The AAT has held that GST applied to the disposal of four properties that had been built, leased and then sold. GST does not ordinarily apply to sale of residential premises unless they are ‘new residential premises’. However, there is a special rule in the GST law that states that a newly constructed property will not be ‘new residential premises’ if it has been applied only to receive residential rent (i.e., leased out) for at least a five year period.
In this case, the taxpayer had acquired four properties between November 2003 and August 2007, then built residential dwellings on them and, once completed, the dwellings were leased, and then sold between January 2011 and August 2012.
The AAT agreed with the ATO that the sales of the four properties in question should be treated as sales of new residential premises. In particular, some of the dwellings had been simultaneously marketed for sale whilst being leased. Also, there were periods of time where the dwellings were without a tenant.
Due to the combination of these factors, none of the dwellings were used only for making input taxed supplies (of residential rent) for a five year period. Therefore, when disposed of, they should have been treated as taxable supplies and subject to GST.
The AAT also held that the ‘margin scheme’ could not be applied to reduce the GST payable, as the taxpayer was not able to provide any written evidence of an agreement between her and the purchasers to apply the margin scheme, as required by the GST Act.