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Edited version of private advice
Authorisation Number: 1052035258896
Date of advice: 19 September 2022
Ruling
Subject:GST property
Question 1
Is the sale of the property located in the indirect tax zone, known as X (Property 1), an input taxed supply of residential premises under section 40-65 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
Yes. The sale of the property will be an input taxed supply of residential premises pursuant to section 40-65. Therefore, GST will not be payable on the sale.
Question 2
Is the sale of the property located in the indirect tax zone, known as X (Property 2), an input taxed supply of residential premises under section 40-65 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
Yes. The sale of the property will be an input taxed supply of residential premises pursuant to section 40-65. Therefore, GST will not be payable on the sale.
Question 3
Is the sale of the property located in the indirect tax zone, known as X (Property 3), an input taxed supply of residential premises under section 40-65 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
Yes. The sale of the property will be an input taxed supply of residential premises pursuant to section 40-65. Therefore, GST will not be payable on the sale.
Question 4
Is the sale of the property located in the indirect tax zone, known as X (Property 4), an input taxed supply of residential premises under section 40-65 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
Yes. The sale of the property will be an input taxed supply of residential premises pursuant to section 40-65. Therefore, GST will not be payable on the sale.
Question 5
Is the sale of the property located in the indirect tax zone, known as X (Property 5), an input taxed supply of residential premises under section 40-65 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
Yes. The sale of the property will be an input taxed supply of residential premises pursuant to section 40-65. Therefore, GST will not be payable on the sale.
Question 6
Is the sale of the property located in the indirect tax zone, known as X (Property 6), a GST-free supply of a going concern under section 38-325 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
Yes. As all the requirements of section 38-325 will be satisfied, the sale will be a GST-free supply of a going concern. Therefore, GST will not be payable on the sale.
This ruling applies for the following periods:
1 July 20XX to 30 June 20XX
1 July 20XX to 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
On DD/MM/YYYY, Entity C, Entity A and Entity B formed a partnership, Entity Y with ABN.
All properties became partnership assets upon formation of the partnership on DD/MM/YYYY.
Entity D is the corporate trustee of Entity B.
Entity Y (You) have been registered for GST since DD/MM/YYYY.
You are carrying on a leasing enterprise of residential and commercial properties.
Entity A and Entity B, in their capacity as partners of Entity Y, are in the process of selling the following properties to X (the Purchaser):
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Property address |
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1 |
Property 1 |
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2 |
Property 2 |
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3 |
Property 3 |
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4 |
Property 4 |
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5 |
Property 5 |
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6 |
Property 6 |
Further details in relation to the properties in the above table:
(1) Property 1
• Entity A and Entity B acquired the property located in the indirect tax zone (Property 1) on DD/MM/YYYY.
• The property was not acquired as a taxable supply.
• The property is a residential dwelling that contains X bedrooms, X bathrooms, a kitchen, dining room, family room, living room and X car spaces on Xm² of land.
• Since acquiring the property, it has been leased as residential premises.
• A Residential Tenancy Agreement was entered into for a fixed term of X months starting DD/MM/YYYY and ending DD/MM/YYYY for rent payable of $X per week.
• The executed Sales Contract dated DD/MM/YYYY provides that:
- the supply to the Purchaser is subject to existing tenancies
- the sale is not a taxable supply
- the margin scheme will not apply
- the sale is input taxed because the sale is of eligible residential premises (sections 40-65, 40-75(2) and 195-1)
- the supply of the property will be for consideration of $X.
(2) Property 2
• Entity A and Entity B acquired the property located in the indirect tax zone (Property 2) on DD/MM/YYYY.
• The property was not acquired as a taxable supply.
• The property is a residential dwelling that contains X bedrooms, X bathrooms, a kitchen, dining room, living room and X car spaces on Xm² of land.
• Since acquiring the property, it has been leased as residential premises.
• A Residential Tenancy Agreement was entered into for a fixed term of X weeks starting DD/MM/YYYY and ending DD/MM/YYYY for rent payable of $X per week (increased to $X per week from DD/MM/YYYY). The agreement continued as a periodic agreement once the fixed term ended.
• The executed Sales Contract dated DD/MM/YYYY provides that:
- the supply to the Purchaser is subject to existing tenancies
- the sale is not a taxable supply
- the margin scheme will not apply
- the sale is input taxed because the sale is of eligible residential premises (sections 40-65, 40-75(2) and 195-1)
- the supply of the property will be for consideration of $X.
(3) Property 3
• Entity A and Entity B acquired the property located in the indirect tax zone (Property 3) on DD/MM/YYYY.
• The property was not acquired as a taxable supply.
• The property is a residential dwelling that contains X bedrooms, X bathrooms, a kitchen and living room on Xm² of land.
• Since acquiring the property, it has been leased as residential premises.
• A Residential Tenancy Agreement was entered into for a fixed term of X months starting DD/MM/YYYY and ending DD/MM/YYYY for rent payable of $X per week. The agreement continued as a periodic agreement once the fixed term ended.
• The executed Sales Contract dated DD/MM/YYYY provides that:
- the supply to the Purchaser is subject to existing tenancies
- the sale is not a taxable supply
- the margin scheme will not apply
- the sale is input taxed because the sale is of eligible residential premises (sections 40-65, 40-75(2) and 195-1)
- the supply of the property will be for consideration of $X.
(4) Property 4
• Entity A and Entity B acquired the property located in the indirect tax zone (Property 4) on DD/MM/YYYY.
• The property was not acquired as a taxable supply.
• The property is a residential dwelling that contains X bedrooms, X bathrooms, a kitchen, dining room, living room and X car spaces on Xm² of land.
• Since acquiring the property, it has been leased as residential premises. The property is currently vacant and you are looking for new tenants.
• The executed Sales Contract dated DD/MM/YYYY provides that:
- the supply to the Purchaser is subject to existing tenancies
- the sale is not a taxable supply
- the margin scheme will not apply
- the sale is input taxed because the sale is of eligible residential premises (sections 40-65, 40-75(2) and 195-1)
- the supply of the property will be for consideration of $X.
(5) Property 5
• Entity A and Entity B acquired the property located in the indirect tax zone (Property 5) on DD/MM/YYYY.
• The property was not acquired as a taxable supply.
• The property is a residential dwelling that contains X bedrooms, X bathrooms, a kitchen, dining room, living room and X car spaces on Xm² of land.
• Since acquiring the property, it has been leased as residential premises.
• A Residential Tenancy Agreement was entered into for a fixed term of X weeks starting DD/MM/YYYY and ending DD/MM/YYYY for rent payable of $X per week. The agreement continued as a periodic agreement once the fixed term ended.
• The executed Sales Contract dated DD/MM/YYYY provides that:
- the supply to the Purchaser is subject to existing tenancies
- the sale is not a taxable supply
- the margin scheme will not apply
- the sale is input taxed because the sale is of eligible residential premises (sections 40-65, 40-75(2) and 195-1)
- the supply of the property will be for consideration of $X.
(6) Property 6
• Entity A and Entity B acquired the property located in the indirect tax zone (Property 6) on DD/MM/YYYY.
• The property was not acquired as a taxable supply.
• The property is a commercial property comprising an area of Xm².
• Since acquiring the property, it has been leased as commercial premises under a lease agreement.
• A X year fixed term Lease Agreement was entered into starting DD/MM/YYYY and ending DD/MM/YYYY, with rent payable of $X (plus GST) via equal weekly instalments of $X (plus GST). The Lessee is X.
• The executed Sales Contract dated DD/MM/YYYY provides that:
- the supply to the Purchaser is subject to existing tenancies
- the sale is not a taxable supply
- the margin scheme will not apply
- the sale is GST-free because the sale is a supply of a going concern under section 38-325
- the supply of the commercial property along with all the rights and obligations under the existing lease will be for consideration of $X.
• You will continue to lease the property until the day of the supply (settlement).
• You and the Purchaser have agreed in writing the sale of Property 6 will be a supply of a going concern under section 38-325.
• You will supply to the Purchaser all of the things that are necessary for the continued operation of an enterprise, which includes the existing lease agreement with tenants in this property.
The Development Application
On DD/MM/YYYY, a Development Application (DA), was lodged with the Local Council for demolition works and construction of a mixed use multi storey development. The DA includes all properties referred to in Schedule 2 (the Adjoining Properties), which includes Properties 1-6 above. See Appendix A.
You and the other landowners of the Adjoining Properties subject to the DA engaged a town planner, X, who prepared, compiled, lodged and negotiated the DA on the landowner's behalf.
The DA was the subject of an extensive Pre-DA process with Council which commenced in YYYY.
The DA was approved in MM/YYYY.
The primary purpose for lodging the DA was to enhance and improve the sale prospects of the land and increase the realisable value of all lots.
You and the other landowners of the Adjoining Properties subject to the DA considered undertaking the development as per the DA; however, this did not eventuate.
The Contracts of Sale
In MM/YYYY, a representative of the Purchaser made contact with a local Real Estate Agent to enquire about purchasing the Adjoining Properties.
The Vendors in Schedule 2 and the Purchaser proceeded to negotiate their respective sales of property.
On DD/MM/YYYY, you entered into Sales Contractswith the Purchaser for the sale of the properties located at Property 1, Property 2, Property 3, Property 4, Property 5 and Property 6. The date for completion of each Sales Contract is X months after the contract date.
The Purchaser has been registered for GST since DD/MM/YYYY with ABN.
You and Purchaser are not associates.
The completion of the Sales Contracts is subject to and conditional upon the simultaneous completion of the sale of the Adjoining Properties. Clauses X - X in the Sales Contracts provide:
X Simultaneous Completion of Contracts
X.X Completion of this Contract is subject to and conditional upon the simultaneous completion of the sale of the properties referred to in Schedule 2 hereto.
X.X Should completion of any one or more of the properties in Schedule 2 not be completed simultaneously with the completion with the sale and purchase of the other properties referred to in Schedule 2 hereto the Vendor will be entitled to delay completion of this Contract until simultaneous completion of all of the sale and purchase Contracts of all of the properties in Schedule 2 is able to be effected.
X Assignment of Rights, Title and Interest
X.X Upon completion the Vendor will assign all of its right, title and interest in Development Application X together with any and all copyright and all documentation relating to the property including, without limitation, plans, drawings and reports obtained by or commission by the Vendor or anyone on the Vendor's behalf to the Purchaser.
...
You will not demolish or develop anything on the properties prior to settlement.
APPENDIX A
Schedule 2 to Contract for Sale and Purchase of Land Between Entity A and Entity D and The Purchaser.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 Section 38-325
A New Tax System (Goods and Services Tax) Act 1999 Section 40-65
A New Tax System (Goods and Services Tax) Act 1999 Section 40-75
A New Tax System (Goods and Services Tax) Act 1999 Section 195-1