Private ruling: Goods and services tax and enterprise
Published: November 2014

Ruling: Q1: Are you carrying on an enterprise for the purposes of section 9-20 of A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when you grant an irrevocable option for the sale of a property? | A1: No. You are not carrying on an enterprise for the purposes of section 9-20 of the GST Act when you grant an irrevocable option for the sale of a property. Your activities do not amount to carrying on an enterprise but constitute the mere realisation of a capital asset which in this case is not subject to goods and services tax. | Q2: If the answer to question 1 is "yes", then at what time does the enterprise commence? | A2: As the answer to question 1 is "no", this question is not applicable.

Relevant facts and circumstances: You are a self-funded retiree. You and your late spouse acquired a Property in 199X. No borrowings were made to purchase the Property. The Property comprised two lots with one house spanning both lots and is located adjacent to the rear of your principle place of residence. You acquired the Property as a rental property and it was rented shortly after the settlement date. The house that comprises the Property is of pre 1946 construction and as the Property is in a "Demolition Control Precinct", the house generally would have been prohibited from being demolished. The house was falling into disrepair with major plumbing and drainage work being required in order for the Property to be tenantable. In 200X, you engaged a town planner to seek approval from Council to demolish the house on the basis that "the street had no traditional building character". Council approved the application in 200X. No other applications to Council were prepared. The Property continued to be rented until early 200Y. The demolition of the house was completed and a final inspection certificate issued in 200Y. The Property has remained vacant since the demolition of the house to date. The Property has not been used for any other purpose since the demolition of the house on it. The Property has not been listed for sale or marketed to any person at any time. You were approached by a developer, without solicitation, who enquired as to the possible purchase of the Property from you. In 20XX, you and the developer signed a call option agreement. Under the call option agreement, you granted the developer an irrevocable option to purchase the Property.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 9-20