Private ruling: GST and sale of real property
Date of advice: 21 October 2020
Published: December 2020
Ruling period: < specified period>
Date scheme commenced: <specified date>

Ruling: Q1: Will the sale of the properties located at <addresses> (the Properties) which you <name> own in joint tenancy with <specified party/parties>, be a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act) and is GST is payable on the supply? | A1: No, the sale of the Properties will not be a taxable supply under section 9-5 of the GST Act and GST will not be payable on the supply.

Relevant facts and circumstances: You, <name>, have applied for this private ruling in relation to the sale of <number> properties, being <addresses> (the Properties). You own the Properties in joint tenancy with <name/names> (the Joint Owners) The subject properties are the result of a land division of <number> properties which you received from <specified party> by way of gift or inheritance. The address and certificate of title (CT) of these <number> properties are as follows: · <list of addresses and CTs> You gifted an interest in the property at <address> to <specified parties>. You now hold the property in joint tenancy with them. The land division of the <number> properties created <number> allotments by amalgamation and/or realignment of the boundaries. The land division was, in part, necessary to rectify an anomaly as one house, which is a <described dwelling>, was built straddling the boundary between <number> lots. The land division accorded the <described house> its own land on a separate single title. The land division also amalgamated <number> lots to give frontage and road access to <number> of the original lots. Certificates of title for the <number> lots are currently pending issue. The <number> lots are: · < list of lot numbers and access from addresses> For ease of reference the <number> lots will be referred to as: · <list of addresses> The Joint Owners in the capacity as an entity are not registered for GST. You are not registered for GST in your individual capacity as <entity type>. You have an Australian business number (<ABN number>) and carry on the enterprises of <activities>. Your <activity> enterprise was carried on from the Properties. The <specified things> are still on the Properties. The GST turnover for the year <yyyy/yyyy> from carrying on these enterprises was <$> and <$> respectively. You are not able to devote as much effort to these enterprises as you would have when you were younger. In relation to the other <number> owners <names>, they are a partnership entity (the Partnership) carrying on an enterprise of <activity> as well. The Partnership has also conducted a <specified enterprise> on the <number> blocks of land in question. The Partnership has an ABN. The Partnership is not registered for GST. You are <number> years in age and planning your retirement. The plan includes selling some of your properties to reduce debts and fund your retirement. Your other properties will be disposed of to <parties>. Currently you are selling/have sold the following <number> properties: (1) <address> - Sale contract executed but not yet settled as the buyers require alterations to be made to the access track before settlement. - This property was purchased by <party> over <number> years ago. He cleaned up the property, installed a bore and used the land as <specified purpose>. - Upon <party's> death in <yyyy> you inherited the property. (2) <address> - Sold and settled. - You acquired this property from <party> to assist them and <another party>, because:  <reasons >  The property was a small block and contained a house which you renovated and sold. The property was never leased. (3) <address> - sale price <$> (4) <address>- sale price <$> Although you have developed a property previously on <address> you do not consider yourself to be a property developer, especially in regard to the land division and the sale of the <addresses>/the Properties, the subject of this ruling request. All your property dealings are summarised in table 1 below. Table 1: Details of properties you own or have previously owned <table listing Address, Property identification, No of owners, Description of property and Position>

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 Paragraph 9-5(a) | A New Tax System (Goods and Services Tax) Act 1999 Paragraph 9-5(b) | A New Tax System (Goods and Services Tax) Act 1999 Paragraph 9-5(c) | A New Tax System (Goods and Services Tax) Act 1999 Paragraph 9-5(d) | A New Tax System (Goods and Services Tax) Act 1999 Subsection 9-20(1) | A New Tax System (Goods and Services Tax) Act 1999 Paragraph 9-20(1)(c) | A New Tax System (Goods and Services Tax) Act 1999 Section 9-40 | A New Tax System (Goods and Services Tax) Act 1999 Section 23-5 | A New Tax System (Goods and Services Tax) Act 1999 Paragraph 23-5(a) | A New Tax System (Goods and Services Tax) Act 1999 Paragraph 23-5(b) | A New Tax System (Goods and Services Tax) Act 1999 Division 38 | A New Tax System (Goods and Services Tax) Act 1999 Division 40 | A New Tax System (Goods and Services Tax) Act 1999 Subsection 188-10(1) | A New Tax System (Goods and Services Tax) Act 1999 Subsection 188-10(2) | A New Tax System (Goods and Services Tax) Act 1999 Section 188-25 | A New Tax System (Goods and Services Tax) Act 1999 Paragraph 188-25(a) | A New Tax System (Goods and Services Tax) Act 1999 Paragraph 188-25(b) | A New Tax System (Goods and Services Tax) Act 1999 Section 195-1

Reasons for decision: Summary: While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision. | Detailed Reasoning - Detailed reasoning: In this reasoning, unless otherwise stated: · all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act) · all legislative terms of the GST Act marked with an asterisk are defined in section 195-1 of the GST Act · all reference materials referred to in this ruling are available on the Australian Taxation Office (ATO) website www.ato.gov.au GST is payable on any taxable supply that an entity makes. The 'entity' in this case refers to the Joint Owners of the properties located at <addresses>. Under section 9-5, an entity makes a taxable supply if all the following requirements are satisfied: (a) The supply is made for consideration, (b) The supply is made in the course or furtherance of an enterprise that the entity carries on, (c) The supply is connected with the indirect tax zone, and (d) The entity is registered for GST 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. Division 38 and 40 provide for certain supplies to be GST-free and input taxed respectively. Where a supply is GST-free or input taxed, GST will not be payable on the sale. In this case, we consider Division 38 and 40 do not apply to the sale of the land located at <addresses>/the Properties. Accordingly, the Joint Owners will not be making a GST-free or input taxed supply in selling the Properties. The facts of this case include: · The Properties/<addresses> are being sold for <$> and <$> respectively. · The Properties are in Australia (In a sale of real property, where the property is situated in Australia, paragraph 9-5(c) will be satisfied). The above facts mean that the requirements specified in paragraphs 9-5(a) and (c) are satisfied. Therefore, paragraphs 9-5(b) and (d) remain to be satisfied for the sale to be a taxable supply. Paragraph 9-5(b) requires that a supply is made by an entity in the course or furtherance of an enterprise that the entity carries on. The term 'enterprise' is defined for GST purposes and subsection 9-20(1) states: An enterprise is an activity, or series of activities, done: (a) in the form of a * business; or (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; or ... Further, Miscellaneous Taxation Ruling MT 2006/1 provides the meaning of enterprise for the purposes of entitlement to an Australian business number. Goods and Services Tax Determination GSTD 2006/6 provides that the discussion in MT 2006/1 equally applies to the term enterprise as used in the GST Act and can be relied on for GST purposes. The following paragraphs in MT 2006/1 are extracted for your information: | Detailed Reasoning - In the form of an adventure or concern in the nature of trade: ... 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. ... 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. ... 253. Trade involves operations of a commercial character. As assets can be sold for reasons other than trade, the circumstances behind the sale need to be considered. For example, a quick resale may have occurred as a result of sudden financial difficulties. The facts of this case include: (i) <addresses>/the Properties were originally a part of the properties that you acquired from <specified party> by way of gift or inheritance. (ii) The Properties, the subject matter of this ruling, are <number> of the <number> allotments created from the land division of <number> properties. · The land subdivision was in part necessary to rectify an anomaly in respect of one house, which is a <description of house> built straddling the boundary of <number> lots. The land subdivision accorded the <described house> its own land on a separate single title. · The land subdivision also amalgamated <number> lots to give frontage and road access to one of the original lots. (iii) You have previously disposed of properties for the following reasons. <table listing Properties sold previously and Reasons for disposal> (iv) More recently, the following <number> properties were sold or are being sold: <list of addresses and ownership> The above properties are being sold for the following reasons: · you are now <number> years old and are retiring/have retired, and · the sale proceeds from the sale of the properties will assist in funding your retirement and reducing your debts. · you are not able to devote as much effort to your <specified enterprises> as you would have when you were younger. (v) You have, on a one-off occasion, carried out a development in subdividing your land at <addresses>. - <addresses and description of land and land size>, so you subdivided into <number> lots being <addresses>. - <address> was your previous residence. You moved to <address> next door. <address> is vacant land. In reviewing the above facts and the overall activities in relation to ownership and disposal/sale of properties, including the reasons for acquiring and disposing of properties, we consider the sale of <addresses> (the subject of this ruling) by the Joint Owners would not amount to a development and sale of properties enterprise for GST purposes. However, it is also relevant to consider whether the sale of the Properties by the Joint Owners is made in the course or furtherance of any other enterprise(s). Paragraph 9-20(1)(c) states that an enterprise is an activity, or series of activities, done on a regular or continuous basis, in the form of a lease, licence or other grant of an interest in property. In this case, you <entity type> are carrying on <activity> on the Properties which are owned by <number> owners/the Joint Owners. The Partnership/<parties> is also carrying on <activity> on the Properties. This means the Joint Owners are supplying land to you and the Partnership for use in <activity>. Accordingly, we consider the Joint Owners, as an entity, are carrying on an enterprise of supplying/licencing land under paragraph 9-20(1)(c). Therefore, we determine the sale of the Properties by the Joint Owners is made in the course or furtherance of this enterprise and the requirement for making a taxable supply, as specified in paragraph 9-5(b), is satisfied. As we have determined that the requirements for making a taxable supply, as specified in paragraphs 9-5(a), (b) and (c) are satisfied, the Joint Owners will be making a taxable supply when the Properties are sold if the remaining requirement in paragraph 9-5(d) is also satisfied. Paragraph 9-5(d) is satisfied if an entity is registered for GST or required to be registered for GST. In this case, the Joint Owners, as an entity are not registered for GST. Accordingly, it is relevant to determine if the Joint Owners, as an entity, are required to be registered for GST. Section 23-5 provides: You are required to be registered under this Act if: (a) you are * carrying on an * enterprise ; and (b) your * GST turnover meets the • registration turnover threshold . We have determined that the Joint Owners as an entity, are carrying on an enterprise of supplying land. This means paragraph 23-5(a) is satisfied. The GST registration turnover threshold for an entity is $75,000 unless the entity is a non-profit body. The GST registration turnover threshold applicable to the Joint Owners entity is $75,000. Subsection 188-10(1) provides that an entity has a GST turnover that meets the turnover threshold if: (a) the entity's current GST turnover is at or above the turnover threshold, and the Commissioner is not satisfied that the entity's projected GST turnover is below the turnover threshold, or (b) the entity's projected GST turnover is at or above the turnover threshold. Subsection 188-10(2) provides that an entity has a GST turnover that does not exceed the turnover threshold if: (a) the entity's current GST turnover is at or below the turnover threshold, and the Commissioner is not satisfied that the entity's projected GST turnover is above the turnover threshold, or (b) the entity's projected GST turnover is at or below the turnover threshold. 'Current GST turnover' at any time during a particular month is the sum of the values of all the supplies that an entity makes, or is likely to make, during the current month and the preceding 11 months. 'Projected GST turnover' at a time during a particular month is the sum of the values of all the supplies that an entity makes, or is likely to make, during that month and the next 11 months. Certain supplies are excluded from the calculation of current GST turnover and projected GST turnover, including: Relevant guidelines in determining the projected GST turnover of an entity are available from the public ruling: Goods and Services Tax Ruling GSTR 2001/7 Goods and services tax: meaning of GST turnover, including the effect of section 188-25 on projected GST turnover (GSTR 2001/7). GSTR 2001/7 includes the following explanations: | Detailed Reasoning - Supplies to be disregarded under section 188-25: 29. Section 188-25 modifies the effect of section 188-20 by excluding certain supplies made when working out your projected GST turnover. Section 188-25 requires you to disregard the following when calculating your projected GST turnover: - ceasing to carry on an enterprise; or - substantially and permanently reducing the size or scale of an enterprise. 30. Your projected GST turnover does not include supplies that fall within the description in either paragraph 188-25(a) or paragraph 188-25(b) listed above. Your supply does not have to satisfy the descriptions in both paragraph (a) and paragraph (b). When you make a supply that is capable of satisfying the description in both paragraphs, the supply is excluded only once. (See example 3 at paragraph 53 of this Ruling.) Note: In paragraph 30 above, the reference to paragraphs 188-25(a) and 188-25(b) is a reference to the first and second dot point in paragraph 29 respectively. The GST Act does not define the term 'capital asset'. However, the meaning of capital asset is discussed in paragraphs 31 to 36 of GSTR 2001/7, which explain that 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. 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 are to be distinguished from revenue assets. A revenue asset is an asset whose realisation is inherent in, or incidental to, the carrying on of a business. If the means by which you derive income is through the disposal of an asset, the asset will be of a revenue nature rather than a capital asset even if such a disposal is an occasional or one-off transaction. Therefore, the character of an asset must be determined at the time of expected supply. Based on the facts of this case, we consider the Joint Owners would be deriving turnover in the form of the outgoings of the Properties being paid for by you and/or the Partnership. Accordingly, we consider the Properties are capital assets held by the Joint Owners to produce income. Therefore, section 188-25 applies to the facts of the situation and the proceeds from the sale of the Properties will be disregarded from the calculation of projected GST turnover. As the turnover received by the Joint Owners from the supply of the Properties is not significant, the current GST turnover would not meet the GST registration turnover threshold to require registration. In addition, as the sale of the Properties is the sale of capital assets, the Joint Owners' projected GST turnover would also not meet the GST registration turnover threshold of $75,000. Accordingly, the GST turnover of the Joint Owners entity will not satisfy paragraph 23-5(b) and that would mean the Joint Owners as an entity are not required to be registered for GST under section 23-5. In turn, the requirement for making a taxable supply in paragraph 9-5(d) will also not be satisfied. Under the circumstances, the Joint Owners, that is <names>, will not be making a taxable supply in selling the properties located at <addresses> and GST will not be payable on the sale.

Reasons for decision: These reasons for decision accompany the Notice of private ruling for <name>. | supplies that are input taxed | supplies that are not for consideration (and are not taxable supplies under section 72-5) | supplies not made in connection with an enterprise that an entity carries on | supplies that are not connected with Australia | any supply made, or likely to be made, by you by way of transfer of ownership of a capital asset of yours; and | any supply made, or likely to be made, by you solely as a consequence of: