ATO ID 2004/402: GST and supply of chattels included in the sale of 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 input taxed supply of residential premises?

Decision
Yes, the entity is making a separate supply that is taxable under section 9-5 of the GST Act when it includes chattels in its input taxed supply of residential premises.

Facts
The entity is a property vendor. The entity's enterprise consists of renovating and selling old houses. The entity is selling a recently renovated residential property. The renovation did not amount to substantial renovations and the sale of the property is an input taxed supply under section 40-65 of the GST Act. The entity purchased new and second-hand chattels such as beds, chairs, tables and rubbish bins to furnish the house. The entity is including the chattels in its sale of the residential premises. The entity is registered for goods and services tax (GST) and the supply of the chattels satisfies the other positive limbs of a taxable supply under section 9-5 of the GST Act.

Reasons for decision
Summary: To determine the GST status of a supply, it is first necessary to establish what the entity is actually 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. Under section 9-5 of the GST Act, an entity makes a taxable supply if: However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. The entity is registered for GST and the supply of the chattels satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. However, 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. For the purposes of subsection 9-30(4) of the GST Act, the thing being supplied must be connected with previous supplies an entity made that were input taxed. For example, if chattels had been previously supplied to tenants who rented residential premises, an entity would have used the chattels in connection with supplies that were input taxed. The entity purchased chattels to furnish the renovated residential premises that it is selling. The entity has not used the chattels for any other purpose. Therefore, the chattels included in the sale of the renovated property have not been previously used by the entity in connection with the making of input taxed supplies. As such, the entity's supply of the chattels is not input taxed under subsection 9-30(4) of the GST Act. Therefore, the entity is making a separate supply that is taxable under section 9-5 of the GST Act when it includes chattels in its input taxed supply of residential premises. Subsection 9-80(2) of the GST Act provides that the value of the mixed supply that represents the taxable supply is calculated in accordance with the following formula: (Price of the supply * 10) / (10 + Taxable proportion) where: 'Taxable proportion' is the proportion of the value of the supply that represents the value of the taxable supply, as expressed as a number between '0' and '1'. GSTR 2001/8 provides guidance on the apportionment of consideration for a supply that includes taxable and non-taxable parts.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 9-5 subsection 9-30(4) subsection 9-80(2) Division 38 Division 40 section 40-65
Related public rulings and determinations: Goods and Services Tax Ruling GSTR 2001/8
Related ATO interpretative decisions: ATO ID 2004/401
Subject references: Goods and services tax GST property & construction GST residential premises GST sale of real property GST supplies & acquisitions GST enterprise GST supply Taxable supply