Private ruling: Goods and services tax - property
Published: November 2014

Ruling: Q1: Is your sale of a specified property an input taxed supply under section 40-65 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: Yes, your sale of a specified property is an input taxed supply under section 40-65 of the GST Act. The house and land constitutes residential premises to be used predominantly for residential accommodation. The physical characteristics of the land and house as a whole indicate that the land is to be enjoyed in conjunction with the residence.

Relevant facts and circumstances: The owners of the surrounding properties got together to lobby the shire to change the zoning on the land. The owners decided to "notionally join" their properties and apply for a zoning change from rural to urban. The properties remain on separate titles and have never been, nor will be merged prior to sale. The owners' goal was to have urban zoning applied to all of the properties and thereby be in a position where they may attract a purchaser. It was and remains the owners' intention not to do anything more than was necessary to secure the rezoning of the land. There is and was no intention to develop the land. There was and is no formal business agreement in relation to the project. Experts were engaged by the owner group to undertake the rezoning of all the properties. The owners were not appropriately skilled to undertake this task themselves. The expert project managers assisted the owners through the rezoning process, from the approval stage, to dealing with the various government departments. Costs have been incurred by the owner group with the exception of one owner who could not afford it. The owners contributed their portion of the costs to a single bank account managed on behalf of all of them. All debts were settled from that account. The costs were split based on each owner's land size as a portion of the total combined size of the land. There is no partnership or joint venture. It was recognised by the owners at the outset that no single owner would have the financial capacity to both undertake the rezoning exercise and achieve the maximum sale price with respect to their land. The rezoning application was successful and it is now zoned residential. An Information Memorandum seeking expressions of interest has been issued. Any prospective buyer will be invited to make an offer to purchase the land. One offer will be made to the owners for administrative ease as recommended by the real estate agent. The owners will determine whether they will all accept the offer price. Each owner must agree to the total offer price in order for the deal to proceed to the next stage. Once the offer is accepted, separate contracts for sale will be drawn up for each owner. The property was purchased by your parents and there was a house on the property at that time. Originally the house was a three room house comprising of a kitchen and two bedrooms. So the house went from a two bedroom house to a three bedroom house. There have been no major renovations since that time. You inherited the property. The old house located on the property has been and is currently used as residential premises. The residence includes all facilities/living areas (physical characteristics) that would be expected of a 'standard' house. The house is old and run down. Due to this the type of tenant that has been attracted to the house is from a lower socio economic background and there have been various instances where the tenants have either refused to pay the rent or been unable to pay the rent. In some cases the property has been damaged by the tenant and the property has been vacant after the eviction of tenants whilst repairs have been carried out. The property was solely used to generate rental income since you inherited it. You did not live in the property nor did you attempt to sell the property in the past. There is no fence around the house. There is only a boundary fence around the entire title. Other than the residential premises the remainder of the property is effectively vacant with only grass cover and trees. There is not subdivision of property.

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