Issue
Is the entity, a property owner, making a supply that is partly a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), and partly an input taxed supply under section 40-65 of the GST Act, when it sells commercial premises with residential premises attached?
Decision
Yes, the entity is making a supply that is partly a taxable supply under section 9-5 of the GST Act and partly an input taxed supply under section 40-65 of the GST Act when it sells commercial premises with residential premises attached.
Facts
The entity is a property owner. The entity is selling commercial premises with residential premises attached.
The entity's supply of the commercial premises with residential premises attached does not meet the requirements of a GST-free supply of a going concern under section 38-325 of the GST Act.
The attached residential premises is used predominantly for residential accommodation. The residential premises is neither commercial residential premises as defined in section 195-1 of the GST Act, nor is it new residential premises as defined in section 40-75 of the GST Act.
The entity is registered for goods and services tax (GST). The supply is for consideration. The supply is made in the course of an enterprise carried on by the entity in Australia. The real property is located in Australia.
Reasons for Decision
Under section 9-5 of the GST Act, an entity makes a taxable supply if: • it makes a supply for consideration; • the supply is made in the course or furtherance of an enterprise that it carries on; • the supply is connected with Australia; and • the entity is registered or required to be registered for GST.
However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.
Under subsection 40-65(1) of the GST Act, a sale of real property is input taxed, but only to the extent that the property is residential premises is to be used predominantly for residential accommodation.
The residential premises was used predominantly for residential accommodation before 2 December 1998, and is not commercial residential premises or new residential premises. Therefore, the supply of the attached residential premises is input taxed under subsection 40-65 of the GST Act.
The supply of the commercial premises is not input taxed under Division 40 of the GST Act, nor is it GST-free under Division 38 of the GST Act. The entity is registered for GST, and the supply of commercial premises satisfies the other positive limbs of section 9-5 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act, when it supplies the commercial premises.
Accordingly, the entity is making a supply that is partly a taxable supply under 9-5 of the GST Act and partly an input taxed supply under section 40-65 of the GST Act when it sells commercial premises with residential premises attached. [Note: he value of a supply that is partly a taxable supply and partly a supply that is GST-free or input taxed, is worked out on a proportional value basis in terms of section 9-80 of the GST Act.]