Private ruling: GST and registration
Date of advice: 19 September 2018
Published: October 2018

Ruling: Q1: Are you required to register for GST as a result of the activity of subdividing land, and building two new dwellings and renovating an existing dwelling on the land? | A1: No. You are not required to register for GST as a result of the activity of subdividing land, and building two new dwellings and renovating an existing dwelling on the land. The reason for this is because your supply of a new dwelling on the subdivided land to your parent is not included in any enterprise you carry on. Furthermore, your GST turnover does not meet the registration turnover threshold given that you only otherwise make input taxed supplies of residential rent in respect of the dwellings you hold.

Relevant facts and circumstances: ● You purchased a property a number of years ago which included an existing dwelling on a block of land. ● The block of land is on two separate titles. ● The property has been rented out since its purchase and it is a residential property. ● It has always been your intention to carry out a project involving renovating the existing dwelling, adding a third title via subdivision and building two new properties for you to add to your long term residential rental portfolio. ● Currently you have X other residential properties. No significant renovations have been done to these properties nor do you have any intention of completing another project like the one described above in the future. ● Currently you are not registered for GST. ● Recently you have approached the bank to set up funding for the project. However, you were not able to fund the project alone so your parent agreed to assist you as a joint venture. ● Your parent will borrow approximately one third of the project costs and on completion of the project you will be transferring one of the new dwellings to your parent. ● The existing renovated dwelling and second new dwelling will remain as an asset of yours and be rented out as a residential property. ● You intend for your properties to be held as an investment once the project is complete and not sold as trading stock. ● Your project is an isolated project on a small scale and you have no plans to repeat the project either in your own name or in any other joint venture arrangement. Additional information provided ● At the time of purchasing the property, your parent lent to you some money for the purchase. The loaned amount was documented and you acknowledged that you would repay the amount within two years and that interest was payable by you on the loaned amount. ● The joint venture referred to in this case is not a GST Joint Venture. ● The total cost for the project is budgeted at $X. Your parent will pay $Y at the start of the development towards meeting the budgeted cost. Your parent does not provide any other amount towards the project. ● With regard to the new dwelling that is to be transferred to your parent, your parent’s contribution is to cover your costs in relation to the construction of the new dwelling and you have no profit making intention from the disposal of this new dwelling to your parent. ● You have advised that your parent only helped financially with the construction costs, and that no consideration was provided by the parent for the land which will be gifted to them. ● Your bank has valued each dwelling at $Z at the end of the project. The intention of you and your parent is that all the dwellings are for long term retirement investment and are not being constructed to be sold for a profit.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 - section 9-20