GST and the supply of a 'removal house'

Is the entity, a property developer, 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 a 'removal house'?

No, the entity is not making an input taxed supply under section 40-65 of the GST Act when it sells a 'removal house'. The entity is making a taxable supply under section 9-5 of the GST Act.

The entity is a property developer. The entity purchases residential premises comprising a house and land. The house is attached to the land and forms an integral part of the land.

The entity then removes the house from the land and sells the house only. The entity retains all interests in relation to the land. The house is referred to as a 'removal house'.

The house was never rented by the developer.

The entity is registered for goods and services tax (GST). The supply satisfies all of the other positive limbs of section 9-5 of the GST Act.

Under section 40-65 of the GST Act, a sale of real property is input taxed, but only to the extent that the property is residential premises to be used predominantly for residential accommodation (regardless of the term of occupation).

Section 195-1 of the GST Act states that real property includes: • any interest in or right over land • a personal right to call for or be granted any interest in or right over land; or • a licence to occupy land or any other contractual right exercisable over or in relation to land.

The case of Cohns Industries Pty Ltd v Deputy FCT (1979) 24 ALR 658 provides legal authority for the rule of statutory interpretation that if the word 'includes' is used in relation to a definition of a word or phrase, prima facie, the word or phrase defined has its ordinary meaning in addition to the matters specified in the definition, whether or not these words of definition come within the ordinary meaning of the word or phrase being defined.

The Macquarie Dictionary (1997) defines 'real property' as: 'tangible and immovable property such as land and houses, buildings or any such structures on the land, and any rights attached to the ownership of the land, such as mineral rights (but excluding leasehold interests).'

The entity is not supplying land, or land and houses, buildings or any such structures on that land. The entity is only supplying a 'removal house' that is detached from the land. Furthermore, the entity retains all interests in relation to the land. Therefore, the 'removal house' does not satisfy the ordinary definition of 'real property' in The Macquarie Dictionary (1997) nor does it satisfy the statutory definition of 'real property' in section 195-1 of the GST Act.

Accordingly, the supply does not satisfy the requirements in section 40-65 of the GST Act because the entity is not selling 'real property'. As such, the entity is not making an input taxed supply under section 40-65 of the GST Act when it sells a 'removal house'.

The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act; nor input taxed under any of the other provisions in Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it sells a 'removal house'.