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OTT1982(Initiate)Initiate
21 Aug 2023

Hi Community members,


Have a situation where a mate needs to sell his newly built TH due to personal circumstances change, a few facts


  • Land purchased in early 2019 and lived in there for a few months as main residents
  • Looked into building duplex towards end of 2019 and due to covid, construction been delayed for a number of years
  • Building of two Townhouses just been completed about 10 months ago
  • Townhouse #1 has been the main residents
  • Townhouse #2 has been on rent for about 8 months now
  • Selling both now as needing cash

Townhouse #1 is clearly the PPOR and should qualify for the CGT main residence exemption.


However, regarding townhouse #2, while understanding that GST is certainly payable as it's "new residential" for GST purpose, but could anyone advise if the sale proceeds from #2 would fall under CGT provisions (i.e. 50% discount available) or rather Revenue?


Many thanks to all


OT



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462 views
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Most helpful reply

AlliATO(Community Support)Community Support
22 Aug 2023

Hi @OTT1982


For GST to apply at settlement the vendor needs to determine if their activity was conducted in a business-like manner. Keep in mind that a one-off property transaction can be an enterprise. It will come down to what their original intent was when they first purchased the land in early 2019.


The original intent will determine if GST at settlement will apply or if the property is a capital asset and fall under CGT provisions.


Have a look at GST at Settlement – a guide for suppliers and their representatives and the subheading Determine if you are running an enterprise.


If your mate does fall into this, then the next thing they will need to work out is if they meet the requirements to Register for GST.


GST at settlement only applies if the supplier is already registered for GST or required to be registered for GST. If they are not already registered and do not meet the requirements to be registered and they are running an enterprise, they would not need to charge GST. 

All replies

Most helpful reply

AlliATO(Community Support)Community Support
22 Aug 2023

Hi @OTT1982


For GST to apply at settlement the vendor needs to determine if their activity was conducted in a business-like manner. Keep in mind that a one-off property transaction can be an enterprise. It will come down to what their original intent was when they first purchased the land in early 2019.


The original intent will determine if GST at settlement will apply or if the property is a capital asset and fall under CGT provisions.


Have a look at GST at Settlement – a guide for suppliers and their representatives and the subheading Determine if you are running an enterprise.


If your mate does fall into this, then the next thing they will need to work out is if they meet the requirements to Register for GST.


GST at settlement only applies if the supplier is already registered for GST or required to be registered for GST. If they are not already registered and do not meet the requirements to be registered and they are running an enterprise, they would not need to charge GST. 

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Newly built residential house Capital or Revenue? | ATO Community