Private ruling: GST and the supply of property
Date of advice: 19 March 2021
Published: May 2021
Ruling period: 1 January 20XX to month ending 30 June 20XX

Ruling: Q1: Is the sale of property (Lot 1) by you a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: No. Section 9-5 of the GST Act provides that you make a taxable supply if: • you make the supply for consideration; • the supply is made in the course or furtherance of an enterprise that you carry on, • the supply is connected with the indirect tax zone (Australia); and • you are registered or required to be registered for GST. However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. In this case, it is accepted that the sale of the property (Lot 1) is not a supply that is made in the course or furtherance of an enterprise that you carry on. Consequently, the sale is not a taxable supply and is not subject to GST. Note, Miscellaneous Taxation Ruling MT 2006/1 The New Tax System: the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian Business Number (MT 2006/1) provides the Commissioner' view on the meaning of on an enterprise. MT 2006/1 provides that assets can change their character from investment, which is capital in nature, to trade and therefore revenue in nature (paragraphs 258 to 260). If the activities on an objective assessment have the characteristics of trade, the person's motive is not relevant (paragraph 254). The characteristics of trade are explained in paragraphs 243 to 261 and include the length of period of ownership and the frequency or number of similar transactions. In particular attention is drawn to paragraph 251 of MT 2006/1 which states: 251. The greater the frequency of similar transactions the greater the likelihood of trade.

Relevant facts and circumstances: You are a medical/healthcare professional. In 20XX you entered into a contract of sale to purchase a property. You subdivided the property into two lots being: • Lot 1 • Lot 2 You engaged a builder to construct two properties which commenced in early 20XX and was completed in late 20XX. The Certificate of Occupancy was issued late 20XX and you have been living in Lot 1 since then. You took out a loan to construct the two townhouses. A copy of the project estimation costs shows that the cost of the construction of the two double storey side by side townhouses, including all site works. You estimated that you spent about $XXX in respect of the construction costs for Lot 1. There is still currently a mortgage for this property. It was your intention to build a family home in which you would stay for many years. However, you have recently decided to put Lot 1 on the market due to the following reasons: • you purchased another property, to better accommodate your growing family. • your financial circumstances have changed, especially with the impact of COVID on the State A economy. It would be difficult to serve two mortgages and maintain two properties at the same time. Lot 1 is expected to sell for $XXX - $XXX. You are not registered for GST. This ruling does not consider the GST treatment of Lot 2.

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