Private ruling: GST and sale of residential premises
Date of advice: 16 October 2019
Published: December 2019
Ruling period: Not applicable
Date scheme commenced: Not applicable

Ruling: Q1: Will the sale of a property be a taxable supply and subject to goods and services tax (GST)? | A1: No. The sale of the property will be input taxed and not subject to GST.

Relevant facts and circumstances: · The entity carries on an enterprise of renting residential properties. · The entity wishes to sell a residential property to a property developer. And the property developer wishes to use the margin scheme on the resale of the property. · The property has a residential house on a xx hectare land in total. · The entity was renting the residential property as an investment property and derives an income of $$$$ per annum. · The entity obtained a Development Approval (DA) to subdivide part of the land for sale and subsequently the DA has been lapsed. · Now the entity wishes to sell the property as a residential with the house. · The house and the land are registered under one title. And the land was unusable and was not used for any activities such as farming or commercial.

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 40-65 | A New Tax System (Goods and Services Tax) Act 1999 - section 195-1

Reasons for decision: Summary: 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; (b) the supply is made in the course or furtherance of an enterprise that you carry on; (c) the supply is connect with the indirect tax zone (Australia); 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. The sale of the property will be made for consideration; in the course or furtherance of the enterprise of renting residential property; and the sale is connected with the indirect tax zone. The sale of a residential property is not GST-free under any provisions of the GST Act or any other legislation. Therefore, it should be determined whether the sale of the property will be input-taxed supply. Under section 40-65 of the GST Act, a sale of property is an input taxed supply if the property is residential premises to be used predominantly for residential accommodation unless the premises are: (a) commercial residential premises, or (b) new residential premises other than those used for residential accommodation before 2 December 1998. The term "residential premises" is defined in section 195-1 of the GST Act as follows: Residential premises means land or a building that: (a) is occupied as a residence or for residential accommodation; or (b) s intended to be occupied, and is capable of being occupied, as a residence or for residential accommodation; (regardless of the term of the occupation or intended occupation) and includes a floating home. Based on the facts provided, the residential premises is located in a xx hectare land and was used for residential rental purposes. The entity acquired the property for investment purposes and has been deriving a rental income of $$$$ per annum. Furthermore, the property is neither a commercial residential premises nor a new residential premises. Accordingly, the sale of the property by the entity will be input taxed. The sale will not be a taxable supply and therefore not subject GST.