Edited version of private advice

Authorisation number: 1052376129532

Date of advice: 24 March 2025

Ruling

Subject: GST - sale of real property

Question 1

Will GST be payable on the sale of the property in accordance with section 9-40?

Answer 1

No. GST will not be payable on the sale of the property as the sale will be an input taxed supply of residential premises in accordance with section 40-65.

Question 2

Will GST need to be withheld at settlement by the purchaser on the sale of the property?

Answer 2

No. GST will not need to be withheld at settlement by the purchaser on the sale of the property.

This ruling applies for the following period:

Year ending 30 June 20YY.

The scheme commences on:

DD MM YYYY

Relevant facts and circumstances

You as joint proprietors, purchased the property off-the-plan on xx xxxxx xxxx.

Settlement of the property occurred on xx xxxx xxxx.

You do not have an Australian Business Number (ABN) and are not registered for GST.

When you signed the contract, your intention was to live in the property upon completion.

Construction was significantly delayed due to COVID-19 and, at the time, you had no way of knowing just how long.

In xxxx, you sold your apartment, thinking the property would be ready soon.

Your parent was experiencing health issues and, with the Australian boarders reopening in late xxxx, you decided to leave Australia with the revised plan to wait for XXXX to be completed, rent it out and, when the time was right, return to Australia.

Documents provided show you were pro-active in getting spots for daycare and schooling in the area for your children.

The building permit was issued on xx xxxx xxxx, the construction of the property was completed in late xxxx and the Occupancy Permit Certificate was issued on xx xxxx xxxx.

You rented out the property to the same tenants from xxx until xxxx until.

You were always considering moving back to Australia at some stage.

The financial pressure of increasing interest rates, insurance costs and property rates have caused you to make the decision to sell the property.

In xxxx xxxx, you entered into a contract to sell the property for $xxx,xxx with settlement to occur on xx xxxx xxxx.

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 Division 38

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

A New Tax System (Goods and Services Tax) Act 1999 paragraph 40-65(2)

A New Tax System (Goods and Services Tax) Act 1999 section 40-75

A New Tax System (Goods and Services Tax) Act 1999 paragraph 40-75(1)

Reasons for decision

Section 9-40 provides that an entity is liable to pay GST on a taxable supply it makes.

Section 9-5 provides that you make a taxable supply if:

(a)          the supply is made for consideration;

(b)          in the course or furtherance of an enterprise that you carry on;

(c)          the supply is connected with the indirect tax zone (Australia); and

(d)          you are registered or required to be registered.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

There is nothing that would make the supply of the property fall within the GST-free provisions contained in Division 38. Therefore, we will need to determine if the supply of the property would be input taxed.

Residential premises

Section 40-65 provides that the sale of real property is input taxed to the extent the property is residential premises to be used predominately for residential accommodation.

However, the sale of the residential property is not input taxed in accordance with subsection 40-65(2) to the extent that the residential premises are:

a)            commercial residential premises; or

b)            new residential premises other that those used for residential accommodation before 2 December 1998.

Residential premises' is defined in section 195-1 as land or a building that:

•                     is occupied as a residence or for residential accommodation, or

•                     is intended to be occupied, and is capable of being occupied, as a residence or for residential accommodation.

(regardless of the term of the occupation or intended occupation).

Guidance on whether premises are considered residential premises is provided in Goods and Services Tax Ruling2012/5 Goods and Services Tax: residential premises (GSTR 2012/5).

Paragraphs 9, 10 and 15 of GSTR 2012/5 highlight a single test that looks to the physical characteristics of the property to determine the premises suitability and capability for residential accommodation.

Paragraph 15 of GSTR 2012/5 states:

To satisfy the definition of residential premises, premises must provide shelter and basic living facilities. Premises that do not have the physical characteristics to provide these are not residential premises to be used predominantly for residential accommodation.

In this case, the property will satisfy the definition of 'residential premises' as the premises provide shelter and basic living facilities such as bedrooms, bathrooms, kitchen, living areas and laundry.

We will now consider below if the property constitutes "new residential premises" within the meaning of section 40-75.

New Residential Premises

Under subsection 40-75(1), residential premises are new residential premises if they:

a)            have not previously been sold as residential premises and have not previously been the subject of a long-term lease; or

b)            have been created through substantial renovations of a building; or

c)            have been built or contain a building that has been built to replace demolished premises on the same land.

The property located was sold to you off-the-plan xx xxxx xxxx, with settlement occurring on xx xxxx xxxx. On this basis, the property is not new residential premises in accordance with subsection 40-75(1) as it has previously been sold as residential premises.

Consequently, the sale of the property will be an input taxed supply of residential premises in accordance with section 40-65 and, as a result, you will not be liable for GST on the sale in accordance with section 9-40.

GST at settlement

If a supplier is selling a new residential property or potential residential land, they must work out if they are carrying on an enterprise. This may be the case, even for one-off transactions.

From 1 July 2018, most purchasers are required to pay a withholding amount from the contract price at the date of settlement for taxable sales. This applies to:

•                     new residential property

•                     land that could be used to build new residential property (potential residential land)

The purchaser pays the withholding amount directly to the Australian Taxation Office (ATO) rather than to the property supplier.

Suppliers must notify purchasers in writing as to whether or not they have a withholding obligation when they sell either:

•                     residential premises

•                     land that could be used to build new residential property ('potential residential land) to a purchaser who is not a GST registered entity acquiring the land for a creditable purpose.

For further information, refer to our website www.ato.gov.au and search GST at settlement.

As determined in question 1, you are not selling new residential premises; therefore, your sale will not be a taxable supply and no GST will be payable on the sale. However, when selling the property, you must notify the purchaser in writing that they do not have a withholding obligation.