GST and input tax credits for cost of constructing residential premises

Is the entity, an owner builder, entitled to claim input tax credits for the construction costs of duplex units under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it occupies one unit and rents out the other unit after the construction is complete?

No, the entity is not entitled to claim input tax credits for the construction costs of the duplex units under section 11-20 of the GST Act, when it occupies one unit and rents out the other unit after the construction is completed.

The entity is an owner builder. The entity purchased a block of land with an existing residential premise.

The entity demolished the existing residential premise and constructed a duplex on the land.

The entity acquired a range of goods and services in demolishing the existing residential premise and constructing the duplex. The supply of these goods and services to the entity are taxable supplies under section 9-5 of the GST Act.

The entity occupies one of the units and leases the other unit for the purpose of residential accommodation to tenants. The entity is registered for goods and services tax (GST).

Section 11-20 of the GST Act provides that an entity is entitled to the input tax credit for any creditable acquisition that it makes.

Section 11-5 of the GST Act lists the requirements that must be satisfied for an entity to make a creditable acquisition. One of those requirements is that the entity must acquire the thing solely or partly for a creditable purpose (paragraph 11-5(a) of the GST Act).

Section 11-15 of the GST Act defines the meaning of creditable purpose. An entity does not acquire a thing for a creditable purpose to the extent that: • the acquisition relates to making supplies that would be input taxed (paragraph 11-15(2)(a) of the GST Act); or • the acquisition is of a private or domestic nature (paragraph 11-15(2)(b) of the GST Act).

The entity occupies one of the units and rents out the other unit for the purpose of residential accommodation to tenants. With regards to the acquisitions relating to the construction of the unit occupied by the owner, the entity is making acquisitions that are of a private or domestic nature. As such, the entity is not making the acquisitions for a creditable purpose ( paragraph 11-15(2)(b) of the GST Act). Therefore, the requirements of section 11-5 of the GST Act are not satisfied.

The supply of the duplex unit by way of lease for the purpose of residential accommodation is an input taxed supply under section 40-35 of the GST Act. With regard to the acquisitions relating to the leased unit, the entity is making acquisitions that relate to making supplies that would be input taxed. As such, the entity is not making the acquisitions for a creditable purpose (paragraph 11-15(2)(a) of the GST Act). Therefore, the requirements of section 11-5 of the GST Act are not satisfied.

As the entity is not making any creditable acquisitions, the entity is not entitled to claim input tax credits for the construction costs of the duplex units under section 11-20 of the GST Act.