What is the correct answer to: GST applies to which type of residential property sales in Australia?

The correct answer is New residential premises, which include homes that have been substantially renovated.. New residential premises, which by definition include substantially renovated premises, are taxable when sold by a GST-registered entity in the course of an enterprise, such as a developer or builder. Existing residential premises are input-taxed, so no GST is charged on them.

What background knowledge is needed for this Finance Taxation question?

GST of 10% was introduced in 2000 by the A New Tax System (Goods and Services Tax) Act 1999. New residential premises include premises that have been substantially renovated. The ATO's view (GSTR 2003/3) is that a substantial renovation removes or replaces all or substantially all of a building; it is not defined by a cost threshold. Existing residential premises are input-taxed, not GST-free: no GST is charged on the sale, and the seller cannot claim credits for GST on related costs.

What is a good way to remember the answer to this Finance Taxation question?

Remember 'NEW-SUB' - NEW properties and SUBstantially renovated properties get GST. Think of a builder wearing a 'NEW SUB' (submarine/sandwich) hat - they're commercial operators who must charge GST on their new creations. Individual homeowners selling existing properties are like people selling their old car - no GST required because it's personal, not commercial. When you see a GST question about residential property, immediately ask: Is it NEW or SUBstantially renovated AND sold by a commercial entity? If yes to both, GST applies. If it's an existing property sold by an individual, no GST.

What exam tip applies to this Finance Taxation question?

Look for 'new', 'substantially renovated', 'developer' or 'builder' to identify a taxable residential sale. Existing homes are input-taxed, so no GST, whoever sells them.

How does this Finance Taxation concept apply in Australian real estate practice?

Sarah is buying an off-the-plan apartment from ABC Developments for $600,000. As this is a new property sold by a developer, GST of $60,000 applies, making her total cost $660,000. Meanwhile, John is selling his existing family home for $800,000 through a real estate agent. As an individual selling an existing property, no GST applies - the buyer pays exactly $800,000. Sarah's conveyancer must ensure the GST component is correctly calculated in the contract and settlement statement, while John's transaction remains GST-free regardless of the higher value.

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GST applies to which type of residential property sales in Australia?

Correct Answer

C) New residential premises, which include homes that have been substantially renovated.

GST of 10% applies to sales of new residential premises, which by definition include substantially renovated premises, when a GST-registered developer or builder sells them in the course of an enterprise. Sales of existing residential premises are input-taxed, so no GST is charged, whoever the seller is.

Answer Options

All residential sales, whatever the age of the dwelling or who the seller is.

Any home sold by an individual owner within five years of its construction.

New residential premises, which include homes that have been substantially renovated.

Established homes sold by a GST-registered owner who has been renting them out.

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