Edited version of private advice

Authorisation Number: 1051923028525

Date of advice: 25 November 2021

Ruling

Subject: Residential premises and goods and services tax (GST)

Question

Will the sale of two adjoining residential properties situated in Australia and rented since 1995 be a supply of input taxed residential premises?

Answer

Yes. The sale of the properties is of input taxed residential premises under section 40-65 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) as they both have the characteristics and are capable of being occupied as such. They do not meet the definition of new residential premises and also do not meet the definition of commercial residential premises.

The partnership is not registered for goods and services tax (GST) as it is under the GST registration threshold. Both the current and projected turnover calculations set out in sections 188-15 and 188-20 of the GST Act respectively, do not include input taxed supplies. Additionally, the partnership is dissolving on the death of a partner and supplies made in the course of ceasing the enterprise under section 188-25 of the GST Act are not included in the turnover calculation and as a result the partnership does not need to register for GST.

This ruling applies for the following periods:

From the financial year commencing 1 July 1994 until the financial year ending 30 June 2022.

The scheme commences on:

1 July 1995

Relevant facts and circumstances

You own residential properties in Australia (the properties) in a family partnership as half share tenants in common.

•                    The family partnership is not registered for Goods and Services Tax (GST) and has not been so registered for many years.

•                    The land is zoned mixed use.

•                    The properties have been rented less than 20 years.

•                    The properties were vacant for the past 12 to 18 months due to:

−        The owners moved to live in a different state

−        The Covid-19 pandemic (the borders have been closed since early 2020) and

−        One of the partners passed away.

•                    A contract for sale (the contract) of both properties is on foot for both blocks together. The contract was entered into by one of the partners in their own right and also as executor of the estate of the other partner to sell their interest.

•                    The purchaser under the contract is stated as XX or nominee.

•                    Settlement of the contract is set for 2021.

•                    The consideration under the contract is approximately $X million.

•                    The GST conditions of sale state that the supply is of input taxed residential premises. The purchase price statement indicates that GST is not applicable to the $X million price.

•                    The contract has a GST at settlement clause indicating that the sale is not subject to GST and the purchaser does not need to withhold any GST.

•                    The sale is to be effected as vacant possession.

•                    Situated on the properties, each lot contains a residence. Each was built before 1940.

•                    You have never lived in the properties.

•                    A large shed on this property was rented out to tradesman for at least 10 years, but this ceased a few years ago.

•                    The residences are in habitable condition currently, and have all the usual characteristics of a residence i.e. they each have a kitchen, bathroom, laundry, bedrooms and a living room.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999, section 40-35

A New Tax System (Goods and Services Tax) Act 1999, section 40-65

A New Tax System (Goods and Services Tax) Act 1999, section 188-15

A New Tax System (Goods and Services Tax) Act 1999, section 188-20