Private ruling: GST and the supply of residential premises
Published: June 2012

Ruling: Q1: Will your supply of the property located in Australia (the Property), with a development approval in place, be a taxable supply? | A1: No, the supply will be input taxed.

Relevant facts and circumstances: You are registered for GST. You own a property located in Australia (the Property). In late 200X a property developer approached a related party to acquire their property, and the Property. You were not a party to this sale process and development approval process, because you did not own either property. The property developer set a condition on their purchase that both properties would be approved to be developed. The development application was granted in 200Y however the sale of the property to this developer did not proceed. You acquired the Property on a specified date for $X with the development approval in place. There was no GST paid on the purchase of the Property. The property is approximately X sqm and contains a single story house. The house is occupied as a residence and has facilities for day to day living such as kitchen, laundry bathroom and bedroom facilities. Since your purchase of the property, only minor improvements have been made to the premises, such as carpet replacement, air-conditioning, painting and minor repairs. Since you acquired the property it has been rented or available for rent as a residential property.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 9-5 and | A New Tax System (Goods and Services Tax) Act 1999 40-65.

Reasons for decision: Summary: Under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), you make a taxable supply if: · you make a supply for consideration · the supply is made in the course or furtherance of your enterprise · the supply is connected with Australia, and · you are registered or required to be registered. However, a supply is not a taxable supply to the extent that it is GST-free or input taxed. Under section 40-65 of the GST Act, a supply of real property is input taxed to the extent that it is residential premises to be used predominantly for residential accommodation unless the premises are commercial residential premises or new residential premises to any extent. | Detailed Reasoning - In this case, you intend to:: · supply the property for consideration, · the supply is made in the course or furtherance of the leasing enterprise you carry on, · the supply is connected with Australia as the property is in Australia and · you are registered for GST. | Detailed Reasoning - Furthermore: there are no provisions in the GST Act that will make your supply of the premises, GST-free and in your factual situation the premises do not meet the GST definition of commercial residential premises or of new residential premises. Therefore, the supply of the premises will be a taxable supply and thus, subject to GST unless the supply is input taxed. The definition of residential premises in section 195-1 of the GST Act refers to land or a building that is occupied as a residence, or for residential accommodation, or is intended and capable of being occupied as a residence or for residential accommodation (regardless of the term of occupation), and includes a floating home. Draft Goods and Services Tax Ruling GSTR 2012/D1: residential premises and commercial residential premises (GSTR 2012/D1) represents the Commissioners preliminary though considered view about the characteristics of residential and commercial residential premises. Paragraph 26 of GSTR 2012/D1 explains that the physical characteristics common to residential premises are premises that provide the occupants with sleeping accommodation and at least some basic facilities for day to day living. The premises you own is described as a single story house which contains bedrooms, bathroom and a kitchen, and is fit for human habitation. Therefore, your premises is considered to meet the definition of residential premises. In addition you advised that the property will be supplied with development approval attached. The ATO provides a series of publications called ATO Interpretative Decisions or ATO ID's which provide the ATO view on particular factual situations. | Detailed Reasoning - ATO ID 2004/303 answers the factual question:: Is the entity, a property developer that is making an input taxed supply of residential premises, making a separate taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when under a contract of sale, it assigns to the purchaser a development consent that runs with the premises? | Detailed Reasoning - It provides the following answer:: No, the entity is not making a separate taxable supply under section 9-5 of the GST Act when under a contract of sale it assigns to the purchaser a development consent that runs with the premises. The entity is making a single input taxed supply of the residential premises, which includes the development consent. In summary, when a development approval is attached to a property which is an input taxed supply of residential premises, upon the sale of the property, the development approval is automatically transferred to the purchaser as a natural consequence of the sale. Therefore, the entity is not supplying the purchaser with anything more than the residential premises. Therefore the supply of the residential premises with the development consent will be an input taxed supply and not subject to GST.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.