Private ruling: Goods and services tax - property - premises - residential premises
Date of advice: 1 August 2018
Published: September 2018

Ruling: Q1: Is the sale or supply of your residential property Property considered a taxable supply pursuant to section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: No, the sale or supply of your Property is not considered a taxable supply pursuant to section 9-5 of the GST Act. Hence, the sale of your property is not subject to GST.

Relevant facts and circumstances: You own a property of XX acres which is your residential property. You purchased the property XX years ago in XXXX. The property was used for primary producing purposes. You operated a small enterprise over the years and were registered for GST. Your enterprise ceased at which time your GST registration were cancelled on XX Xxxxxxx XXXX. You have not carried out any business since the GST registration was cancelled. You are not registered for GST as the relevant income is below the registration turnover threshold. You have used the property as your residential property and are selling due to xxxxxxxx. The amount of consideration you will receive from the sale of the Property will exceed the GST threshold of $75,000. There has been no improvement to the property. The property is unable to be subdivided due to council area regulations.

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(d) | A New Tax System (Goods and Services Tax) Act 1999 section 23-5 | A New Tax System (Goods and Services Tax) Act 1999 section 188-25

Reasons for decision: Summary: In the reasoning unless otherwise stated, ● all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) ● all reference materials referred to are available on the Australian Taxation Office (ATO) website www.ato.gov.au ● all legislative terms of the GST Act marked with an asterisk are defined in section 195-1 of the GST Act You are an entity for the purposes of the GST Act and will be liable for GST on any taxable supplies you make. Section 9-5 provides 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 the indirect tax zone; 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. In order for the supply of your Property to be a taxable supply, all of the requirements in section 9-5 must be satisfied. One of the requirements for a taxable supply is that you are registered or required to be registered for GST (refer to paragraph 9-5(d)). GST registration Section 23-5 provides you are required to be registered where: ● you are carrying on an enterprise; and ● your GST turnover meets the registration turnover threshold. If you carry on an enterprise, you must register for GST if your GST turnover is at or above the GST turnover threshold, that is, $75,000 or more or $150,000 or more for non-profit organisations. Your GST turnover will meet this threshold if either your current annual turnover or your projected annual turnover is at or above the threshold. Your current GST turnover is the total of all taxable supplies you have made during a particular month and the preceding 11 months. Your projected GST turnover is the total of all taxable supplies you have made, and are likely to make, during a particular month and the following 11 months. In your case the amount you receive from the sale of the property will cause your projected GST turnover to exceed the registration turnover threshold of $75,000. However, section 188-25 provides that in working out your projected GST turnover you can disregard the following: ● any supply made, or likely to be made, by way of transfer of a capital asset of yours; and ● any supply made, or likely to be made, by you solely as a consequence of: ● ceasing to carry on an enterprise; or ● substantially and permanently reducing the size or scale of an enterprise. The effect of section 188-25 is to exclude certain supplies, such as capital supplies that would cause a person to cross the registration turnover threshold even though the person's ordinary turnover falls below that threshold. We consider the sale of your property to be a supply of a capital asset pursuant to section 188-25. This means you can exclude the consideration received from the sale in the calculation of your projected GST turnover. Generally, the term 'capital asset' refers to those assets that make up the profit yielding structure of an enterprise. Therefore, unless you have made other taxable supplies as part of your enterprise which cause you to meet the registration turnover threshold, you are not required to be registered for GST. As stated above, one of the requirements of a taxable supply is that the entity making the supply is registered or required to be registered for GST (refer to paragraph 9-5(d) and section 23-5). Further you need to be carrying on an enterprise which is not the case since you ceased your primary production enterprise from DDMMYY onwards. From the information you provided, we consider that the sale of your property is not taxable under section 9-5 and you are not liable to pay GST on that supply.