Will the supply of side B of the duplex be subject to GST once it is completed and then sold?
Yes. This ruling applies for the following period : 20 December 2021 to 19 December 2025.
You have no Australian Business Number (ABN), are not currently registered for GST and have never been registered for GST in the past. You entered into a contract to purchase a property in Australia (the property). No GST was included in the purchase price as the supply of the property to you was an input taxed supply of residential premises. When you acquired the property, it contained a second-hand dwelling that had been newly updated inside and outside and that had development approval for a duplex to be built on it. Your original intention for the property at the time of its acquisition was for your family to live in the existing dwelling that was on the property. Soon after the property purchase had settled, you and your family moved into the existing house and lived in it for some time. You later decided to demolish the existing dwelling on the property and build a new duplex (through the existing planning permit). However, demolition of the existing house and construction of the new duplex did not commence straight away, as you had to wait for the bank to assess the loan application and approve the loan that would fund both the demolition and the construction.
The construction contract (which included demolition of the existing house) was signed after the bank had approved the loan. Demolition of the existing dwelling and construction of the new duplex commenced shortly afterwards. You advised that the decision to build a new duplex was an investment decision; with the intent (at that time) for the new duplex being for your family to live in one side (side A) and for the other side (side B) to be rented out to generate an income stream. Due to the pandemic the construction of the new duplex has been delayed, with completion now expected to be somewhat later than originally planned. Since construction started, you have been assessing whether, instead of the original plan for the duplex (i.e., living in side A and renting out side B), an alternative option might be better with maximising the return on capital; with this alternative option being to: • sell side B; • reinvest the sale proceeds from the sale of side B in another bigger property for you and your family to live in; and • hold side A as an investment property (although you expect to first live in it).
When you made the decision to sell side B of the duplex, the decision was made upon realising that you may be able to sell one side of the duplex and get a premium on its sale due to the building being new. To date, no sale agreement has been entered into in relation to side B of the duplex. Nor has any marketing/advertising regarding the sale of side B of the duplex yet been undertaken, as construction is still underway. Side B of the duplex has never been marketed/advertised for lease.
A New Tax System (Goods and Services Tax) Act 1999 Section 9-5 Section 9-20 Section 9-40 Section 23-5 Section 23-15 Division 188. Detailed reasoning Section 9-40 of A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that you must pay the GST payable on any taxable supply that you make, while section 9-5 of the GST Act provides that you make a taxable supply if: • you make the supply for consideration • the supply is made in the course or furtherance of an enterprise that you carry on • the supply is connected with the indirect tax zone (essentially Australia), and • you are 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 taxe