Private ruling: Sale of Property
Date of advice: 21 March 2016
Published: May 2016

Ruling: Q1: 1. Will the sale of Lot A be a taxable supply? 2. Will the sale of Lot B be a taxable supply? | A1: 1. No, the sale of Lot A will not be a taxable supply. The sale of Lot A will be input taxed pursuant to section 40-65 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). 2. No, the sale of Lot B will not be a taxable supply under section 9-5 of the GST Act.


Relevant legislative provisions: 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 9-5 | A New Tax System (Goods and Services Tax) Act 1999 section 9-20

Reasons for decision: Summary: Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) outlines the requirements for making a taxable supply. 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. However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed (*denotes a term defined in section 195-1 of the GST Act) The sale of Lot A will be made for consideration and in the course of your leasing enterprise. The supply will be connected with the indirect tax zone. You are registered for GST. The sale of Lot A will fulfil the requirements in paragraphs 9-5(a) to 9-5(d) of the GST Act. Therefore, the sale will a taxable supply unless it will be a GST-free or input taxed. Section 40-65 of the GST Act states: (1) A sale of *real property is input taxed , but only to the extent that the property is *residential premises to be used predominantly for residential accommodation (regardless of the term of occupation). (2) However, the sale 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. (*denotes a term defined in section 195-1 of the GST Act) You advised that the residential units were not new and that no substantial renovations have been made to them in the past 5 years. As such, the residential units are not 'new residential premises' as described in section 40-75 of the GST Act. Therefore, the sale of Lot A will be input taxed. The sale of Lot B must be held to the criteria in section 9-5 of the GST Act to determine if it will be a taxable supply. You will sell Lot B for consideration (paragraph 9-5(a)); the sale will be connected with the indirect tax zone (paragraph 9-5(c)); and you are registered for GST (paragraph 9-5(d)). What remains to be determined is whether the supply of Lot B will be made in the course or furtherance of an enterprise that you carry on. You have not recorded Lot B as an asset of your business. You have not claimed any input tax credits nor made income tax deductions for all costs associated with Lot B. You advised that you purchased Lot B with a view to build your primary residence. You have not previously undertaken any property development activity. You have not done anything with Lot B other than obtaining development approval which has already lapsed. Based on the facts provided, the sale will not be made in the course of your leasing enterprise or any other enterprise carried on by you. Paragraph 9-5(b) of the GST Act will not be satisfied. Therefore, the sale of the Lot B will not be a taxable supply.

Relevant facts: You and your spouse jointly acquired X residential properties in 19XX. The X properties are Lot A and Lot B. Lot A comprises of land and less than 5 residential units while Lot B is vacant land. | At the time of purchase, you were only interested in Lot B with a view to building your primary residence on the vacant land. The vendor owned both lots and you could only secure Lot B by also purchasing the adjoining Lot A. | Since the purchase, the residential units on Lot A have been rented to residential tenants. You confirm that the residential units are not new nor have any substantial renovations been made to these units in the past 5 years. | You and your spouse lodged plans for Lot B with the local authority to build your primary residence in 20YY. These plans were approved but you did not build at that time due to the cost of construction. In 20ZZ your spouse passed away and Lot B remains vacant to this day. Development approval for Lot B was extended through 20VV and has since lapsed. | You have not recorded Lot B as a business asset. You have not claimed any GST input tax credits nor made income tax deductions with respect to Lot B. You have capitalised all costs associated with Lot B. | You now wish to sell the properties to fund your retirement.