Edited version of private advice

Authorisation Number: 7925153473185

Date of advice: 15 July 2022

Ruling

Subject: GST and supply of property

Question 1

Will the sale of the xx units by the Vendor to the Purchaser be input taxed under section 40-65 of the GST Act?

Answer

Yes, the sale of the Property will be input taxed.

Question 2

If the answer to question 1 is yes, will the sale by the Vendor to the Purchaser of the assigned xx carparks together with the xx units of the Property also be input taxed?

Answer

Yes, the sale of the assigned car parks together with the sale of the units of the Property will also be input taxed

Question 3

Is the grant of the option by the Vendor to the Purchaser, allowing for the Purchaser to buy the Property and Car Park ("Option") input taxed?

Answer

Yes, the grant of the option will be input taxed.

This ruling applies for the following period:

xx

The scheme commences on:

xx

Relevant facts and circumstances

1.    You acquired the Property and Carpark over a period of time. You did not pay any GST in relation to these acquisitions either as the acquisition were input taxed or the vendor was not registered or required to be registered for GST.

2.    You are currently registered for GST.

3.    The Property was used for the purpose of deriving rental income through the leasing of the apartments. The site consists of an apartment block built and is made up of several separate lots of apartments (of which xx apartments are currently owned by you).

4.    The Carpark is on a separate title to the Property and is located adjacent to the Property.

5.    The Carpark consists of xx lots of car-park spaces which are used exclusively by the owners and tenants of the residential apartments.

Easements Over the Carpark

6.    There are several easements over the Carpark for the benefit of the owner of the respective apartments on the Property, For the provision of services from the XXXX Highway through Lot 20 to Lot 19.

7.    Appendix B refers to the Instrument setting out the terms of easements burdening the Car Park.

Grant of Option to Purchase Property and Carpark

8.    The Vendor and Purchaser executed an Option to Purchase Deed ("Option Deed"), which granted the Purchaser the option to purchase the Property and the adjoining Carpark on the terms set out in the land contract attached at Annexure A to the Option Deed ("Contract of Sale"). As consideration for the grant of the Option, the Purchaser is to pay an option fee of $xx.

9.    Upon exercise of the Option, the Contract of Sale becomes binding on the parties and the option fee will be treated as the deposit under the Contract of Sale. The total purchase price for the Property and the Carpark under the Contract of Sale is $xxx.

Relevant legislative provisions

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

A New Tax System (Goods and Services Tax) Act 1999 Subsection 9-30(2)

Reasons for decision

Question 1

Subsection 9-30(2) provides that a supply is input taxed if:

(a) it is input taxed under Division 40 or under a provision of another Act; or

(b) it is a supply of a right to receive a supply that would be input taxed under Division 40 or a provision of another Act.

Division 40, specifically section 40-65, provides that the sale of real property is input taxed to the extent that the property is residential premises to be used predominately for residential accommodation. However, the sale will not be input taxed to the extent that the residential premises are either 'commercial residential premises' or 'new residential premises'.

In this case, the supply of the Property is input taxed pursuant to section 40-65 of the GST Act. The apartment block is considered as residential premises as defined in section 195-1 of the GST Act and does not fall under "commercial residential premises". Therefore, the supply of the Property will be input taxed for GST purposes.

Question 2

Example 2 in Goods and Services Tax Ruling GSTR 2012/5; Goods and Services Tax: residential premises discussed at paragraph 18 the supply of a car parking space.

18. Patrick is a plumber who is registered for GST. He purchases a residential unit in a CBD location with a separately titled car parking space in the same building. He resides in the unit for a period and then decides to rent the unit to overseas students who attend a nearby university. He initially leases the residential unit and car parking space together under the one lease. The supply of the residential unit and car parking space is an input taxed supply of residential premises that are to be used predominately for residential accommodation.

The above would be applicable in your scenario which means that the supply of the car park building together with the apartment block is a 'composite' supply which consists of a 'dominant' supply (being the apartment block and an 'ancillary or incidental' supply (being the car park building). The Commissioner has formed the view that the GST treatment of the dominant supply in a composite supply would apply to the whole supply as per GSTR 2001/18. Applying this view to your scenario, the sale of the apartment block and the car park building together will be treated according to how the apartment block (the dominant supply) will be treated. As determined in Question 1, the supply of the apartment block is input taxed. Accordingly, the supply of the apartment clock and the car park building will be input taxed.

Question 3

As discussed above, the supply of the Property and the cark park will be an input taxed supply pursuant to section 40-65.

Accordingly, your granting of the call option that relates to your supply of the area of the Property and carpark will be considered as 'residential premises will be an input taxed supply pursuant to paragraph 9-30(2)(b).