Private ruling: GST and sale of residential property
Published: July 2014

Ruling: Q1: Is the supply of your residential properties a taxable supply? | A1: No, the supply of your residential properties is not a taxable supply.

Relevant facts and circumstances: You are registered for the goods and services tax (GST). You purchased a property situated at X. You purchased the property as a residential supply of two houses. The houses are many decades old and the supply was a supply of residential premises. You neither paid any GST on the supply and nor claimed input tax credits on your acquisition. You used the property as short term accommodation as part of your motel business and paid GST on all rental income received. You performed capital works/renovations on the property and as the property was used as part of your motel business, you claimed input tax credits on the capital works. The renovations made to the property were minor. You subsequently subdivided the property which led to the two houses being located on separate land titles. You are selling two residential properties that are many decades old and that have not been extensively renovated.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 subsection 40-65(1) and | A New Tax System (Goods and Services Tax) Act 1999 subsection 40-65(2).

Reasons for decision: Summary: Subsection 40-65(1) of the A New Tax System (Goods and Services Tax) Act 1999 (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). Subsection 40-65(2) of the GST Act mentions that a sale is not input taxed to the extent that the residential premises are commercial residential premises or new residential premises other than those used for residential accommodation before 2 December 1998. In this case it is necessary to determine whether the premises being sold are commercial residential premises or new residential premises. | Detailed Reasoning - Commercial residential premises: The definition of 'commercial residential premises' in section 195-1 of the GST Act includes a hotel, motel, inn, hostel or boarding house. You informed us that the presidential premises are many decades old and that the supply to you was an input taxed supply of residential premises. Consequently, no GST was charged on the supply and you also did not claim input tax credits on your acquisition. You subsequently did some minor renovations to the property and used it as part of your motel business and paid GST on all rental income received. You have now subdivided the property which led to the two houses being located on separate land titles. You have also indicated that the sale of those premises is the sale of residential property. The description provided by you indicates that the premises you are selling exhibit all the physical characteristics of residential premises and are not designed as a hotel, motel, inn, hostel, boarding house or similar premises. Therefore, we consider that the premises you are selling are residential premises. | Detailed Reasoning - New residential premises: According to subsection 40-65(2) of the GST Act, the sale of new residential premises other than those used for residential accommodation before 2 December 1998 are not input taxed. As the facts provided indicate, the residential premises are many decades old and have been used for residential accommodation before 2 December 1998. Therefore, they are not considered new residential premises. In this case it is determined that the premises being sold are neither commercial residential premises nor new residential premises. Therefore, the sale of your residential premises will be input taxed and not taxable.