Private ruling: GST on Sale of property
Date of advice: 21 April 2017
Published: September 2017

Ruling: Q1: Is the sale of your property a taxable supply pursuant to section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: No.

Relevant facts and circumstances: You are a corporate entity and are not registered for GST. You have owned the property (“Company Property”) for multiple decades. The property has been used for rental and assignment purposes. This property includes a number of sheds and a cottage. The property was previously used for rental and assignment purposes. At this time you intend to sell the property to a property developer. No other supplies are being made in this proposed transaction.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 Section 9-5. | A New Tax System (Goods and Services Tax) Act 1999 Subsection 9-20(1). | A New Tax System (Goods and Services Tax) Act 1999 Section 38-1. | A New Tax System (Goods and Services Tax) Act 1999 Section 195-1. | A New Tax System (Goods and Services Tax) Act 1999 Section 23-5. | A New Tax System (Goods and Services Tax) Act 1999 Section 188-15. | A New Tax System (Goods and Services Tax) Act 1999 Section 188-20. | A New Tax System (Goods and Services Tax) Act 1999 Section 11-20. | A New Tax System (Goods and Services Tax) Act 1999 Subsection 11-15(1). | A New Tax System (Goods and Services Tax) Act 1999 Section 11-5.

Reasons for decision: Summary: GST is payable where you make a taxable supply. You make a taxable supply, for GST purposes, 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 that is defined in section 195-1 of the GST Act). For the sale of the property to be a taxable supply, all of the requirements listed in section 9-5 of the GST Act must be satisfied. From the facts in this case, you are selling the property for consideration and the property is located in Australia. Therefore, the sale of the property meets the requirements in paragraphs 9-5(a) and 9-5(c) of the GST Act. What remains to be considered are whether the sale of the property is in the course of an enterprise that you carry on, whether you are required to be registered for GST and whether the sale of the property is GST-free or input taxed? | Detailed Reasoning - Whether the sale of the property is in the course of an enterprise that you carry on: An 'enterprise' is defined in section 9-20 of the GST Act to include, amongst other things, an activity, or series of activities done: (a) in the form of a business (b) in the form of an adventure or concern in the nature of trade; or (c) on a regular or continuous basis, in the form of a lease, licence or other grant of an interest in property. In your case, you have been renting the property. Therefore, your leasing activities constitute an enterprise for the purposes of section 9-20 of the GST Act. As such, the sale of the property is made in the course of your leasing enterprise, and the requirement in paragraph 9-5(b) of the GST Act is satisfied. | Detailed Reasoning - Whether you are required to be registered for GST: You have advised that you are not registered for GST. Therefore, we need to consider whether you are required to be registered for GST. Section 23-5 of the GST Act provides that you are required to be registered if: (a) you are carrying on an enterprise, and (b) your GST turnover meets the registration turnover threshold of $75,000. Based on the facts provided, your only enterprise is the leasing of the property. We therefore need to determine whether the income from leasing and the proceeds from the sale of the property are included in working out your GST turnover. Section 188-10 of the GST Act provides that your GST turnover meets the registration turnover 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. The GST turnover threshold is $75,000. Your current GST turnover is the sum of the values of all supplies made in a particular month plus the previous 11 months. Your projected GST turnover is the sum of the values of all supplies made in a particular month plus the next 11 months. In working out both your current and projected GST turnover, you disregard certain supplies including: ● supplies that are input taxed; and ● supplies that are not made in connection with an enterprise that you carry on. However, section 188-25 of the GST Act excludes certain supplies made when working out your projected annual turnover. When calculating your projected GST turnover, you do not include any supplies made or likely to be made by you: ● by way of transfer of ownership of a capital assets of yours; or ● solely as a result of ceasing an enterprise or substantially and permanently reducing the size or scale of your enterprise. The meaning of capital assets is discussed in Goods and Services Tax Ruling GSTR 2001/7. Paragraphs 31 and 32 of GSTR 2001/7 state: 31. The GST Act does not define the term 'capital assets'. Generally, the term 'capital assets' refers to those assets that make up 'the profit yielding subject' of an enterprise. They are often referred to as 'structural assets' and may be described as the 'business entity, structure or organisation set up or established for the earning of profits'. 32. 'Capital assets' can include tangible assets such as your factory, shop or office, your land on which they stand, fixtures and fittings, plant, furniture, machinery and motor vehicles that are retained by you to produce income. 'Capital assets' can also include intangible assets, such as your goodwill. | Detailed Reasoning - Company Property: In your case, you derive income from leasing the property. As such, the property is considered the profit yielding subject of your leasing enterprise. That is, the property is a capital asset of your leasing enterprise. In addition, your leasing enterprise will cease as a consequence of the disposal of the single asset used in the enterprise. Hence, the sale of the property is disregarded in the calculation of your projected GST turnover. As such, the consideration for the sale of the property is included in the calculation of your current GST turnover, but is excluded in the calculation of your projected GST turnover. Based on the information provided, when you sell the property, your current GST turnover will be at or above $75,000. However, your projected GST turnover will be below $75,000. Hence, your GST turnover will not meet the registration turnover threshold and you will not be required to be registered for GST. Accordingly, paragraph 9-5(d) of the GST Act is not satisfied. As all the requirements of section 9-5 of the GST Act are not met, the sale of the property will not be a taxable supply. There is no need to consider further whether the supply is GST-free or input taxed. Consequently, GST will not be payable on the sale of the property.