GST Implications if Property Held for a Dual Purpose (ie. Renting and Selling)? (GSTR 2009/4)
- August 3, 2023
USER
implications if property held for a dual purpose (ie. renting and selling)? (GSTR 2009/4)
Tax Genii (Thought)
I’m looking for the information about “GST implications if property held for a dual purpose” in ATO Legislation Database.
Tax Genii (Observation)
I found the following information in ATO Legislation and supporting material:
The Goods and Services Tax (GST) implications on property with dual purpose are not explicitly mentioned in the provided knowledge. However, several tax rules and principles can be inferred which may apply to such a scenario.
- Income from real property, including natural resource royalties, may be fully taxed by the country where the property is situated (Article 6).
- Business profits are generally taxed in the country of residence of the recipient unless they are derived through a branch or other permanent establishment in another country, in which case that country may tax the profits. This applies to business trusts and payments for spectrum licenses (Article 7; Exchange of Notes, Item 7(a)).
- Profits from operations of ships and aircraft are generally taxed in the country of residence of the operator (Article 8).
- Profits of associated enterprises may be taxed on the basis of dealings at arm’s length (Article 9).
- Any provision of the laws of a Contracting State designed to prevent tax avoidance or evasion includes measures addressing thin capitalisation, dividend stripping, transfer pricing, controlled foreign company, transferor trust, and foreign investment fund rules, and measures ensuring effective tax recovery (Exchange of Notes, Item 1(d)).
- If a term is not specifically defined within the tax treaty, it is interpreted as per the domestic taxation law of the country applying the tax treaty. GST definitions are sometimes broader than income tax definitions, and the definition more specific to the type of tax should be applied in such cases (Article 13, paragraph 1).
- Income or gains from the alienation of property, which in Australia is income or a profit under ordinary concepts, will be taxed in accordance with this Article, rather than Article 7 (Business profits), together with relevant capital gains.
- Income or gains from the alienation of real property may be taxed by the country in which the property is situated. The term real property has the same meaning as it has under paragraph 2 of Article 6. Where the property is situated is determined in accordance with paragraph 3 of Article 6.
I found the following information in ATO Public rulings:
The knowledge provided discusses the Goods and Services Tax (GST) implications of the purchase of fuel using a fuel card, not specifically about property with dual purpose. However, it does mention a concept that could be relevant to the query: the idea of a “dual sale”. In the context of the document, a dual sale refers to a situation where there is a supply of the fuel by the fuel company to the leasing company and an on-supply of the fuel to the lessee. One of the conditions for a dual sale is that the price for each transaction needs to be separately agreed between the parties. This concept might apply to a property with dual purpose in terms of GST implications, where different parts of the property are used for different purposes and each part might be subject to different GST rules. However, without more specific information or context, it’s difficult to provide a more detailed summary.
Tax Genii
The Goods and Services Tax (GST) implications for a dual purpose property (i.e., one used both for renting and selling) are not explicitly stated in ATO legislation or supporting material. However, various taxation principles can be inferred from the existing rules.
If we infer from these rules, profits from the property are typically taxed in the country of the recipient’s residence unless they are derived through a branch or other permanent establishment in another country. In that case, that country may impose taxes on the profits. This rule applies to business trusts and payments for spectrum licenses. These principles could potentially apply to a property with dual purposes, where different sections of the property are utilized for different purposes and each part might be subject to different GST regulations.
Moreover, the rules imply that income or gains from the alienation of property will be taxed in the country in which the property is situated.
The tax treaty stipulates that if a term is not expressly defined, it should be interpreted according to the country’s domestic tax law applying the tax treaty. In some cases, GST definitions are broader than income tax definitions. The definition more specific to the type of tax should be used in such instances.
Please keep in mind this is a generalized interpretation based on the provided tax laws and rules. For a more precise understanding related to GST implications on a dual-purpose property, it’s recommended to consult a tax professional or to directly contact the Australian Taxation Office (ATO).
For more specific GST regulations related to dual-purpose properties, you may want to refer to Goods and Services Tax Ruling GSTR 2009/4, which deals with the issue of applying GST to property transactions. You may review the full document, GSTR 2009/4, provided by the ATO for more detailed information.
[Reference for details (ATO Legislation link)] (https://www.ato.gov.au/law/view/document?src=hs&pit=99991231235958&arc=false&start=1&pageSize=10&total=6&num=0&docid=NEM%2FEM200332%2FNAT%2FATO%2F00003&
dc=false&stype=find&df=1870&tm=and-basic-GST%20implications%20property%20dual%20purpose)
[Reference for details (Public rulings link)] (https://www.ato.gov.au/law/view/document?src=hs&pit=99991231235958&arc=false&start=1&pageSize=10&total=4&num=0&docid=GST%2FGSTR20051%2FNAT%2FATO%2F00001&
dc=false&stype=find&df=1118&tm=and-basic-GST%20implications%20property%20dual%20purpose)
Accountant, Technologist & Futurist
