Edited version of private advice

Authorisation Number: 1051902203155

Date of advice: 23 September 2021

Ruling

Subject: Supply of property - taxable supply

Question

Will the supply of the property be a taxable supply and is there a requirement to payback the claims made in relation to development approvals?

Answer

No

Relevant facts and circumstances

The Company is registered for GST.

The Company's main business is investing in residential properties.

The Company purchased the property in xxxx.

There is a residential premise situated on the property.

The residence has not been demolished.

The residential property was leased until xxxx, and that the Company is looking for a new tenant.

The Company's intention when purchasing the property was to rent the property and hold for capital growth.

The Company has had several attempts at getting development approval for the property however, these have been denied.

The Company has claimed the GST in their activity statements in relation to the costs of the development approvals.

The Company has now decided to sell the property.

Relevant legislative provisions

Section 40-65 of a New Tax System (Goods and Services Act) Act 1999

Section 9-5 of a New Tax System (Goods and Services Act) Act 1999

Section 11-15 of A New Tax System (Goods and Services Tax) Act 1999

Reasons for decision

Section 9-5 of the GST Act, an entity makes a taxable supply where the supply:

1.  de for consideration; and

2.  de in the course or furtherance of an enterprise that you carry on; and

3.  nnected with the indirect tax zone; and

4.  de by a supplier who is 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) states that a sale of real property is input taxed, but only to the extent that the property is residential premises to be used predominately to be used for residential accommodation (regardless of the term of occupation)

Subsection 40-65(2) provides that the sale will not be input taxed to the extent that the residential premises are:

(a) rcial residential; or

(b) esidential premises other than those used for residential accommodation (regardless of the term of occupation) before 2 December 1998.

In this case, if the property were to be sold by the Company, the supply would consist of a property located in an indirect tax zone, would be for consideration, would be made in the course or furtherance of the Company's enterprise it is carrying on and it would be made by a supplier that is registered for GST. However, because this property is a real property that is predominately used for residential accommodation, the supply would be input taxed.

The property is a residential premise that has been used for residential accommodation and continues to be used for residential accommodation. Therefore, the sale of this property, provided it remains in its current form as a residential premise, will be an input taxed supply when sold.

Costs relating to the development approvals

Paragraph 11-15(2)(a) of the GST Act provides that you do not acquire the thing for a creditable purpose to the extent that the acquisition relates to making supplies that would be input taxed.

As a consequence of this, any acquisitions relating to the sale of this property are not creditable acquisitions and there will not be any GST credits available to claim in relation to the costs to sell this property.

In relation to the costs already incurred by the Company in trying to obtain development approvals for this property, there is no requirement to repay any GST claimed on those acquisitions.

That is because the costs involved in trying to obtain the development approval do not relate to making an input taxed supply. Had the development applications been successful and were sold as part of the sale of the residential premises then the nature of the acquisition would potentially have been altered to be a non-creditable acquisition and therefore may have been required to be repaid.