Edited version of private advice

Authorisation Number: 1052413410589

Date of advice: 25 June 2025

Ruling

Subject: GST - residential premises

Questions 1

Is the sale of the properties at xxxx a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999?

Answer 1

No

This ruling applies for the following period:

Quarter ending 31 December 20XX

The scheme commenced on:

X June 20XX

Relevant facts and circumstances

XXXX (you) is an Australian proprietary company. Australian Security and Investment Commission data shows that you were deregistered in July 20XX.

You have never been registered for goods and services tax (GST) or had an Australian Business Number (ABN).

On XXXX, you purchased five properties at XXXX (the Properties).

The Properties were purchased off the plan from the vendor, who was also the developer, pursuant to five separate individual contracts of sale of real estate, each dated XXXX.

All the contracts were due to settle on a date after the registration of the plan of subdivision and the issue of the occupancy permits.

The vendor engaged XXXX (the Builder) to construct the Properties.

After construction was complete, you rented out 4 of the Properties under standard residential tenancy agreements. The fifth property was not leased during your period of ownership.

Other than the renting of the Properties, you were not carrying on any other enterprise.

On X March 20XX a receiver (Receiver) was appointed to be manager over your assets, including the Properties.

The Receiver was XXXX.

The Receiver managed the sale process, appointed a sales agent, obtained a valuation and approved some of the rectification works. The Receiver also collected rent from the tenants in occupation of the Properties prior to their settlement and liaised with the sales agents.

On XXXX, a sales agent was appointed.

On XXXX, a valuation of the Properties was received.

On XXXX, the settlement from the sale of the Properties was completed by the Receiver.

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 9-20

A New Tax System (Goods and Services Tax) Act 1999, section 9-40

A New Tax System (Goods and Services Tax) Act 1999, section 23-5

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

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

A New Tax System (Goods and Services Tax) Act 1999, section 188-10

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

A New Tax System (Goods and Services Tax) Act 1999, section 188-25

A New Tax System (Goods and Services Tax) Regulations 1999 section 23.15.01

Reasons for decision

Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that you make a taxable supply if:

(a) you make the supply for consideration; and

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

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

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

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

The sale of the Properties is made for consideration and the Property is located in Australia. Thus, the requirements of paragraphs 9-5(a) and 9-5(c) of the GST Act are met.

However, for section 9-5 of the GST Act to apply, it will also depend on whether the sale of the Property was made in the course or furtherance of an enterprise that you carried on, and whether you were required to be registered for GST. Once the requirements of section 9-5 of the GST Act are met, there is also a need to consider the extent the supply is GST-free or input tax because of another provision within the GST Act.

Enterprise

Subsection 9-20(1) of the GST Act provides that an enterprise includes, among other things, an activity, or series of activities, done:

(a) in the form of a business

(b) in the form of an adventure or concern in the nature of trade

(c) on a regular continuous basis, in the form of a lease, licence or other grant of an interest in property

In this case, you derived income from leasing the Properties on a regular and continuous basis. The leasing of the Properties constitutes an 'enterprise' under paragraph 9-20(1)(c) of the GST Act.

As you were not registered for GST when you sold the Properties, consideration must be had to paragraph 9-5(d) of the GST Act as to whether you were required to be registered for GST when you sold the Properties.

Registration

Section 23-5 of the GST Act provides that you are required to be registered for GST if:

(a) you are carrying on an enterprise; and

(b) your GST turnover meets the registration turnover threshold.

As discussed above, your leasing activities fall within the scope of 'carrying on an enterprise' thus satisfying paragraph 23-5(a) of the GST Act.

The A New Tax System (Goods and Services Tax) Regulations 1999 at section 23.15.01 sets the registration turnover threshold for entities, other than non-profit bodies, at $75,000 a year.

Subsection 188-10(1) of the GST Act provides that you have a GST turnover that meets the registration turnover threshold if:

(a) your current GST turnover is at or above $75,000 and the Commissioner is not satisfied that your projected GST turnover is less than $75,000; or

(b) your projected GST turnover is at or above $75,000.

'Current GST turnover' is defined in section 188-15 of the GST Act as the sum of the values of all of your supplies made in a particular month and the preceding 11 months.

'Projected GST turnover' is defined in section 188-20 of the GST Act as the sum of the values of all of your supplies made in a particular month and the following 11 months.

Paragraphs 188-15(1)(a) and 188-20(1)(a) of the GST Act provide that input taxed supplies are disregarded when calculating current and projected GST turnovers respectively. This means that if your rental of the Properties was an input taxed supply of residential premises under section 40-35 of the GST Act (i.e. being a supply of residential premises that are neither commercial residential premises such as a hotel or motel, nor accommodation in commercial residential premises), then the rental proceeds are not to be included in the calculation of your current or projected GST turnovers.

Additionally, section 188-25 of the GST Act provides that in calculating projected GST turnover, you disregard any supply made, or likely to be made, by you by way of transfer of ownership of a capital asset you own.

Goods and Services Tax Ruling GSTR 2001/7 Goods and services tax: meaning of GST turnover, including the effect of section 188-25 on projected GST turnover, discusses the meaning of 'capital assets' at paragraphs 31 to 36:

Meaning of 'capital assets'

31. The GST Act does not define the term 'capital assets'. Generally, the term 'capital assets' refers to those assets that make up 'the profit yielding subject' of an enterprise. They are often referred to as 'structural assets' and may be described as 'the business entity, structure or organisation set up or established for the earning of profits'.

32. 'Capital assets' can include tangible assets such as your factory, shop or office, your land on which they stand, fixtures and fittings, plant, furniture, machinery and motor vehicles that are retained by you to produce income. 'Capital assets' can also include intangible assets, such as your goodwill.

33. Capital assets are 'radically different from assets which are turned over and bought and sold in the course of trading operations'. An asset which is acquired and used for resale in the course of carrying on an enterprise (for example, trading stock) is not a 'capital asset' for the purposes of paragraph 188-25(a).

34. 'Capital assets' are to be distinguished from 'revenue assets'. A 'revenue asset' is 'an asset whose realisation is inherent in, or incidental to, the carrying on of a business'.

35. If the means by which you derive income is through the disposal of an asset, the asset will be of a revenue nature rather than a capital asset even if such a disposal is an occasional or one-off transaction. Isolated transactions are discussed further at paragraphs 46 and 47 of this Ruling.

36. Over the period that an asset is held by an entity, its character may change from capital to revenue or from revenue to capital. For the purposes of section 188-25 the character of an asset must be determined at the time of expected supply.

You rented the Properties to generate income and therefore the Properties are capital assets. As such, the sale of the Properties constitutes the transfer of a capital asset for the purposes of section 188-25 of the GST Act and is disregarded when calculating your projected GST turnover.

We note that the previous sale off the plan of the premises in 2017 means that the Properties cannot be new residential premises under paragraph 40-75(1)(a) of the GST Act because they have previously been sold as residential premises.

Further, your renting of the Property was the only enterprise that you were undertaking when you sold the Properties, with the rental income the only source of income from any enterprise. The receipt of rent is an input taxed supply under section 40-35 of the GST Act as a supply of residential premises and not a supply of commercial accommodation. This is evident from the residential leases provided and proof of rent received on a continuous basis. Accordingly, under paragraphs 188-15(1)(a) and 188-20(1)(a) of the GST Act, amounts of rent received in relation to the Properties are disregarded when calculating your current GST turnover and projected GST turnover respectively.

With amounts related to input taxed supplies and transfer of capital assets disregarded, your current GST turnover under section 188-15 of the GST act and projected GST turnover under section 188-20 of the GST Act were both nil.

Given the above, your GST turnover did not meet the GST registration turnover threshold when you sold the Properties. Therefore, you were not required to be registered for GST as the requirement of paragraph 23-5(b) of the GST Act was not met.

As you were not registered or required to be registered for GST when you sold the Properties, paragraph 9-5(d) of the GST Act is not met.

Conclusion

The sale of the Properties is made in the course or furtherance of a leasing enterprise, the sale is made for consideration and the Properties are located in Australia. However, you were neither registered nor required to be registered for GST when you sold the Property.

Consequently, you did not make a taxable supply when you sold the Properties as the sale does not meet all the requirements of section 9-5 of the GST Act. The sale of the Properties is therefore not subject to GST.