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Proposed statutory amendments

Generally the proposed amendments include:

The wholesale supply amendment

In determining whether the retail supply of premises is a first supply of residential premises, the wholesale supply is disregarded where there has been:

1. a development supply; and
2. an arrangement under which the wholesale supply was conditional on specified building or renovation work being undertaken by the recipient.

The subdivision amendments

Subdivision of non-new residential premises does not by itself result in the subdivided premises being new residential premises. Further, a supply of new residential premises made because a subdivision plan was lodged does not result in premises on a subsequent supply being non-new residential premises.

Clarification amendment

Residential premises can become new residential premises as a result of substantial renovations, or because they have been built to replace demolished premises. Clarification will be made on whether they cease to be new residential premises once they are sold or supplied by way of a long term lease as a residential premises.

Date of effect and transitional provisions

Under the draft legislation, the subdivision amendments and wholesale supply amendment will affect supplies made on or after 27 January 2011 subject to transitional provisions.

The wholesale supply amendment will not apply in circumstances where:

1. the arrangement for the wholesale supply to be made was in place and legally enforceable before 27 January 2011; and
2. no GST return has been lodged including input tax credits.

The subdivision amendment will not apply where the relevant subdivision plan was lodged for registration before 27 January 2011.

The clarification amendment is to have effect for supplies made on or after the day the Bill receives Royal Assent.

In light of the future changes, residential property developers need to:

1. decide whether they need to make changes to achieve a more tax efficient structure;
2. determine which of their existing developments fall within the new regime; and
3. understand how and when GST will apply under the new rules.

For more information on GST and property development, please contact Gavin McInnes on 3009 8444 or g.mcinnes@rostroncarlyle.com.