.
You will need to notify the purchaser in writing that they do not have a withholding obligation and do not need to pay a withholding amount from the contract price of the property to the Australian Taxation Office (ATO) when purchasing the property. This can be included in the sale contract or in a separate document prior to settlement.
Relevant facts
You are not registered for GST.
You bought residential premises in 20XX. After the purchase you rented the premises straight away.
In 20XX you decided to pull down the residential premises and have two new residential premises (premise A and premise B) built on that land.
The demolition of the old premises commenced in October 20XX and the building of the two new residential premises started in November 2017.
The Certificate of Occupancy for the new residential premises was issued in 20XX.
You have the two residential premises listed on the market for rent as soon as the Certificate of Occupancy was issued and started receiving rental income from 20XX.
You reviewed your financial situation and decided to downsize your current living arrangements. You decided to sell premises A and your principal place of residence. With the proceeds of these properties you intend to buy a smaller property to live in and be debt free.
You had premises A listed on the market for sale and recently entered a contract for sale with a purchaser. The date of settlement for premises A will be after the tenants for Premise A move out. You will continue receiving rental income for Premise A until the tenants move out.
You will keep premises B and continue to lease that property.
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 23-5
A New Tax System (Goods and Services Tax) Act 1999 Section 40-35
A New Tax System (Goods and Services Tax) Act 1999 Division 188
A New Tax System (Goods and Services Tax) Act 1999 section 195-1