Private ruling: GST and mortgagee in possession sale of residential premises
Published: October 2014

Ruling: Q1: Are you making a taxable supply under section 105-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when you sell the property? | A1: No. As you are a mortgagee in possession we need to consider how section 105-5 interacts with section 9-5 and 40-65 of the GST Act. Section 105 of the GST Act provides that you make a taxable supply if you supply the property of another entity (the debtor) to a third entity in or towards the satisfaction of a debt that the debtor owes to you; and had the debtor made the supply, the supply would have been a taxable supply. The supply by Entity A as trustee of the Trust would be a taxable supply as it meets all the conditions of section 9-5 of the GST Act unless the supply of the property will be an input taxed supply of residential premises. We have considered the physical characteristics of your property pursuant to section 40-65 and 195-1 of the GST Act and consider that the whole property is residential premises and is not commercial residential premises or new residential premises. Therefore, you are not making a taxable supply under section 105-5 of the GST Act because if the debtor made the supply it would be an input taxed supply. There will be no GST payable on the sale.

Relevant facts and circumstances: You are registered for GST. You were appointed as a controller of a property pursuant to an instrument. You have provided a copy of the form titled Notification that a person has been appointed controller/ entered into possession etc. The Property is located in Australia (Property). You will be exercising your power of sale as mortgagee in possession to sell the Property. You have appointed xxx (Agents) to act as your agents and exercise all of your powers at law. The debtor and current registered proprietor of the Property is Entity A as trustee for the Trust (the Trust). The Trust is registered for GST. The residence on the Property was occupied by the parents of xxx, a director of Entity A, since the property was acquired by the Trust in ddmmyyyy. No rent has been paid by the parents since at least ddmmyyyy. You have provided a copy of a valuation of the Property for forced mortgagee sale purposes. Amongst other things, the valuation provides: • The Property is xxx square meters, zoned rural residential. • It contains a residence with x bedrooms and x bathrooms. On ddmmyyyy your representative provided the following further information: • The property includes a small orchard consisting of approximately x small trees and is not commercial. • The workshop is a standard shed without power. • The bottom of the Property is bushland/trees. • You contend the sale of the Property will not be a taxable supply if the debtor were to make it.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 Section 9-5, | A New Tax System (Goods and Services Tax) Act 1999 Section 40-65 | A New Tax System (Goods and Services Tax) Act 1999 Section 105-5, and | A New Tax System (Goods and Services Tax) Act 1999 Section 195-1.