GST and sale of residential premises that have been used for residential accommodation prior to 2 December 1998

Is the entity, a property owner, making an input taxed supply under section 40-65 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells residential premises that have been used for residential accommodation prior to 2 December 1998?

Yes, the entity is making an input taxed supply under section 40-65 of the GST Act when it sells residential premises that have been used for residential accommodation prior to 2 December 1998.

The entity is a property owner. The entity is selling residential premises. The entity purchased the premises in the early 1990s and has rented them ever since. The premises are used predominantly for residential accommodation. They are not commercial residential premises. The entity has not carried out any substantial renovations to the premises.

The entity is registered for goods and services tax (GST).

Under subsection 40-65(1) of the GST Act, the sale of real property is input taxed to the extent that it is residential premises to be used predominantly for residential accommodation. However, subsection 40-65(2) of the GST Act provides that the 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.

The premises are not commercial residential premises. Therefore, it is necessary to determine if the premises fall within the definition of new residential premises. If the premises are new residential premises, the supply will be taxable where the requirements of section 9-5 of the GST Act are satisfied.

Subsection 40-75(1) of the GST Act provides that residential premises are new residential premises if they: • have not previously been sold as residential premises and have not previously been the subject of a long-term lease; or • have been created through substantial renovations of a building; or • have been built, or contain a building that has been built, to replace demolished premises on the same land.

In this case, the premises have been sold previously as residential premises (that is, when the entity originally purchased them). They have not been created through substantial renovations nor have they been built to replace demolished premises on the land. Therefore, the residential premises do not fall within the definition of new residential premises.

Accordingly, the entity is making an input taxed supply under section 40-65 of the GST Act when it sells residential premises that have been used for residential accommodation prior to 2 December 1998.