Private ruling: Goods and services tax (GST) and sale of property
Published: June 2013

Ruling: Q1: Will GST be payable by you on your sale of the property and the other things to be supplied under the property sale contract? | A1: No.

Relevant facts and circumstances: You are an individual. You are not registered for GST. You are retired. You will sell a property located in Australia (the property). You purchased the property many years ago. The property is large. You have used the property as your primary place of residence since the year in which you purchased it. A house was on the property when you purchased the property. You renovated the house. There are also sheds on the property. You used a shed/s on the property for the purposes of a garage and to store equipment such as a mower. You carried on an animal farming activity on the property. This was not a business, but was a hobby. There was never a possibility of making a profit from this activity in the past because you have never sold any animals. You did not make money from the animal farming activity. There are certain inclusions listed in the property sale contract.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 subsection 7-1(1) | A New Tax System (Goods and Services Tax) Act 1999 section 9-5 | A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-20(1)(a) | A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-20(1)(b) | A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-20(2)(b) | A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-20(2)(c) | A New Tax System (Goods and Services Tax) Act 1999 section 9-40

Reasons for decision: Summary: GST will not be payable by you on your sale of the property and the other things to be supplied under the property sale contract because you will not supply these things in the course or furtherance of an enterprise that you carry on. | Detailed Reasoning - Detailed reasoning: GST is payable by you on your taxable supplies. You make a taxable supply where you satisfy the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), which states: You make a taxable supply if: (a) you make the supply for *consideration; and (b) the supply is made in the course or furtherance of an *enterprise that you *carry on; and (c) the supply is *connected with Australia; and (d) you are *registered, or *required to be registered. However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed. (*Denotes a term defined in section 195-1 of the GST Act) An enterprise includes an activity or series of activities done in the form of a business (paragraph9-20(1)(a) of the GST Act) and an adventure or concern in the nature of trade (paragraph 9-20(1)(b) of the GST Act). Paragraph 9-20(2)(b) of the GST Act excludes private recreational pursuits and hobbies from the definition of enterprise. Paragraph 9-20(2)(c) of the GST Act excludes an activity or activities done by an individual without a reasonable expectation of profit or gain from the definition of enterprise. Miscellaneous Taxation Ruling MT 2006/1 provides guidance on the meaning of enterprise for ABN purposes. Goods and Services Tax Determination GSTD 2006/6 provides that the principles in MT 2006/1 apply equally to the terms 'entity' and 'enterprise' and can be relied upon for GST purposes. Paragraph 234 of MT 2006/1 discusses adventures or concerns in the nature of trade. It states: 234. Ordinarily, the term 'business' would encompass trade engaged in, on a regular or continuous basis. However, an adventure or concern in the nature of trade may be an isolated or one-off transaction that does not amount to a business but which has the characteristics of a business deal. Paragraph 244 of MT 2006/1 discusses sales of private assets. It states: 244. An adventure or concern in the nature of trade includes a commercial activity that does not amount to a business but which has the characteristics of a business deal. Such transactions are of a revenue nature. However, the sale of the family home, car and other private assets are not, in the absence of other factors, adventures or concerns in the nature of trade. The fact that the asset is sold at a profit does not, of itself, result in the activity being commercial in nature. Paragraph 258 of MT 2006/1 distinguishes between trading assets and investment assets. It states: 258. United Kingdom cases categorise assets as either trading assets or investment assets. Assets purchased with the intention of holding them for a reasonable period of time, to be held as income producing assets or to be held for the pleasure or enjoyment of the person, are more likely not to be purchased for trading purposes. Your animal farming activity on the property was not in the form of a business and was not part of an animal trading activity. Your animal farming activity was done as a hobby. Therefore, it is not an enterprise. You held the property for many years for your pleasure and enjoyment. You used the property for private purposes. You have not carried on any enterprise on the property; your sale of the property is not part of a property trading enterprise and the other things you will supply under the property sale contract are not connected with an enterprise that you carry on. Your sale of the property and the other things to be supplied under the property sale contract will be the mere realisation of private investment assets. Therefore, your sale of the property and the other things to be supplied under the property sale contract will not be supplies made in the course or furtherance of an enterprise you carry on. Hence, you will not satisfy the requirement of paragraph 9-5(b) of the GST Act. As you will not satisfy all of the requirements of section 9-5 of the GST Act, you will not make a taxable supply of the property or the other things to be supplied under the property sale contract. Hence, GST will not be payable by you on your sale of the property or the other things to be supplied under the property sale contract.