Private ruling: The treatment of GST on the sale of a residential investment property.
Date of advice: 17 August 2018
Published: October 2018
Ruling period: 1 July 20XX to 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Is GST applicable to the sale of the property by the Vendor? | A1: No. There are no provisions in Division 38 of the A New Tax System (Goods and Services Tax) 1999 Act (GST Act) which allow the supply of residential premises by way of sale to be GST-free. Subsection 40-65(1) of the GST Act provides that the sale of residential premises is input taxed, but only to the extent that the property is residential premises to be used predominantly for residential occupation (regardless of the term of occupation). Where a supply is input taxed, GST does not apply to the supply. The sale of the property will not be a taxable supply under section 9-5 of the GST Act because the supply was input taxed as the sale of residential premises. No GST is payable on the sale of the property.

Relevant facts and circumstances: The property is a residential premise under one lot number and one title. The property was purchased by the Vendor in 20XX, the date of settlement was in 20XX. On the contract of sale, it was noted that there was no GST as it was not a taxable supply. The property was sold as a house only. The Vendor was not registered for GST and was not required to be register for GST. The margin scheme was not use in making the supply. No GST credits have been claimed in respect of the residential expenses incurred in renting the property. The Vendors obtained a development application approval in mid 20XX for a residential boarding house on the property. The relevant entity has claimed GST credits on all costs relating to the development of DA, Architect fees and legal fees. The Vendors have decided to sell the property; no building works have been carried out on the premises while they have owned the property and will be sold as a residential property only.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) 1999 Act Division 38 | A New Tax System (Goods and Services Tax) 1999 Act Section 9-5 | A New Tax System (Goods and Services Tax) 1999 Act Subsection 40-65(1)