Private ruling: GST and sale of new residential premises
Date of advice: 24 May 2019
Published: July 2019

Ruling: Q1: Are you making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) on which you are liable to pay GST, when you sell the property? | A1: No, you are not making a taxable supply under section 9-5 of the GST Act when you sell the property and therefore you are not liable to pay GST on the sale.

Relevant facts and circumstances: ● You are spouses. ● You are not, nor have you ever been, registered for goods and services tax (GST). ● You purchased a block of vacant land (the property). ● You subsequently engaged a builder to build a home on the property with the intention of it being your main residence. ● Approximately one year later, you obtained an occupancy certificate for the property and moved in shortly afterward. ● You experienced significant difficulty living at the property as it was too far from your workplaces and there was a lack of public transport. ● As a result, you moved back to your previous home and rented the property via an agent until present. The property was rented for a period of less than five years. ● You encountered financial difficulties this year and have decided to sell the property.

Relevant legislative provisions: The A New Tax System (Goods and Services Tax) Act 1999 section 9-5; section 188-15; section 188-25

Reasons for decision: Summary: GST only applies to the sale of certain property types (like new residential premises) if the vendor is registered or required to be registered for GST purposes. You may be required to register for GST even if you are not a business if: ● the turnover from your property transactions and other transactions are more than the GST registration threshold, and ● your activities are regarded as an ‘enterprise’. For GST purposes, an enterprise includes 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 (for example, if you buy land with the intention of developing it for immediate resale at a profit); or on a regular or continuous basis, in the form of a lease, licence or other grant of an interest in property. In your case, you built and lived in the property as your residence. Your intention was to build a family home, and was not to develop the land for immediate resale at a profit. Due to unforeseen circumstances, you only lived in the property for a few months before renting it for a period of less than (but almost) five years prior to sale. You have never been registered for GST. There is no other surrounding evidence to suggest that you are conducting a business of property development in relation to the property, or that the sale of the property was a one off adventure or concern in the nature of trade (as it was your intention to live in the property and not to develop for immediate sale and profit). The only enterprise that you conducted in relation to the property was the enterprise of leasing. Whilst your sale of the property was a supply in the course of the cessation of that leasing enterprise, both the leasing and sale proceeds are disregarded for the purposes of working out whether your GST turnover meets the turnover threshold for registration (currently $75,000) because the leasing was an input taxed supply and the sale was the mere realisation of your capital asset (see sections 188-15 and 188-25 of the GST Act, which exclude both of these types of supplies from calculating GST turnover). Therefore, as you are not required to be registered for GST in relation to your leasing enterprise, and you are not carrying on any other enterprise in relation to the property, you are not making a taxable supply under section 9-5 of the GST Act when you sell the property, and you are not liable to pay GST on the sale.