Private ruling: GST on the sale of property
Date of advice: 19 August 2016
Published: November 2016

Ruling: Q1: Is the disposal of land by the entity being made in the course or furtherance of an enterprise carried on by the entity and therefore a taxable supply? | A1: No. The disposal of the property by the entity is not a taxable supply as it is not being made in the course or furtherance of an enterprise.

Relevant facts and circumstances: • The entity was registered for GST. • The property for sale does not have any residential premises on the land. The only structure is a single level structure that is divided into several parts. • One part has been rented to a neighbour for a number of years for a nominal fee. • The entity leased farmland which is the reason the entity was registered for GST. • The contract of sale specifies that the price includes GST (if any).

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 9-5

Reasons for decision: Summary: Under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), an entity makes a taxable supply if: • it makes the supply for consideration, • it makes the supply in the course or furtherance of an enterprise it carries on, • the supply is connected with the indirect tax zone, and • it is registered, or required to be registered, for GST. However, a supply is not a taxable supply to the extent that it is GST-free or input taxed. The entity intends to supply the property for consideration. Further, the property is situated in Australia and the sale will occur in the indirect tax zone and the entity is registered for GST. To determine whether or not there is a GST liability on the sale of the property it must be determined whether this supply is in the course or furtherance of an enterprise carried on by the entity. In this case, the property has at all times been largely held for the private use of the entity and has never been considered an asset of the leasing enterprise being undertaken. There is no application of the property to the enterprise previously carried on by entity. Over the years the majority of the property was used by the entity for personal private use. The use of part of the properties by other persons has been incidental to the entity's ownership of the property for private purposes. Further, the minor amount charged for the use of one part of the property is not consistent with a commercial enterprise. The disposal of the property by the entity does not have the necessary connection to the leasing enterprise carried on by the entity as it has not been applied to that enterprise. Accordingly, the disposal of the property would not be made in the course or furtherance of an enterprise carried on by the entity for the purposes of section 9&dash;5(b) of the GST Act. The disposal of the property would therefore not be subject to GST as not all of the requirements of a taxable supply under section 9&dash;5 of the GST Act have been met.