Private ruling: GST and sale of residential premises
Date of advice: 22 November 2023
Published: 8 January 2024
Ruling period: Four years from the date of issue

Ruling: Q1: Is the sale of the residential unit at a specified address in Australia (Unit X) by Entity X an input taxed supply under subsection 40-65(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: Yes. Subsection 40-65(1) of the GST Act provides that a sale of real property is input taxed to the extent that the property is residential premises to be used predominantly for residential accommodation (regardless of the term of occupation). However, subsection 40-65(2) of the GST Act provides that the sale of real property is not input taxed to the extent that the residential premises are: (a) commercial residential premises, or (b) new residential premises other than those used for residential accommodation (regardless of the term of occupation) before 2 December 1998. Subsection 40-75(1) of the GST Act states that residential premises are new residential premises if they have: (a) not previously been sold as residential premises (other than commercial residential premises) and have not previously been the subject of a long-term lease (b) been created through substantial renovations of a building, or (c) been built, or contain a building that has been built, to replace demolished premises on the same land. Based on the information provided the sale of Unit X by Entity X is an input taxed supply under subsection 40-65(1) of the GST Act.

Relevant facts and circumstances: Entity X has been registered for GST since dd/mm/yyyy. On dd/mm/yyyy, a related entity transferred Unit X to Entity X. The related Entity was the developer of Unit X and Entity X was the investment entity. The related entity has been registered for GST since dd/mm/yyyy. The transfer form provided shows the consideration for the transfer of Unit X as $X. Entity X actually paid $X to the related entity for the acquisition of Unit X, which was the market value of the unit at the time. The related entity declared the sale of Unit X to Entity X as a taxable supply of new residential premises in its relevant business activity statement and paid GST on the supply. Entity X did not claim GST credits on construction or acquisition of Unit X. From about dd/mm/yyyy, Entity X engaged a real estate agent, to act as the leasing agent for Unit X until dd/mm/yyyy. On or about dd/mm/yyyy, Entity Y lent $Y to Entity X for a specified period secured by, amongst other things, a mortgage over Unit X. Entity X at no point offered Unit X for sale between the acquisition date and dd/mm/yyyy. Unit X was rented or was available for rent as residential premises continuously throughout this period. On dd/mm/yyyy, Entity X listed Unit X for sale with the real estate agent. There were no substantial renovations carried out on Unit X since its purchase from the related entity nor it was converted or altered for use as commercial premises at any point in time. On dd/mm/yyyy, Entity Y appointed Entity Z as Receiver and Manger of Entity X. On dd/mm/yyyy, Entity Z exchanged contracts for the sale of Unit X in their capacity as Receiver and Manager of Entity X. The sale of Unit X settled on dd/mm/yyyy. The sale price was $Z. The purchasers are not related entities of Entity X.

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 subsection 40-65(1)