ATO ID 2004/401: GST and supply of chattels included in the sale of previously leased residential premises
Date of decision: 30 April 2004
Business line: Indirect Tax

Issue
Is the entity, a property vendor, making a separate supply that is taxable under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it includes chattels in its sale of residential premises and the entity used those chattels solely in connection with its input taxed supply of those premises by way of lease?

Decision
No, the entity is not making a separate supply that is taxable under section 9-5 of the GST Act. The entity's supply of the chattels is an input taxed supply under subsection 9-30(4) of the GST Act as the entity used the chattels solely in connection with its input taxed supply of residential premises by way of lease.

Facts
The entity is a property vendor. The entity is selling a residential property. The sale of the property is input taxed under section 40-65 of the GST Act. The entity used this property to make input taxed supply of residential premises by way of lease under section 40-35 of the GST Act. The entity provided chattels such as beds, chairs, tables and rubbish bins for its tenants to use in the property. The entity did not use the chattels for any other purpose. The entity includes the chattels in its sale of the residential premises. The entity is registered for goods and services tax (GST).

Reasons for decision
Summary: To determine the GST status of a supply, it is first necessary to establish what the entity is supplying. The entity is selling a residential premises including a number of chattels. Unlike fixtures that form part of the building they are affixed to, chattels are separate items to the building they are contained in and title to them does not automatically pass to a purchaser. Therefore, the entity's sale comprises two parts, the residential premises and the chattels. Goods and Services Tax Ruling GSTR 2001/8 provides that where a supply consists of more than one part, the supply could be either a mixed or a composite supply. Where a supply contains a dominant part and also something that is integral, ancillary or incidental to that part, the supply is composite. A composite supply is treated as a single supply and takes its GST status from the dominant component of the supply. Where the supply has separately identifiable parts, the supply is a mixed supply. The GST status of the component parts of a mixed supply are determined separately. The entity's sale comprises of residential premises and chattels. The supply of chattels is not integral, ancillary or incidental to the supply of residential premises. As such, the entity is making a mixed supply and the GST status of the supply of chattels is determined separately from the supply of the residential premises. Subsection 9-30(4) of the GST Act provides that an entity's supply is input taxed if it is a supply of anything (other than new residential premises) that it has used solely in connection with its supplies that are input taxed but are not financial supplies. The entity provided the chattels to the tenants in the residential premises. The supply of the premises to the tenants was input taxed. The entity did not use the chattels for any other purpose. Therefore, the entity used the chattels solely in connection with its input taxed supply of residential premises by way of lease. Accordingly, the requirement under subsection 9-30(4) of the GST Act is satisfied and the entity's supply of the chattels is input taxed.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 9-5 subsection 9-30(4) section 40-35 section 40-65
Related public rulings and determinations: Goods and Services Tax Ruling GSTR 2001/8
Related ATO interpretative decisions: ATO ID 2004/402
Subject references: Goods and services tax GST property & construction GST residential premises GST sale of real property GST special rules GST supplies & acquisitions GST supply Input taxed supplies