GST and new residential premises

1 Is the Property new residential premises under section 40-75 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

1 Yes. Question 2 Will the supply of the property by you be made in the course or furtherance of an enterprise in accordance with section 9-20 of the GST Act? Answer 2 Yes. This ruling applies for the following period : 1 August 20XX - 31 December 20XX The scheme commenced on: 1 August 20XX

You purchased the Property as Joint Tenants, for a specified sum in August 20XX. You are registered as a partnership. You are not registered for GST as individuals. The partnership has been registered for GST since a specified date. The Property had an existing residence, consisting of X bedrooms, X bathrooms and X parking spaces, and a pool studio. You moved into the Property with your children as soon as practicable after settlement, and it became your main residence. On a specified date, you moved to a rental property and a caravan park for X months so renovations could be undertaken. Following that you moved back to your previous residence, where you currently reside. You intended to move back into the Property when the renovations were completed. On a specified date, the renovations to the Property were completed. The property now consists of a X-bedroom and X-bathroom main residence and a new self-contained studio. The studio contains a kitchenette, dining area, bed and bathroom. A free-standing X car garage was also constructed on the Property.

The renovations were originally estimated to cost a specified amount; however, due to changes in the scope and scale of works, the increase in material costs and the cost of new furnishings and décor, the total cost was a specified amount A related entity arranged a Loan with a bank in 20XX. The purpose of the loan is recorded on the loan offer document as Investment - Purchase Shares/Other Assets. The balance of the renovation cost, which amounted to $X million, was funded by a combination of sales of shares, funds/cash that was available from existing loan facilities and funds borrowed from family. Development applications and approvals On a specified date, you lodged a development application with the Council. It was approved on a specified date. A modification plan was submitted on a specified date. This was approved by the Council. The Notice of Determination and Statement of Reasons Modification Approval document, issued on a specified date, lists the modified conditions of consent. The demolition plans were not altered from the original application.

Although the approval states the development will be in accordance the demolition plans, you advise that the actual demolition was in accordance with the drawings you provided as part of your private ruling application. The works completed on the Property include: Demolitions and removals The garage doors were removed from the internal garage and replaced with a wall with openings for two new steel doors, creating a guest suite. A topping slab was laid over the existing slab to raise the floor level. The storage area and pantry were removed from the newly created guest suite area. The laundry and WC area were demolished. The walls between the laundry and WC were demolished and removed. A new external wall was constructed to enclose the original portico. Two new interior walls and an exterior wall were constructed to form a new ensuite for the guest suite, a new reconfigured and refinished laundry and a new mud room area. Two walls were removed from the entry area and former kitchen area. A portico was constructed with a new interior wall and doors in the location of the original kitchen. Two large doorways were cut from the original wall entering the new conservatory area.

Two walls that formed the original entrance foyer were demolished and removed. The kitchen was demolished, removed and relocated. A wall was constructed to create an entrance portico in the space where the kitchen was originally located. Two exterior load bearing walls and three interior walls which originally formed a bedroom, media lounge and sitting area were demolished and removed, and a new extension was built to accommodate the new kitchen with servery to the terrace area, the meals and walk in butler's pantry and servery area. A wall between the sitting and living area was demolished and removed. XX% of the original concrete floor slab on the lower floor was retained. The downstairs ceilings were removed and replaced with new gyprock, which was then rendered. The staircase was demolished, removed and replaced with a widened, curved staircase. Two walls were removed from the existing bathroom and new walls were constructed to extend the bathroom adjoining the stairs. The bathroom door was relocated. The bathroom was demolished, reconfigured and refurnished. The upstairs ceilings, rafters and roof were demolished and replaced with a pitched ceiling with exposed timber rafters.

The upstairs master ensuite was demolished and relocated to the area where the walk-in-robe and change room area were originally located. Three walls were removed from this area and repositioned. The upstairs bathroom was demolished, reconfigured and refinished. 3 exterior walls were demolished and repositioned from the corners of a bedroom, and the linen and passage area. New walls were constructed, creating a larger bedroom, robe and walk in linen closet. The wall between the upstairs linen closet, and a bedroom was demolished and repositioned. The balcony which was originally on 3 sides of the second level was demolished and replaced with a widened balcony on 2 sides. Double steel doors were installed to the exterior walls of a bedroom and another bedroom, providing direct access to the new balcony. Roof tiles were removed from the first storey and replaced with Colorbond. The concrete driveway was demolished, removed and repositioned. The southern courtyard concrete slab was removed and replaced with pavers. The exterior wall to this area was replaced with a large sliding door. The eastern courtyard concrete slab was removed and replaced with pavers and pebble.

The western veranda was removed and widened. The concrete slab was removed and replaced with a timber deck over a new concrete slab. The windows were removed and replaced with a large sliding steel door. A timber beam and slat pergola was built over the new area. The pool studio and patio were demolished and removed. The paving around the edge of the pool was removed and replaced with stone. The garage was demolished. The water tank (eastern side) was demolished and removed. The water tank (north-western side) was retained and an additional 100,000 litre inground water tank was located on the western side of the house. A number of original young quandong trees were relocated to the front of the property and a tree was removed from the north side of the property. All interior and exterior windows and doors were removed and replaced. Several exterior door placements were altered, with some extended to accommodate larger openings. Additional doors were installed as part of the renovation. All windows were replaced with new steel frames, with some repositioned and additional new windows installed. All aluminium windows were replaced with steel windows.

All interior doorways were replaced with arched doors and new frames, with some repositioned as part of the renovation. For the purposes of this private ruling, the items listed above are collectively referred to as 'removals'. Replacements The Property was re-wired and replumbed. Internal greywater and sewage infrastructure was replaced. Stormwater and sewerage were plumbed into existing stormwater tanks and septic. Timber arched entrance door was replaced with a steel and glass door. The upstairs bathroom was demolished, remodelled and refitted. The original timber and carpet floors were replaced with timber floors on the downstairs level. The carpets upstairs were replaced with timber. For the purposes of this private ruling, the items listed above are collectively referred to as 'replacements'. Additions A new kitchen was built in a new location, with a large servery area to the outside terrace. A guest ensuite was created in a space that was previously a toilet and part of the laundry. Steel and glass doors were added to the five external arches from the former breezeway area, creating a conservatory.

Two small windows were removed, and two new arched doors were cut into the wall of the guest suite, with steel and glass doors installed in the new arches. A large stone fireplace, hearth and chimney were constructed in the lounge area. An enclosed mudroom was created between the laundry and the portico by adding a wall and a door to the exterior of the property. A new master ensuite bathroom was created. After receiving approval by the council for a change of use application, a self-contained studio was constructed in the location of the demolished garage. The studio includes a courtyard, kitchenette and butler's pantry. An application to install a new laundry was submitted to the Council on 18 August 2025. A gym, with an infrared sauna, ice bath and rooftop yoga deck were built in the garden area. A spa was added to the pool area. A new garage with parking for X cars was built behind the house. A new pool deck was constructed. The swimming pool back wash was connected to the sewer via new overflow relief gully. Ducted air-conditioning was installed. For the purposes of this private ruling, the items listed above are collectively referred to as 'additions'. Short-term letting

The Property has been let as fully furnished and equipped short-term accommodation since a specified date. The Property is advertised on AirBnb, Stayz/VRBO, and other booking platforms. Most bookings are made through your own website. You block dates in the booking calendar for personal use, as well as for ad-hoc activities such as property marketing, inspections, and meetings with real estate agents. Sale Due to debt, the Property is currently on the market for sale. The rent is not sufficient to meet the outgoings and loan repayments. In between two dates, you changed your registered voting address to your current residence. However, you still considered the Property to be your main residence while renovations were occurring and intended to return. In late 20XX, you decided not to return to the Property and resolved to sell it. You return to the Property periodically between bookings as your current residence is a XX-hour drive away from the Property. Additionally, one partner is managing your farm which requires attention and presence, and your child is attending the local primary school, making frequent travel to the Property not possible.

You travel to the Property by either driving or flying, depending on timeframes and cost of flights. You decided to withdraw the original listing of the sale of the Property upon terminating the previous agency agreement (approximately 4-5 weeks prior to entering into an agreement with the new sales agent). In the middle of a specified month and year, you signed an agreement with a new sales agent. The listed price is Buyers Guide of $X million.

A New Tax System (Goods and Services Tax) Act 1999 section 9-5 A New Tax System (Goods and Services Tax) Act 1999 section 9-20 A New Tax System (Goods and Services Tax) Act 1999 section 40-65 A New Tax System (Goods and Services Tax) Act 1999 section 40-75 A New Tax System (Goods and Services Tax) Act 1999 section 195-1

This is to explain how we reached our decision. This is not part of the private ruling. Issue GST and new residential premises Question 1 Is the Property new residential premises under section 40-75 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? Summary The Property is new residential premises under section 40-75 of the GST Act. Detailed reasoning Under subsection 40-75(1), residential premises are new residential premises if they: (a)          have not previously been sold as residential premises (other than commercial residential premises) and have not previously been the subject of a long-term lease; or (b)          have been created through substantial renovations of a building; or (c)           have been built, or contain a building that has been built, to replace demolished premises on the same land. Paragraphs (b) and (c) have effect subject to paragraph (a). However, in accordance with subsection 40-75(2), residential premises are not new residential premises if, for the period of at least 5 years since:

(a)          the premises first became residential premises: where the premises have not previously been sold as residential premises and have not previously been the subject of a long-term lease; or (b)          the premises were last substantially renovated: where the premises have been created through substantial renovations of a building, or (c)           the premises were last built: where the premises have been built, or contain a building that has been built to replace demolished premises on that same land; the premises have only been used for making supplies that are input taxed because of paragraph 40-35(1)(a). Renovations to the existing residential premises The term 'substantial renovations' is defined in section 195-1 of the GST Act as: substantial renovations of a building are renovations in which all, or substantially all, of a building is removed or replaced. However, the renovations need not involve removal or replacement of foundations, external walls, interior supporting walls, floors, roof or staircases. The definition of 'substantial renovations' requires consideration of what work has been done to the building since it was acquired by the current owner.

Goods and Services Tax Ruling GSTR 2003/3 Goods and services tax: when is a sale of real property a sale of new residential premises ( GSTR 2003/3 ) provides guidance on when substantial renovations apply in practice. Paragraph 61 of GSTR 2003/3 provides that, for the purposes of the GST Act, if substantial renovations to a building are to occur, then the renovations mustsatisfy the two following criteria: •                     the renovations need to affect the building as a whole; and •                     the renovations need to result in the removal or replacement of all or substantially all of the building. Where one of the above criteria is not satisfied substantial renovations have not occurred and no further inquiry needs to be made. Renovations need to affect the building as a whole Paragraphs 63, 64 and 66 of GSTR 2003/3 state: 63. Under this heading we discuss the concept of a building in its entirety, works on surrounding land (for example, curtilage) and additions to the building. Building in its entirety

64. Whether substantial renovations have occurred should be based on consideration of the building in its entirety, that is the building as a whole, and not by reference to specific or individual rooms in the building. For renovations to be substantial they must directly affect most rooms in a building. The renovation of only one part of a building, without any work on the remaining parts of the building, would not constitute substantial renovations. Curtilage 66. Work associated with the renovations, but not directly attributable to the building itself, for example, landscaping and beautification of surrounding land, is not renovations of a building. In your case the entire building has been affected by the renovations. This condition is satisfied. Removal or replacement of all or substantially all of the building

The extent to which parts of a building are removed or replaced will determine whether the above criterion is satisfied. The definition of substantial renovations states that it is not necessary for foundations, external walls, interior supporting walls, floors, roof or staircases to be removed or replaced to be substantial. This criterion is satisfied where there is a removal or replacement of a substantial part of the: •                     structural components of the building; or •                     non-structural components of the building. Paragraphs 70 to 77 of GSTR 2003/3 state the following: 70. Structural work may give rise to substantial renovations in its own right. Structural work includes such work as: •                     altering, or replacing of, foundations; •                     replacing, removing or altering of floors or supporting walls, or parts thereof (interior or exterior); •                     lifting or modifying of roofs; replacing existing windows and doors such that it is necessary to alter brickwork (for example, replacing a single door with a double sliding door).

71. Structural work is also undertaken in the course of building an extension to a house or adding new bedrooms to a house. 72. Where a substantial part of the structural components of a building is removed or replaced this will often mean that a substantial part of the non-structural components is also removed or replaced. 73. However, substantial renovations may also occur where a substantial part of the non-structural components is removed or replaced but the structural components are not substantially affected. For example, in a unit, it is not essential that both components are substantially removed or replaced for substantial renovations to have occurred. 74. Non-structural building work includes: •                     replacing electrical wiring; •                     replacing, removing or altering non-supporting walls, or parts thereof (interior or exterior); •                     plastering or rendering an entire wall or walls; •                     plumbing (eg replacing old metal pipes with copper pipes or plastic pipes); •                     removing or replacing kitchen cupboards, bathroom fixtures, etc;

•                     removing or replacing air-conditioning or security systems. ... 77. As part of renovations, work is often undertaken which does not impact on the structure of the building but is more in the nature of renewing or refreshing what is already there. We consider work of this nature to be cosmetic. Cosmetic work by itself does not amount to substantial renovations. We consider cosmetic work includes: •                     painting; •                     sanding floors; •                     removing and replacing worn or out of date fittings such as light fittings; •                     replacing curtains or carpets. Guidance is provided on what we regard as substantial renovations in Examples 8 and 9 at paragraphs 124 to 130 of GSTR 2003/3. For example, in Example 8, the removal and replacement of the exterior walls, the removal of some internal walls and the replacement of the flooring and the kitchen in a house are considered collectively to amount to substantial renovations. Where structural or non-structural work amounts to substantial renovations that create new residential premises, any cosmetic work undertaken will form part of the new residential premises.

Regarding additions to the house, paragraph 67 of GSTR 2003/3 states the following: 67. Additions that are undertaken with renovations are not included in determining whether a building has been substantially renovated. However, once it is determined that a building has been substantially renovated and new residential premises created, all additions to the building form part of the new residential premises. This will occur, for example, where all or substantially all of a two-bedroom bungalow is removed and replaced and a covered rear deck is added. For the purposes of the GST Act, renovations are 'substantial renovations' of a building if they are renovations in which all, or substantially all, of a building is removed or replaced. This requires consideration of: •                     what constitutes the 'building' •                     how much of the 'building' is to be 'removed' or 'replaced' •                     whether the extent to which the building, or parts of it, that will be 'removed' or 'replaced' amounts to 'all' or 'substantially all' of the building. Only renovation works carried out by the current owner are considered. The current owner in this case is you.

What constitutes the 'building'? As stated above, the definition of substantial renovations requires consideration of what work has been done to the building since it was acquired by the current owner. This necessitates that we examine the building in its entirety, that is, the building as a whole, as it existed before the renovation works commenced. We consider the original residence, which consisted of X bedrooms, X bathrooms, and X car parking spaces, to be the building as a whole as it existed prior to the renovation works commencing. The building was inclusive of all structural and non-structural components including external walls, internal walls, floors, windows, doors, roof, staircase and internal and external fixtures. How much of the building was 'removed' or 'replaced'? We must now consider how much of the building was removed or replaced. Removals/Replacements With respect to the building in its entirety, we consider the works listed as 'removals' and 'replacements' in the facts constituted a 'removal' or a 'replacement'. Additions

As stated above, additions that were undertaken as part of the renovations are not included in determining whether a building has been substantially renovated. Although these works involve an activity of 'renovation', the installation or addition of these features constitutes neither 'removal' nor 'replacement' of any part of the building, as required to meet the criteria for substantial renovations. We consider the works listed as 'additions' in the facts to be additions that were undertaken. Conclusion To satisfy the criteria for substantial renovations, the renovations need to affect the building as a whole and the renovations need to result in the removal or replacement of all or substantially all of the building.

Based on the extent and nature of the works undertaken, the renovations affect the building as a whole and have resulted in the removal or replacement of substantially all of the building. In this case, substantial parts of both the structural and non-structural components of the building have been removed or replaced, leading to the conclusion that the works amount to substantial renovations of the building and therefore result in the creation of new residential premises. Other buildings In this case, it is also necessary to consider the self-contained studio, the garage and the gym that have been constructed on the Property. The principles in paragraph 78 of GSTR 2012/5 Goods and services tax: residential premises ( GSTR 2012/5 ) are relevant to these structures, even though paragraph 78 deals with apartments within a building complex.

78. A supply of a residential apartment in a building may include a garage, car-parking space, or storage area physically separate from the apartment, but within the building complex. The garage, car-parking space, or storage area is ancillary or incidental to the dominant component of the supply being the residential apartment. It can be therefore reasonably concluded that the garage, car-parking space, or storage area are to be used for the better enjoyment of the residential apartment. They do not form a dominant part of the supply. The supply is therefore a composite supply of residential premises to be used predominantly for residential accommodation. [33] This is still the outcome where the garage, car-parking space, or storage space is separately titled to the residential apartment, if it is physically located within the building complex.

While paragraph 78 relates to residential apartments in a building, its principles have equal application where there is a house with separately located ancillary structures. On the facts of this case, the garage and gym on the Property are used in conjunction with, and for the better enjoyment of, the main house. They are therefore ancillary to the supply of the Property and not separate to the sale of the Property. However, unlike the garage and gym, the studio is not merely ancillary to the main house because it is a self-contained dwelling capable of independent occupation. You constructed a new self-contained studio, containing a kitchenette, dining area, bed and bathroom. The studio has the physical characteristics of residential premises and is capable of being occupied as a residence, in its own right. When the new self-contained studio is supplied by you as part of the overall sale of the Property, it will not previously have been sold as residential premises and will be considered new residential premises under paragraph 40-75(1)(a). Conclusion

Accordingly, because both the main house and the studio are new residential premises under section 40-75, the sale of the Property will be a fully taxable supply of new residential premises. As the entire supply consists of new residential premises, no apportionment of the consideration is required. Question 2 Will the supply of the property by you be made in the course or furtherance of an enterprise in accordance with section 9-20 of the GST Act? Summary The sale of the Property will be made in the course or furtherance of an enterprise in accordance with section 9-20 of the GST Act. Detailed reasoning The term 'enterprise' is defined for GST purposes in section 9-20 and includes, among other things, an activity or series of activities done: (a)          in the form of a business; or (b)          in the form of an adventure or concern in the nature of trade; or (c)           on a regular or continuous basis, in the form of a lease, licence or other grant of an interest in property. The phrase 'carrying on' in the context of an enterprise includes doing anything in the course of the commencement or termination of the enterprise.

However, under paragraph 9-20(2)(c), an enterprise does not include an activity, or series of activities, done by an individual or a partnership (all or most of the members of which are individuals), without a reasonable expectation of profit or gain. The question of whether an entity is carrying on an enterprise is examined in Miscellaneous Taxation Ruling MT 2006/1 The New Tax System: the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian Business Number ( MT 2006/1 ). Goods and Services Tax Determination GSTD 2006/6 Goods and services tax: does MT 2006/1 have equal application to the meaning of 'entity' and 'enterprise' for the purposes of the A New Tax System (Goods and Services Tax) Act 1999? ( GSTD 2006/6 ) provides that the guidelines in MT 2006/1 are considered to apply equally to the term 'enterprise' as used in the GST Act and can be relied upon for GST purposes. The following paragraphs in MT 2006/1 explain: Paragraph 159 explains whether or not an activity, or series of activities, amounts to an enterprise is a question of fact and degree having regard to all of the circumstances of the case.

Paragraph 234 provides that ordinarily, the term 'business' would encompass trade engaged in, on a regular or continuous basis. However, an adventure or concern in the nature of trade may be an isolated or one-off transaction that does not amount to a business, but which has the characteristics of a business deal. Paragraphs 243 to 257 discuss the characteristics of trade, including the badges of trade as referred to in a number of judicial decisions: •                     the subject matter of realisation; •                     length of period of ownership; •                     frequency or number of similar transactions; •                     supplementary work on or in connection with the property realised; •                     circumstances that were responsible for the realisation; •                     motive. Paragraphs 258 to 260 consider Trade v. investment assets.

Assets are generally categorised as either trading assets or investment assets. Assets purchased with the intention of holding them for a reasonable period of time, to be held as income producing assets or to be held for the pleasure or enjoyment of the person, are more likely not to be purchased for trading purposes. Examples of investment assets are rental properties, business plant and machinery, the family home, family cars and other private assets. The mere disposal of investment assets does not amount to trade. Assets can change their character but cannot have a dual character at the same time. Over the period that an asset is held by an entity its character may change from a trading asset to an investment asset or vice-versa but cannot have a dual character at the same time. Paragraph 262 acknowledges that the question of whether an entity is carrying on an enterprise often arises where there are 'one-offs' or isolated real property transactions.

Paragraph 263 states that the issue to be decided is whether the activities being conducted are an enterprise in that they are of a revenue nature as they are considered to be activities of carrying on a business or an adventure or concern in the nature of trade (profit making undertaking or scheme) as opposed to the mere realisation of a capital asset. Paragraph 265 includes a list of factors that provide assistance in determining whether activities are a business or an adventure or concern in the nature of trade. If several of these factors are present it may be an indication that a business or an adventure or concern in the nature of trade is being carried on. These factors are as follows: •                     there is a change of purpose for which the land is held; •                     additional land is acquired to be added to the original parcel of land; •                     the parcel of land is brought into account as a business asset; •                     there is a coherent plan for the subdivision of the land; •                     there is a business organisation - for example a manager, office and letterhead;

•                     borrowed funds financed the acquisition or subdivision; •                     interest on money borrowed to defray subdivisional costs was claimed as a business expense •                     there is a level of development of the land beyond that necessary to secure council approval for the subdivision; and •                     buildings have been erected on the land. The guidelines in paragraph 266 state that in determining whether activities relating to isolated transactions are an enterprise or are the mere realisation of a capital asset, it is necessary to examine the facts and circumstances of each particular case. This may require a consideration of the factors outlined above, however there may also be other relevant factors that need to be weighed up as part of the process of reaching an overall conclusion. No single factor will be determinative rather it will be a combination of factors that will lead to a conclusion as to the character of the activities. In this case, we consider the following factors:

•                     You purchased the Property to be your principal residence, and you resided in the Property until you moved to permit renovations to commence. •                     You borrowed funds to assist with the demolition of parts of the house, the pool house, and the driveway, as well as renovations to the house and the construction of the studio, gym, garage, spa, and the driveway and landscaping. •                     You sourced finance for the development, and the lending was on the basis that the loan was for investment purposes. •                     While you originally purchased and held the Property as your principal residence, you relocated to your current residence. You commenced letting the Property for short-term accommodation after the renovations were completed. In an overall analysis and weighing up all the facts of this case, including the above factors, we consider the sale of the Property will be made in the course or furtherance of your leasing enterprise.