Private ruling: GST - sale of new residential premises
Date of advice: 8 May 2026
Published: 20 July 2026
Ruling period: XX XXX 20XX -

Ruling: Q1: Are you making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 when you sell xxxx (Unit 1)? | A1: Yes. | Q2: Are you making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 when you sell xxxx (Unit 2) and xxxx (Unit 3)? | A2: Yes. | Q3: Are you making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 when you sell xxxx (Unit 4)? | A3: Yes. | Q4: Are you entitled to input tax credits under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 in relation to the construction costs (Construction Costs) incurred in the development xxxx (Units 1-4)? | A4: Yes. However, the input tax credits to which you are entitled are reduced as the acquisitions are made for only a partly creditable purpose to the extent they relate to Units 1, 2 and 3. Furthermore, you may be required to make adjustments under Division 129 of the A New Tax System (Goods and Services Tax) Act 1999 where there are changes in the extent of creditable purpose. Furthermore, Division 93 of the GST Act provides that you will not be entitled to input tax credits where they have not been claimed within four years from when they were first attributable. | Q5: Under section 29-10 of the A New Tax System (Goods and Services Tax) Act 1999 , to which tax period are the input tax credits attributable to? | A5: The input tax credits are attributable to the tax period in which consideration was paid.

Relevant facts and circumstances: You have been registered for GST from xxxx and account for GST on a cash basis. In xxxx, you purchased a property consisting of a single dwelling at xxxx (the Property). In xxxx, you leased out the Property. In xxxx, you demolished the dwelling on the Property in preparation for subdivision of the land and to build four units. In xxxx, a building permit was granted for the construction of the four units (collectively, the Units). In xxxx construction of the Units commenced. You engaged a third-party builder to undertake the construction. In xxxx, the Certificate of Compliance was issued. You moved into Unit 1 to use it as your primary place of residence. In xxxx, you advertised Unit 2 and Unit 3 for lease. On xxxx, you entered into a Contract of Sale for the sale of Unit 4. Settlement occurred on xxxx, with a GST withholding amount withheld. You intend to sell Units 1, 2 and 3 within five years of construction being completed and therefore within five years from when the premises first became capable of being occupied as a residence for residential accommodation.

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 11-5 | A New Tax System (Goods and Services Tax) Act 1999 section 11-15 | A New Tax System (Goods and Services Tax) Act 1999 section 11-20 | A New Tax System (Goods and Services Tax) Act 1999 section 29-10 | A New Tax System (Goods and Services Tax) Act 1999 section 40-35 | 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 75-5 | A New Tax System (Goods and Services Tax) Act 1999 section 93-10

Reasons for decision: Detailed Reasoning - Questions 1-3: 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; and d) you are registered, or required to be registered for GST. However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. Your supplies of the four properties located at Units 1-4 will be made for consideration (payment), will be made in the indirect tax zone (Australia) and you will be registered for GST as at the date of your supply. Therefore paragraphs 9-5(a), 9-5(c) and 9-5(d) of the GST Act will be satisfied. Consequently, it must be considered whether you will be making the sales of the Properties in the course or furtherance of an enterprise that you carry on under paragraph 9-5(b). | Detailed Reasoning - Enterprise: The definition of an enterprise in section 9-20 of the GST Act includes (amongst other things) an activity or series of activities, done: • in the form of a business • in the form of an adventure or concern in the nature of trade, or Miscellaneous Taxation Ruling MT 2006/1 The New Tax System: the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian Business Number (MT 2006/1) provides our view on the meaning of 'enterprise' for the purposes of entitlement to an Australian Business Number (ABN). The view applies equally to the goods and services tax. Paragraph 265 of MT 2006/1 refers to Statham & Anor v. Federal Commissioner of Taxation 89 ATC 4070; 20 ATR 228 and Casimaty v. FC of T 97 ATC 5135; (1997) 151 ALR 242; 37 ATR 358 which established a number of factors that provide assistance in determining whether activities are a business or an adventure or concern in the nature of trade. These factors are as follows: • there is a change of purpose for which the land is held • additional land is acquired to be added to the original parcel of land • the parcel of land is brought into account as a business asset • there is a coherent plan for the subdivision of the land • there is a business organisation - for example a manager, office and letterhead • borrowed funds financed the acquisition or subdivision • interest on money borrowed to defray subdivisional costs was claimed as a business expense • there is a level of development of the land beyond that necessary to secure council approval for the subdivision • buildings have been erected on the land. As stated in paragraph 266 of MT 2006/1, no single factor will be determinative. Rather it will be a combination of factors that will lead to a conclusion as to the character of the activities. The development of the Property into four separate residential premises with the intention of sale at a profit amounts to an enterprise and the sales are made in the course of that property development enterprise. As such, paragraph 9-5(b) of the GST Act will be satisfied if the Units are considered to be sold in the course of that enterprise. | Detailed Reasoning - New Residential Premises: Generally, the sale of residential premises is input taxed under section 40-65 of the GST Act. However, paragraph 40-65(2)(b) of the GST Act provides that the sale of new residential premises is not input taxed (and is therefore a taxable supply) in certain circumstances. Paragraph 40-75(1)(a) of the GST Act defines new residential premises as, amongst other things, residential premises that have not previously been sold as residential premises and have not previously been the subject of a long-term lease. However, residential premises are not new if they have been rented out continuously for five years or more (unless they were held for sale and rent at the same time) in accordance with paragraph 40-75(2)(a) of the GST Act. Following construction and subdivision, the property, became four new distinct properties. As such, the properties are new residential premises as they have not previously been sold as residential premises. As the leasing of Unit 2 and Unit 3, will not exceed five years, their sales will satisfy the definition of new residential premises and are not excluded from being new residential premises under subsection 40-75(2) of the GST Act. The sales of Unit 1 and Unit 4 will also satisfy the definition of new residential premises under paragraph 40-75(1)(a) of the GST Act as they also have also not previously been sold as residential premises and will not be rented out. | Detailed Reasoning - Unit 1: Activities which are done as a private recreational pursuit or hobby are excluded from being part of an enterprise. Generally, the sale of a private residence is not a sale done in the course or furtherance of an enterprise. This is stated in paragraph 11 of Goods and Services Tax Ruling GSTR 2003/3 Goods and services tax: when is a sale of real property a sale of new residential premises ?: 11. The sale of a person's private residential premises will not be subject to GST, even if the premises are new residential premises, unless the sale is in the course or furtherance of that person's enterprise and the person is registered or required to be registered for GST. Paragraph 178 of MT 200/61 refers to the Taxation Ruling TR 97/11 when discussing the indicators of a business which include: • a significant commercial activity; • a purpose and intention of the taxpayer to engage in commercial activity; • an intention to make a profit from the activity; • the activity is or will be profitable; • the recurrent or regular nature of the activity; • the activity is carried on in a similar manner to that of other businesses in the same or similar trade; • activity is systematic, organised and carried on in a businesslike manner and records are kept; • the activities are of a reasonable size and scale; • a business plan exists; • commercial sales of product; and • the entity has relevant knowledge or skill. When considering the factors identified in paragraphs 265 and 178 of MT 2006/1 and applying them to the sale of Unit 1, the conclusion is that the sale has the hallmarks of a commercial transaction or a business deal. The Property was purchased with the intention of leasing it out. That is, there was a commercial use of the Property from the time that you purchased it. The use then changed when the house was demolished and you began the property development activities. The plan for the development was to build and sell four units. The sale of Unit 1 is not to be viewed in isolation as it was part of the bigger property development project. That project involved demolishing the original residence, building four separate units and subdividing the Property into four separate titles for sale. The property development project involved significant commercial activities and amounts to an enterprise for GST purposes. Whilst Unit 1 may be occupied as your primary place of residence for some time, your intention for Unit 1 was and remains to sell it along with the three other units. Although the reasons behind the timing of the sales of the four units is unclear, it is reasonable to assume that selling the four units separately over time (rather than all simultaneously) is likely to result in higher prices and/or quicker sales. The sale of Unit 1 is a part of that property development enterprise, even though it has been used for a non-enterprise purpose for a period of time prior to its sale. Consequently, the sale of Unit 1 is an activity done in the course or furtherance of your property development enterprise. As such, the sale will satisfy the requirements of section 9-5 of the GST Act. As there are no relevant provisions within the GST Act which would result in the sale of Unit 1 being a GST-free supply and, as discussed above, the sale will not be input taxed (as it will be new residential premises), the sale of Unit 1 will be a taxable supply under section 9-5 of the GST Act. | Detailed Reasoning - Units 2 and 3: As discussed above, the sales of Unit 2 and Unit 3, will be for consideration (payment), are connected with the indirect tax zone (as they are located in Australia) and you are registered for GST. Furthermore, there are no provisions which would result in the sales being GST-free. Also, as discussed above, as the sales will be made within five years of the properties being completed and used for making input taxed supplies by leasing them out, the sales will be of new residential premises in accordance with section 40-75 of the GST Act. Consequently, the sales will be taxable supplies if they are supplies made in the course or furtherance of an enterprise that you carry on. Similar to the sale of Unit 1, the sales of Unit 2 and Unit 3 are part of the property development enterprise that you have undertaken. Even though Unit 2 and Unit 3 are currently used as capital assets generating rental income, they were constructed to sell as part of the property development project. As recognised in MT 2006/1 (for example, at paragraph 260), assets can change their character from capital to revenue or vice versa. Unit 2 and Unit 3 are presently being used to generate rental income and are therefore capital assets. However, they were constructed for the purposes of sale and their use for generating rental income was only every intended to be temporary. The eventual sales of Unit 2 and Unit 3 are supplies made in the course of the property development enterprise. Consequently, those sales will be taxable supplies under section 9-5 of the GST Act. | Detailed Reasoning - Unit 4: As discussed above, the sale of Unit 4 was for consideration (payment), was a supply made in the course of the property development enterprise, was connected with the indirect tax zone (as it is located in Australia) and you are registered for GST. Furthermore, there are no provisions which would result in the sale being GST-free. Also, as discussed above, as the sale was of new residential premises in accordance with paragraph 40-75(1)(a) of the GST Act, it is not an input taxed supply. Therefore, the sale of Unit 4 was a taxable supply under section 9-5 of the GST Act. | Detailed Reasoning - Margin scheme: Generally, when an entity sells real property as a taxable supply, the margin scheme may be used to determine how much GST is payable on the supply. However, an entity is not entitled to use the margin scheme in certain circumstances including: • if the property was purchased as a taxable supply and the margin scheme wasn't used; • if the property was purchased from an entity that wasn't eligible for the margin scheme, and the purchase was ­ as part of a going concern; or ­ GST-free farmland, or ­ from an associate for no consideration (no payment). Further information about the margin scheme is available on the Tax Office website (www.ato.gov.au) or, if you're not sure about your eligibility, you can apply for a private ruling. | Detailed Reasoning - Question 4: Under section 11-20 of the GST Act, you are entitled to the input tax credits (ITCs) for any creditable acquisition that you make. Section 11-5 of the GST Act provides that you make a creditable acquisition if: (a) you acquire anything solely or partly for a creditable purpose; and (b) the supply of the thing to you is a taxable supply; and (c) you provide, or are liable to provide, consideration for the supply; and (d) you are registered or required to be registered for GST. Your acquisitions of Construction Costs are taxable supplies made to you; you have provided consideration (payment) for those purchases and you are registered for GST. Therefore, your acquisitions of Construction Costs will be creditable acquisitions if they have been made for a creditable purpose. Section 11-15 of the GST Act provides that an entity acquires a thing for a creditable purpose to the extent that the entity acquires it in carrying on its enterprise. However, the entity does not acquire a thing for a creditable purpose to the extent that the acquisition relates to making supplies that would be input taxed, or the acquisition is of a private or domestic nature. As Unit 4 was sold immediately after construction was completed, it was not used to make input taxed supplies or for a private or domestic nature. Consequently, acquisitions of the Construction Costs are creditable acquisitions under section 11-5 of the GST Act to the extent that those acquisitions relate to Unit 4. As such, you are entitled to the ITCs in respect of those Construction Costs under section 11-20 of the GST Act to the extent that they relate to Unit 4. Unit 2 and Unit 3 are currently being used to make input taxed supplies of residential premises by way of lease. Therefore, your acquisitions of Construction Costs that relate to Unit 2 and Unit 3 were made for a partly creditable purpose. That is, the Construction Costs relate to both the taxable supplies of the sales of Unit 2 and Unit 3 as well as the input taxed supplies of the leasing of Unit 2 and Unit 3. Similarly, as Unit 1 is currently being used by you as your primary place of residence, the Construction Costs relate to both the taxable supply of the future sale of Unit 1 and the private or domestic use as your residence. Therefore, to the extent that the acquisitions of Construction Costs relate to Unit 1, they were made for a partly creditable purpose. The Goods and Services TaxRulingGSTR 2006/4 Goods and services tax: determining the extent of creditable purpose for claiming input tax credits and for making adjustments for changes in extent of creditable purpose (GSTR 2006/4) provides guidance on determining the extent of creditable purpose for the ITCs that you may be entitled to claim in relation to the Construction Costs. Paragraphs 17 and 19 of GSTR 2006/4 state: 17. When you make an acquisition or importation, the extent of your creditable purpose is based on your planned use of the acquisition or importation in your enterprise expressed as a percentage of its total use. For example, if you acquire a computer which you plan to use 60% in your enterprise for a creditable purpose, you are entitled to claim 60% of the full input tax credit. The extent of your creditable purpose is 60%. ... 19. If your actual use of the thing acquired or imported varies over time from your planned use, there is a change in the extent of your creditable purpose. If this occurs, you may need to make an adjustment to the amount of input tax credits you claimed. In this event, your net amount for the adjustment period is increased or decreased by the resulting adjustment. The amount of the adjustment depends on the change in the extent of your creditable purpose. Further to this, paragraph 25 of GSTR 2006/4 outlines that it is your planned extent of creditable purpose that is relevant for calculating input tax credits and you need to determine your planned extent of creditable purpose on a basis that is fair and reasonable. Paragraphs 44 and 45 of GSTR 2006/4 then provide how to calculate ITCs for acquisitions that are partly creditable: 44. Formulae are specified in the GST Act for the calculation of input tax credits for acquisitions and importations that are partly creditable. For acquisitions: Full input tax credit × Extent of creditable purpose × Extent of consideration 45. ... for the purpose of claiming input tax credits, you need to estimate the extent to which the acquisition or importation is for a creditable purpose. ... This means that at the time of acquisition or importation, it is your planned use of the thing for a creditable purpose that is relevant in working out your input tax credit. You may estimate the planned use of the acquisition or importation based on: • records you already have available from a previous period; • records kept since you made the acquisition or importation, but before you lodge your BAS for the tax period in which you made the acquisition or importation including your actual use (full or partial) of the acquisition; • records kept for some other purpose, for example, income tax, management accounting, profitability analysis, intra-entity transfer charging or cost accounting; • your previous experience concerning the usage of similar acquisitions; • your business plan; or • any other fair and reasonable basis. Division 129 of the GST Act provides that adjustments to previously claimed ITCs may be required where the actual use of the acquisition has changed from the planned use (at the time of the acquisition). Paragraphs 13 and 14 of Goods and Services TaxRuling GSTR 2009/4 Goods and services tax: new residential premises and adjustments for changes in extent of creditable purpose (GSTR 2009/4) states: 13. An adjustment under Division 129 arises for an acquisition in an adjustment period where: • there is a difference between the actual application and the planned (or intended) application of the thing for a creditable purpose, or • there is a difference between the actual application of the thing up to the end of one adjustment period and the actual application of the thing up to the end of the previous adjustment period. 14. Division 129 provides for adjustments in relation to things in tax periods that are adjustment periods. The number of adjustment periods that relate to a thing are determined by the GST-exclusive value of the acquisition. The number of adjustment periods for acquisitions (that do not relate to business finance) are set out in the following table. | Detailed Reasoning - Adjustment periods: $5,000 or less Two $5,001 to $499,999 Five $500,000 or more Ten Further to this, paragraphs 23 to 29 of GSTR 2009/4 states: | Detailed Reasoning - Determining whether an acquisition made in constructing new residential premises is a creditable acquisition for the purposes of Division 11: 23. Prior to an entity considering whether or not it has to make adjustments under Division 129, the entity will have determined its planned extent of creditable purpose for a thing to determine its entitlement to input tax credits under Division 11 for the acquisition of the thing. This planned extent of creditable purpose for which the entity acquired the thing is an important element in determining whether an adjustment subsequently arises under Division 129. 24. If an entity constructs new residential premises and the entity plans, as evidenced by an objective assessment of the facts and circumstances, to only sell those premises by way of a taxable supply as part of its enterprise, the acquisitions made in constructing the premises will be for a creditable purpose. Assuming all of the other requirements in section 11-5 are satisfied, the acquisitions will be creditable acquisitions and the entity will be entitled to input tax credits. 25. Alternatively, if an entity constructs new residential premises for the purpose of sale but intends to lease the premises for a period of time prior to the sale, and an objective assessment of the facts and circumstances supports this dual planned use, the entity's acquisitions will be partly creditable. The entity will therefore be entitled to only a proportion of the full input tax credit. Example 1 - partly input taxed and partly creditable planned use 26. Kim is a property developer. Kim recognises that the market for selling new residential premises has slowed significantly but is expected to pick-up in approximately two years. She decides to build new residential premises for sale as part of her property development enterprise but makes a decision to lease the premises for 2 years in order to allow the market to improve. An objective assessment of the facts and circumstances supports this dual planned use. In particular, Kim's business plan at the time of making the acquisition and the loan application documents reflect this intended use of the premises. 27. The acquisitions Kim makes in constructing the new residential premises are for two purposes - being the making of an input taxed supply of residential premises by way of lease and a taxable supply of new residential premises. 28. Kim's acquisitions are made in carrying on her enterprise and are for a creditable purpose except to the extent they relate to the making of the input taxed supplies. That is, the acquisitions are partly creditable. Kim will need to determine the extent of creditable purpose using a fair and reasonable method of apportionment. 29. If an entity constructs new residential premises to use solely by way of leasing the residential premises, and this planned use is supported by an objective assessment of the surrounding facts and circumstances, the entity's acquisitions will relate solely to making supplies that would be input taxed, and will not be made for a creditable purpose. The entity will not be entitled to input tax credits in relation to the acquisitions. Although the acquisitions in these circumstances are not creditable acquisitions, adjustments can still arise under Division 129 if the entity subsequently applies the residential premises for a creditable purpose. | Detailed Reasoning - Working out adjustments for changes in creditable purpose: Section 129-40 of the GST Act contains a 5-step method statement to determine whether you will have an adjustment for the purposes of Division 129 of the GST Act: Step 1: Work out the extent (if any) to which you have applied the thing acquired or imported for a creditable purpose during the period of time: (a) starting when you acquired or imported the thing; and (b) ending at the end of the adjustment period. This is the actual application of the thing. Step 2: Work out: (a) if you have not previously had an adjustment under this Division for the acquisition or importation--the extent (if any) to which you acquired or imported the thing for a creditable purpose; or (b) if you have previously had an adjustment under this Division for the acquisition or importation--the actual application of the thing in respect of the last adjustment. This is the intended or former application of the thing. Step 3: If the actual application of the thing is less than its intended or former application, you have an increasing adjustment , for the adjustment period, for the acquisition or importation. Step 4: If the actual application of the thing is greater than its intended or former application, you have a decreasing adjustment , for the adjustment period, for the acquisition or importation. Step 5: If the actual application of the thing is the same as its intended or former application, you have neither an increasing adjustment nor a decreasing adjustment, for the adjustment period, for the acquisition or importation. Paragraphs 92 to 102 of GSTR 2009/4 provides two examples which outline how to calculate the extent to which a premises has been applied for a creditable purpose: Example 11 - premises applied for a creditable purpose, to some extent, for the entire relevant period 92. John is registered for GST and has quarterly tax periods. He constructed new residential premises for the purpose of sale and was entitled to full input tax credits on his acquisitions. One particular acquisition of construction services was made on 1 October 2006 for $55,000 (GST inclusive). The premises were completed on 1 February 2007. John continued to hold the premises for the purpose of sale but also commenced leasing the premises for residential accommodation on 1 April 2007. John received rental income of $2,500 per month and expected to sell the premises for $500,000. John has continued to retain the dual concurrent application since 1 April 2007. 93. The first adjustment period in relation to the acquisition of construction services is the period ending 30 June 2008. There are 21 months in the relevant period between the time of the acquisition on 1 October 2006 and the end of the first adjustment period on 30 June 2008. 94. For the six months from 1 October 2006 to 31 March 2007 John applied the premises solely for a creditable purpose, that is, an extent of creditable purpose of 100%. 95. For the 15 months from 1 April 2007 to 30 June 2008 John has applied the premises for both a creditable purpose and a non-creditable purpose. John works out the extent of creditable purpose for the relevant period by using an output based indirect method (using estimated sales consideration) as follows: $500,000 ÷ ($500,000 + $37,500) = 93.02% 96. This percentage is the actual application of the thing for the purposes of step 1 of the method statement in subsection 129-40(1). 97. In circumstances where the premises have not been applied for a creditable purpose, to some extent, for the entire period, the output based indirect method (using estimated sales consideration) would be one possible fair and reasonable basis of apportionment. However, it would need to be modified with an additional time-based apportionment to reflect the fact that the premises have been applied for a creditable purpose for only part of the relevant period. The measure of time used should be appropriate for the circumstances of each case. For example, using either days or months may be appropriate to provide a fair and reasonable basis of apportionment depending on the circumstances. Example 12 - premises applied for 100% creditable purpose for part of the relevant period, and then subsequently applied for 0% creditable purpose for the remainder of the period 98. Assume the facts are the same as for Example 11 of this Ruling. However, rather than continuing to hold the premises for sale as part of the enterprise John decided on 1 April 2007 to hold the premises solely for the purpose of leasing. 99. As in paragraph 94 of this Ruling, for the six months from 1 October 2006 to 31 March 2007 John applied the premises solely for a creditable purpose, that is, an extent of creditable purpose of 100%. 100. For the 15 months from 1 April 2007 to 30 June 2008 John has applied the premises solely in relation to making input taxed supplies, that is, an extent of creditable purpose of 0%. 101. John applies a time-based apportionment to the application for a creditable purpose to ascertain the extent of creditable purpose for the relevant period (this is because for the rest of the period the extent of creditable purpose is 0%): (6 mths ÷ 21 mths × 100%) = 28.57% 102. This percentage is the actual application of the thing for the purposes of step 1 of the method statement in subsection 129-40(1). Further to this, under section 93-5 of the GST Act, your entitlement to an ITC ceases unless it is included in an assessment within four years of the lodgement due date of the Business Activity Statement (BAS) for the tax period in which you could have first claimed the ITC. Given that you account for GST on a cash basis, the earliest tax period in which you could claim an ITC for a purchase is the tax period in which you make the payment. If you make the payment over multiple tax periods, the four-year time limit applies separately to each part of the payment. Therefore, you will no longer be entitled to claim ITCs for acquisitions related to the Construction Costs if the BAS lodgement due date for the relevant tax period was more than four years ago. | Detailed Reasoning - Question 5: Subsection 29-10(2) of the GST Act provides that because you account for GST on a cash basis, where you provided all the consideration for an acquisition in relation to the Constructions Costs incurred during the property development in a tax period, the ITCs will be attributable to that tax period. If you have provided only part of the consideration for acquisitions in relation to the Construction Costs, ITCs are attributable to the extent that you provided the consideration in that tax period. For example, where 50% of the consideration for an acquisition was provided in a tax period, you attribute 50% of the total ITCs to that tax period. The remainder of the ITCs are attributable to the tax period in which you provide the remainder of the consideration.