Private ruling: GST - sale of residential premises
Date of advice: 20 January 2026
Published: 9 March 2026
Ruling period: XX January 20XX to XX January 20XX

Ruling: Q1: When it is sold, will the taxpayers be making a taxable supply of the property at X, pursuant to section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: No. | Q2: Will any of the proceeds from the sale of the said property be treated as ordinary income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A2: No.

Relevant facts and circumstances: In 20XX, Person and Person X, (the taxpayers), decided to build an investment property. Their intention was to build an investment property that their children could rent while allowing the property to appreciate in value over an estimated period of X years. The taxpayers explored various house and land packages and eventually found one that suited their goals and intentions, situated at X. The taxpayers' plans were carried out as follows: X/X/2020 - Deposit paid in respect of acquisition of land X/X/2020 - Deposit paid in respect of house construction X/X/2020 - Approval of home loan from bank X/X/2020 - Building contract signed by taxpayers X/X/2021 - Settlement of land purchase X/X/2021 - Approval of Building Permit obtained X/X/2021 - Commencement of construction X/X/2022 - Occupancy Certificate granted Despite indications the construction works would take 7 months, the build took 2 years. The delay was due to building product delays, overcommitment from the builder, and COVID delays. On completion, the house was leased in 20XX to X at market value. That lease was terminated in 20XX and a property manager was appointed, who who currently manages the current lease to tenants. In 20XX the taxpayers consulted a financial advisor who suggested selling the property would be beneficial to their financial position moving forward towards retirement. The taxpayers now intend to sell the property for the following reasons: • The above circumstances have been extremely stressful both financially and mentally. • The rise of interest rates, which have almost doubled since they started building the house, has caused financial strain as the property's rental income is not covering the costs, resulting in significant contributions from the taxpayers. • Mrs X is X years of age and considering retirement at X. She is currently working part time to assist in meeting the shortfall of the rent to maintain the property and does not have a guarantee of income going forward due to her age and no guarantee of contract extension. The taxpayers are not registered for GST and, apart from the leasing of the property, are not carrying on an enterprise.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 , sections 9-5, 9-20, 9-40, 40-35, 40-65, 40-75, 188-25, and 195-1. | Income Tax Assessment Act 1997 section 6-5 and Parts 3-1 and 3-3

Reasons for decision: Detailed Reasoning - Question One: Liability to GST will only arise if a taxable supply (or taxable importation) is made, pursuant to section 9-40 of the GST Act. There are several components to a taxable supply, as stipulated by the section 9-5. They are: a) the supply is made for consideration; b) the supply is made in the course or furtherance of an enterprise that the supplier carries on; c) the supply is connected with Australia; and d) the supplier is registered for GST or is required to be registered. Section 9-5 also provides an exclusion to a supply being a taxable supply: if the supply is GST-free or input taxed it cannot be a taxable supply despite a) to d) above being satisfied. Upon commencing to lease the property at X (the property) to tenants, the taxpayers' supply of the lease satisfied components a) and c) of a taxable supply. By virtue of the definition of 'enterprise' provided by section 9-20 of the GST Act - specifically paragraph 9-20(1)(c) - the supply also satisfied component b) of the definition. However, section 40-35 of the GST Act stipulates that the supply of a lease of residential premises is input taxed. Therefore, regardless of whether or not the taxpayers were/are required to be registered for GST - component d) of a taxable supply - the taxpayers have not been making a taxable supply of that lease. Turning to the proposed sale of the property, two questions arise: 1. What is the GST treatment of a sale of residential premises? 2. Will the proceeds of the sale be sufficient to require the taxpayers to be registered for GST and thus satisfy component d) of a taxable supply? As to the first question, section 40-65 of the GST Act treats a sale of 'new residential premises' as being input taxed. Pursuant to section 40-75, the property will be 'new residential premises' if it: a) continues to be leased to tenants prior to being sold; and b) it is sold before more than 5 years have passed since completion of its construction, ie before X . Thus, if the property is sold before X, the sale will be an input taxed supply and therefore not a taxable supply. If the property is sold after X, the sale will not be input taxed, so then the second question becomes relevant. The requirement to register, if satisfied, will have the effect of treating the sale as a taxable supply as the other three components will be satisfied. (Specifically, the sale will be treated as being made in the course of carrying on an enterprise being carried on because, by virtue of section 195-1 of the GST Act, carrying on an enterprise includes doing anything in the course of terminating an enterprise.) The requirement to register will depend on whether the taxpayers' 'projected GST turnover' will exceed the registration turnover threshold of $75,000. Presumably the proposed sale amount will exceed that threshold. However, section 188-25 of the GST Act stipulates that in determining 'projected GST turnover' any supply made, or likely to be made: a) by way of transfer of ownership of a capital asset; or b) solely as a consequence of ceasing to carry on an enterprise, is ignored. In our view, either or both of paragraphs 188-25(a) and (b) will be satisfied in respect of the sale of the property. Thus, the taxpayers will not be required to be registered for GST as a result of the likely sale of the property and consequently will not be making a taxable supply when the property is sold. | Detailed Reasoning - Question Two: Based on the information provided, the proceeds from the property will not be ordinary income and not assessable under section 6-5 of the ITAA 1997 as either: a) the carrying on of a business in accordance with the factors listed in Taxation Ruling 97/11; or b) a profit-making or commercial transaction in accordance with Taxation Ruling TR 92/3. Therefore, any proceeds received on the disposal of the property will represent a mere realisation of capital assets which will be assessed under the capital gains tax provisions contained in Parts 3-1 and 3-3 of the ITAA 1997.