Private ruling: GST and sale of property
Date of advice: 3 December 2015
Published: February 2016

Ruling: Q1: Will the sale of Lot A in the proposed subdivision of the property be a taxable supply? | A1: No. The sale of Lot A will not be a taxable supply.

Relevant facts and circumstances: You and your spouse own a property as joint tenants. The property contains residential premises which are your principal place of residence. The remainder of the property is used in an enterprise carried on by another entity. You and your spouse receive rent payments of less than $75,000 per annum from the other entity. You and your spouse own and lease another residential. You and your spouse do not carry any other enterprise or business either individually or in a partnership. Neither of you are registered for GST. You and your spouse entered into a contract with an entity under which the entity will apply for a Development Approval (DA) to subdivide the property into Lot A and Lot B. You and your spouse will retain Lot B and the entity will purchase Lot A for a specified amount. The contract is subject to and conditional upon the entity obtaining the DA on terms and conditions satisfactory to the entity. Where operational works are required to be carried out on or to the property or any part of it under the DA, the entity shall complete those operational works at the cost of the entity.

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 section 23-5 | A New Tax System (Goods and Services Tax) Act 1999 section 188-10 | A New Tax System (Goods and Services Tax) Act 1999 section 188-20 | A New Tax System (Goods and Services Tax) Act 1999 section 188-25

Reasons for decision: Summary: Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) 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 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. (* denotes a term defined under section 195-1 of the GST Act) Your sale of Lot A is for consideration and is connected with the indirect tax zone. As such, the requirements in paragraphs 9-5(a) and 9-5(c) of the GST Act are satisfied. The property consists of residential premises which are used by for private purposes with the remainder being used in your leasing enterprise. Therefore, to the extent that Lot A will consist of the portion used in your enterprise, the sale of Lot A will be made in the course of that enterprise. The requirement in paragraph 9-5(b) of the GST Act is satisfied. As you are not registered for GST, it must be determined whether you are required to be registered when you sell Lot A. Under section 23-5 of the GST Act, an entity is required to be registered if: • it carries on an enterprise; and • its GST turnover meets the registration turnover threshold. Currently, the registration turnover threshold is $75,000 ($150,000 for non-profit bodies). An entity's GST turnover meets the turnover threshold if: • its current GST turnover is at or above the turnover threshold, and the Commissioner is not satisfied that its projected GST turnover is below the turnover threshold; or • its projected GST turnover is at or above the turnover threshold. You advised that the rent received for the portion of the property used as a farm is less than $75,000. Furthermore, the rent received from the other property that you and your spouse own is disregarded in working out your GST turnover as the lease of that other property is an input taxed supply. Therefore, your current GST turnover is below the registration turnover threshold. The value of supplies that are not made in connection with an enterprise that an entity carries on is disregarded in working out its projected GST turnover. Also disregarded is any supply made by an entity by way of transfer of ownership of a capital asset of the entity. The portion of the property used by you as your principal place of residence is of a private nature; thus, the sale would not be made in connection with your leasing enterprise. The remainder of the property used leased to the other entity is a capital asset in your leasing enterprise; thus, the sale would be a transfer of ownership of a capital asset. Regardless of whether Lot A would consist of the portion of the property used for private purposes or for your leasing enterprise, the sale would be excluded in working out your projected GST turnover. Therefore, your projected GST turnover would be below the registration turnover threshold. Accordingly, your GST turnover does not meet the registration turnover threshold and you are not required to be registered when you sell Lot A. The requirement in paragraph 9-5(d) of the GST Act is not satisfied. As not all of the requirements in section 9-5 of the GST Act are satisfied, the sale of Lot A will not be a taxable supply.