TAX TIP #31: GST WITHOLDING | NEW RESIDENTIAL PREMISES

Facts

Mum and Dad built a new home, in which they lived in, for four (4) years.

They decide to sell.

Mum and Dad are not property developers.

Question

Is the sale subject to GST with-holding?

Answer

No.

Mum and Dad are not required to be registered for GST and the supply is not a taxable supply regardless that the house is new residential premises.

Tax Tip

Conveyancing solicitors and their staff get over excited that GST applies to new residential premises, being premises newly built for less than five (5) years (see section 40-75 GST Act), and believe GST with-holding automatically applies.

However, the basis of GST is that GST applies only to taxable supplies (see section 9-5 GST Act).

One of the requirements of a taxable supply is that the supplier is registered or required to be registered for GST.

In this case, Mum and Dad are assumed not to be registered for GST because they are not property developers.

The question is whether they are required to be registered for GST.

In Tax Tip #4 we discuss this issue in more detail however, in summary and applying it to this case, Mum and Dad, as they are not property developers, are not conducting a profit-making undertaking and are not required to be registered for GST.

Therefore, the sale of the home, even though it is new residential premises, is not a taxable supply and GST with-holding does not apply.

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