Private ruling: GST and property transaction
Published: March 2014

Ruling: Q1: Are you required to be registered for goods and services tax (GST) under section 23-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: No

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. • You are an individual and are not registered for goods and services tax (GST) • You are a salary and wage earner and your parents are retired. • You and your parents own an equal share in a property that was your principal place of residence. • The residence was purchased by your parents and they have resided in it continuously for a period in excess of 30 years. • You obtained a 50% share in the residence in 20XX. • In 20YY after being advised that the condition of the residence was poor and that the cost of renovation would be high a decision was made to demolish the residence and to build a new house on the land. • Your intention was always for yourself and your parents to move into the newly built house once completed as your principal place of residence as your parents did not want to move into a different area. • There was never an intention to sell or lease the newly built house or to profit from the adventure. • Whilst the house was under construction you and your parents leased a nearby property until the premises were completed. • It is anticipated that the newly constructed house will be completed in early to mid-20ZZ. • You have not advertised to sell the property. • You were approached by a third party to purchase the property when it is completed.

Relevant legislative provisions: All references are to the A New Tax System (Goods and Services Tax) Act 1999 : Section 9-5 | Section 23-5 | Section 188-10 | Section 188-20 | Section 195-1

Reasons for decision: Summary: The sale of the property is a mere realisation of a capital asset. As you are not carrying on an enterprise in relation to the property, you are not required to be registered for GST | Detailed Reasoning - Detailed reasoning: Section 9-40 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that you must pay the GST on any taxable supply that you make. A supply is a taxable supply if it meets all the requirements of section 9-5 of the GST Act. This section 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 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. (* denotes a term defined in section 195-1 of the GST Act) In your case, the requirements of paragraphs 9-5(a) and 9-5(c) of the GST Act are satisfied as the sale of the property is to be made for consideration and the sale is connected with Australia as the property is situated in Australia. There are no provisions in the GST Act that would allow your supply of the newly constructed premises for residential purposes to be GST-free or input taxed. Therefore, what needs to be determined is whether the sales of the newly constructed premises will be in the course or furtherance of an enterprise that you carry on and whether you are required to be registered for GST. The term enterprise is defined in subsection 9-20(1) of the GST Act to include, amongst other things, 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 … Miscellaneous Taxation Ruling MT 2006/1 The New Tax System: the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian Business Number (MT 2006/1) considers the meaning of the word 'enterprise' for the purposes of entities' entitlement to an ABN. Goods and Services Tax Determination GSTD 2006/6 Goods and services tax: does MT 2006/1 have equal application to the meaning of 'entity' and 'enterprise' for the purposes of the A New Tax System (Goods and Services Tax) Act 1999 confirms that the principles in MT 2006/1 apply equally to the term enterprise for GST purposes. Having given consideration to the factors contained in MT 2006/1, it is our view that the activities carried out in regard to the building of the newly constructed premises and the subsequent sale of premises is a mere realisation of a capital asset and does not amount to the carrying on of an enterprise for GST purposes. Accordingly, the requirements of paragraph 9-5(b) of the GST Act are not satisfied. It follows that you are not required to be registered for GST. As all of the requirements under section 9-5 of the GST act are not satisfied the sale of the newly constructed premises is not a taxable supply in accordance with the GST Act and will therefore not be subject to GST.