Private ruling: Sale of commercial property
Published: February 2013
Ruling period: N/A
Date scheme commenced: N/A

Ruling: Q1: Is the sale of a number of commercial properties subject to GST? | A1: No, the sale of a number of commercial properties is not subject to GST.

Relevant facts and circumstances: You are a partnership and own a number of commercial properties as tenants in common. You are carrying on an enterprise of leasing commercial property. You are currently not registered for the goods and services tax (GST). However, you were registered for the GST as a partnership from 1 July 2000 and you cancelled your registration in 2009. Australian Taxation Office records show that you were registered for the GST during the above period as a partnership. You have owned the properties from before the advent of the GST and the properties are leased to tenants for commercial use. Your turnover from this enterprise is less than $75,000 per annum. The properties are the only capital assets you have in your leasing enterprise and you have no other enterprise under this partnership. You are now selling these commercial properties to unrelated entities. Once the properties are sold your enterprise of leasing will terminate.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 (GST Act) Section 9-5 . | A New Tax System (Goods and Services Tax) Act 1999 (GST Act) Section 23-5 | A New Tax System (Goods and Services Tax) Act 1999 (GST Act) Section 188-25 .

Reasons for decision: Summary: Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states that: 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. (The terms marked with an asterisk are defined at section 195-5 of the GST Act) You are supplying the a number of commercial properties for consideration, you are making these supplies in the course of an enterprise you are carrying on and the supplies are connected with Australia as the properties are situated in Australia. Thus, the first three requirements for the supplies of the commercial properties to be taxable supplies are satisfied. You have also informed us that you are not registered for the GST. What remains to be determined, therefore, is whether you are required to be registered for the GST and whether the supplies you make are GST-free or input taxed. The supplies of these commercial properties are not GST-free or input taxed as neither the provisions of Division 38 nor Division 40 of the GST Act apply in this case. Further, you are not registered for the GST. Thus the only remaining criterion to test is whether or not you are required to be registered. Under section 23-5 of the GST Act, you are required to be registered under the Act if you are carrying on an enterprise and your GST turnover meets the registration turnover threshold. Subsection 23-15(1) of the GST Act states that, if you are a non-profit body, your registration turnover threshold is $50,000 or such higher amount as the regulations specify. Regulation 23-15.01 of the A New Tax System (Goods and Services Tax) Regulations 1999 (Regulations) specifies that the registration turnover threshold for a non-profit body is $75,000. Subsection188-10(1) of the GST Act states that you have a GST turnover that meets a particular threshold if: a) your *current GST turnover is at or above the turnover threshold, and the Commissioner is not satisfied that your *projected GST turnover is below the turnover threshold; or b) your projected GST turnover is at or above the turnover threshold. You informed us that your current GST turnover is less than $75,000. Therefore, it is necessary to determine whether or not your projected GST turnover is at or above the threshold. The proceeds from the sale of assets should generally be considered as revenue and should be included in the calculation of your projected GST turnover. However, there are exclusions to this. Section 188-25 of the GST Act states that in working out your projected turnover to disregard: a) any supply made, or likely to be made, by you by way of transfer of ownership of a capital asset of yours; and b) any supply made, or likely to be made, by you solely as a consequence of: (i) ceasing to carry on an *enterprise; or (ii) substantially and permanently reducing the size or scale of an enterprise. In this case you are transferring the ownership of your capital assets (the properties) and thereby ceasing to carry on your enterprise. Therefore, you have to disregard these sales from working out your projected GST turnover. In the absence of these, your projected GST turnover would not meet the required turnover threshold. As such, you are not required to be registered. Since you are neither registered nor required to be registered, the supplies of the commercial properties do not satisfy all of the requirements of section 9-5 of the GST Act for them to be taxable supplies. Consequently, the sale of the properties is not subject to GST.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.