Vendor guide on GST treatment of residential premises
It is typical for people to consider stamp duty, land tax and income tax implications when they sell a property, but remember that it is equally important to consider whether the transaction will be subject to goods and services tax (GST). 

One important thing to remember is that there is now a single test that looks at the physical characteristics of a property to determine its suitability for residential accommodation, and as a result, its GST treatment.

Let us run through how the sale of your property may fall under one of these three categories:

  • taxable supply – the seller is liable for GST on the sale and can claim GST credits for anything purchased or imported to make the sale
  • GST-free supply – the seller is not liable for GST, but can still claim GST credits for anything purchased to make the sale, or
  • input taxed supply – the seller is not liable for GST on the sale and also cannot claim any GST credits.

The sales of properties are input taxed, and not subject to GST, if they are used predominantly for residential accommodation.  Various issues exist that determine whether residential premises can be considered residential accommodation or not. After that, we outline what happens when you sell commercial residential and new residential premises. 

  1. Buyer's intention not relevant to the Tax Office's assessment
  2. Fit for human habitation
  3. Sale of other facilities together with a residential unit
  4. Premises used both for residential accommodation and for business purposes 
  5. Land included with building used for residential purposes

Commercial residential premises

Commercial residential premises include the below:

a)    a hotel, motel, inn, hostel or boarding house

b)   premises used to provide accommodation in connection with a school

c)    a ship that is mainly let out on hire

d)   a ship that is mainly used for entertainment or transport or a marine at which one or more of the berths are occupied by ships used as residences

e)    a caravan park or a camping ground, or

f)    anything similar to the residential premises described in paragraphs (a) to (e).

Consult our office to find out more about the specific characteristics of the commercial residential premises. There are also variations on the places outlined that are still considered commercial residential premises, so be sure to seek advice.

New residential premises

A new residential premise is one that:

  • has not been sold as a residential premise previously
  • has been created through substantial renovations (consult this office to find out what constitutes "substantial renovation"), or
  • is a new dwelling that has replaced an existing dwelling on the same land.

"Off the plan" sales and newly built homes are considered sales of new residential premises. Once the property has been continuously rented for five years however, it ceases to be a new residential premise.

Consult tGJB ob 02 9686 3130 before selling a property, be it commercial or residential, to find out what the GST implications of the sale will be. Click here to read the full article.

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