Private ruling: GST and sale of residential premises
Date of advice: 14 July 2020
Published: August 2020
Ruling period: Year ending 30 June 2020
Date scheme commenced: 1 January 2020

Ruling: A1: No - the supply of the residential property is not a taxable supply as you are not considered to be carrying on an enterprise. As such, you are not required to be registered for GST.

Relevant facts and circumstances: 1. You are currently a Director in a business selling auto parts. Prior to this, you ran a car detailing business and have always worked in car industry. 2. You are not registered for GST. 3. You purchased an existing dwelling at ("the Property") on xx for $x. 4. Our research identified that you were the sole owner of the property. 5. For x years from the time you acquired the property, you and your de facto partner occupied it as the family's primary place of residence. 6. During the x years, you subdivided the property and constructed another residential premise at the rear of the property. 7. Upon completion, you and your de facto partner moved into the newly constructed property which became ("Unit 2") in xx. 8. The residential premise at the front of the property was sold, which settled in xx. 9. Your intention was only to live in Unit 2 and for it to be the family home for many years to come. However, your relationship with your de facto partner ended in xx and you moved out of Unit 2 in xx. 10. As you and your de facto partner could not reach an amicable settlement, the matter progressed to the Family Court. 11. To fund the costs incurred for the Family Court proceedings, you sold Unit 2. The sale was within x years of completing the construction of the premises. 12. Your tax agent, xx advised us of the following: · No supplementary work was undertaken to improve the sale price of Unit 2 (other than the works involved in the normal preparation for sale) · You or your de-factor partner have not previously developed any properties nor have any intention to do so in the future. 13. Unit 2 was subsequently sold for $x and was settled on xx. 14. On xx, your tax agent provided the Contract of Sale & Section 32 for Unit 2.


Reasons for decision: Summary: Section 9-5 of the GST Act states you make a taxable supply if (a) you make a supply for consideration and (b) it is in the course or furtherance of an enterprise that you carry on and (c) the supply is connected with the indirect tax zone (Australia) 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 your case, you are making a supply of property for consideration and the sale is connected with the indirect tax zone of Australia. You are not carrying on and enterprise and is not registered for the GST, therefore, you have only satisfied paragraphs 9-5(a) and 9-5(c) of the GST Act. From the facts provided, you are not carrying on an enterprise as this is a once off isolated transaction. Having established that an enterprise is not being conducted, we do not need determine whether you will need to be registered for GST as you will not meet the turnover threshold. Therefore, as you do not satisfy all the elements in section 9-5 of the GST, the sale of the residential premise at xx will not be a taxable supply. | Detailed Reasoning - Detailed reasoning: The disposal of the residential premise will be treated as a mere realisation of an asset as the activity of subdivision and sale of the property is an isolated transaction. As this is the first time you have commenced this type of transaction, we have determined that the sale is not made in the course of carrying on an enterprise. In accordance to paragraph 263 of MT 2006/1 your activities in this situation are not an enterprise in that they are not of a revenue nature in the form of a business or in the form of an adventure or concern in the nature of trade. Your activity in relation to the sale of the new residential premise is a 'one off' undertaking for which you did not have a commercial purpose in mind. Therefore, you do not meet all the elements of section 9-5 of the GST Act. Accordingly, the sale will not be a taxable supply and you are not required to be registered for GST as per subsection 188-20(1) of the GST Act. However, in the future if you carry on a similar type of activity, we may consider that you are carrying an enterprise.

Question 1 and 2: Is the sale of the property by you a taxable supply under section 9-5 of a New Tax System (Goods and Services Tax) Act 1999 ("GST Act")?