GST on Renovated Homes - who knew?

I was not aware!

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Me neither!

What I didn’t understand from the article was who was going to decide whether the GST was payable or not. Was it the conveyancor/solicitor, or the mortgagor; and was it the buyer’s or the seller’s? Or was it the State/Territory Government who had no way of knowing whether there were renovations done or not?

I would be curious to know whether this is a storm in a teacup, or have there been significant numbers of home buyers hit with an extra 10% cost for GST.

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I suspect it is a legality that could be imposed, not has been imposed. For now I’ll say it is determined by magic. However, if one bought a seriously renovated home for say an even $1 million (cheap in many places) and after the fact received a bill for 10% GST at or after settlement, how would one go? The ATO may even declare stamp duty liable for GST before it is over? It does provide ‘value added’ (to governmental coffers).

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In my view, the article is a storm in a teacup. Sellers are required to disclose any GST liability in the contract. In a case where GST should have been paid and the relevant disclosure wasn’t made, the ATO would be chasing the seller for the unpaid GST. Additionally the GST would only be payable in cases the substantial renovations were a part of an enterprise being carried on by the seller.

I don’t know why the ABC would choose to republish such a poorly written article. It glosses over the fact that a definition is contained in Australian legislation an explained in an associated taxation ruling, preferring to mention a coupe of Canadian cases. It then goes on to suggest a solution, without explaining why it would be needed, and ignoring the numerous loopholes that would be created.

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Frequently Auntie republishes articles that appear in The Conversation. The purpose of that publisher is to dumb down academic articles to a few hundred words which form a brief overview of more substantive work.
This GST article is one of a few from an author who has chosen to research the tax treatment of the sale of houses in various jurisdictions that have similar goods and services tax to Australia. It seems to me this was to work towards a Phd. It dates back to a 2021 thesis.

I sometimes despair at what ABC online has become. What my tax dollars are paying for.

I am sure the ATO has better things to concern themselves about. If a residential property is first sold and new, then GST applies. If second hand and no longer new, then no. If in doubt about whether or not renovations turn an existing property into a new property, then a tax expert is required. As with most complicated tax issues.

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Maybe OT for the topic, but a reasonable conjecture is the decades of ever reduced funding that essentially kneecapped their ability to do more.

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The ‘horses head’ - for those who would like to take a peak under the hood.

One expects there are those flipping properties and sites who know the way it is. Specially if they are claiming input credits.

Per the ATO:

If you sell residential premises or potential residential land:

  • you may be required to notify your purchaser in writing (before settlement) whether or not they are required to withhold GST from the contract price and pay this directly to us
  • you are still required to report the sale on your business activity statement.

How consumers might read this and how the ATO interprets its own - best not to guess. The word “may” is not exclusive. Best to talk to the experts (solicitor re contracts before signing and registered tax consultant).

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No it is just a scramble for Web sites to draw viewers. Got to get content from wherever it can be found. The more visitors to a site, the more advertisors will pay to be a presence on that site. And presumably the more visitors to a site, the more it will be seen to be important in our communications channels and suitably funded. By Gov in the ABC case.

Now the ABC is a no advertising organization, by charter, but their website content smacks at times of just tabloid stuff to draw eyeballs. And a lot of cross-promotion to other ABC content like TV and radio.

That is right. It applies ‘If you’re carrying on a business of renovating properties or ‘flipping’ properties’. Reading the ABC article, one could easily believe it applied to every home owner.

The ATO has some good information on when GST applies for substantial renovations. It also outlines the tax consequences for substantial renovations which aren’t part of a enterprise activity.

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Let’s face facts. The ABC are lazy and very happy to reuse other’s work to save them getting off their backsides and doing articles themselves.
The sooner the ABC is moved over to a subscription model the better. That would save Treasury a lot of money to spend on hospitals etc.

Or opinions as the case may be.

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The ATO has published a GST Ruling on this topic, GSTR 2003/3. There is also GSTR 2009/4 which may relate indirectly. Both represent the ATO’s view on the operation of the legislation and are well supported with examples and explanations.

I’d suggest you read both and also some recent case law which is referenced in GSTR 2003/3.

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This is the ruling GSTR 2003/3 referred to by @timetaxi:

and GSTR 2009/4: