10 April 2015
If a client is buying residential property with the intention of not living in it but subdividing and selling, does GST apply?
In 2012 the Australian Taxation Office (ATO) issued a new GST ruling, GSTR 2012/5, which deals with the GST treatment of residential premises. The new ruling clarifies many issues raised with respect to previous rulings relating to the GST treatment of residential premises.
The ruling confirms that the intention of the purchaser is not relevant when determining whether the supply relates to residential premises.
If the premises are residential premises, it makes no difference if the purchaser's stated intention is to redevelop the property, because the buyer's plans do not change the characteristics of the premises in the hands of the supplier. Provided the house, at the date of supply, constitutes residential premises which are capable of being used predominantly for residential accommodation, then the sale is input taxed.
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