Builder unable to obtain a refund of incorrectly charged GST

Hello Chasers,

A builder found out the hard way when not applying the GST rules correctly – don’t let this be you!

The Administrative Appeals Tribunal has held that a builder was unable to receive a refund of GST incorrectly charged on the sale of residential premises that had been rented for just over five years since construction was complete.

The taxpayer claimed the GST charged on a unit was charged in error, on the basis that the sale was actually an input-taxed supply. Accordingly, the taxpayer sought a refund of the GST previously remitted to the ATO on the unit.

For residential premises to fall outside the definition of ‘new residential premises’ and therefore be input taxed rather than a taxable supply, it needs to meet the requirements of S.40-75(2)(a) of the GST Act.

To meet the requirements of this section there needs to have been a continuous five-year period since the premises first become residential premises, during which the premises have “only been used for making supplies that are input taxed” (i.e., being used as a rental property).

Unfortunately for the builder, this requirement was not satisfied because the unit was also marketed for sale a few months before the completion of the five-year period since the issue of the certificate of occupancy.

A lesson to be learnt here is that any time a residential premise is both rented and on the market, for sale, it does not meet the requirements to count towards the five-year continuous period that it has “only been used for making supplies that are input taxed.”

If you are not sure about the rules of the game please check with our Team and call 55612643.

Have a great day!

Read more of our daily blogs in our Chasing the Dream Facebook Community

Share This

Related Posts

Featured
4 Min Read

Claiming 2024 Working from Home Expenses

Hello Chasers, If you have been working from home this financial year, you will probably have some work- related expenses to claim. There are now two ways to calculate a work from home deduction: fixed rate…
Read Full Article
Featured
4 Min Read

How to Wow!

Hello Chasers, If you have been following our business development blog theme (Creating Consistent Cashflow) this quarter, we are now going to focus on a very important and often neglected aspect of business. And that is…
Read Full Article