Private ruling: Taxable supply
Published: April 2013

Ruling: Q1: Is the sale of your property a taxable supply? | A1: No, the sale of your property is not a taxable supply.

Relevant facts and circumstances: You are the owners of a property as joint tenants. You have entered into a call option with a property developer. The option must be exercised by its due date. When the option is exercised, the option fee will form part of the consideration for the sale of the property. Settlement will take place a number of days after the contract date (being the date the option is exercised). You purchased the property with the intention to reside on the property. The property has been your principal residence since purchase. You do not carry on any enterprise as a partnership. You have not previously operated or currently operate any enterprises related or unrelated to the property. During your ownership of the property, no part of the property has been used for business purposes. You have not developed or made any improvements to the property. You have not acquired or sold any other properties previously. You have not claimed input tax credits or income tax deductions in relation to the property.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 9-5, | A New Tax System (Goods and Services Tax) Act 1999 9-20(1) and | A New Tax System (Goods and Services Tax) Act 1999 9-40.

Reasons for decision: Summary: Under section 9-40 of the GST Act, you must pay the GST payable on any taxable supplies that you make. Section 9-5 of the GST Act provides you make a taxable supply if: (a) you make the supply for consideration, (b) the supply is made in the course or furtherance of an enterprise you carry on, (c) the supply is connected with Australia, and (d) you are registered or required to be registered for GST. A supply however is not a taxable supply to the extent that it is GST-free or input taxed. In this case, of relevance for consideration is paragraph 9-5(b) of the GST Act. That is, whether your supply of the property will be made in the course or furtherance of an enterprise that you carry on. Enterprise is defined in subsection 9-20(1) of the GST Act to include an activity, or series of activities, done (a) in the form of a business; (b) in the form of an adventure or concern in the nature of trade; Miscellaneous Taxation Ruling MT 2006/1 discusses the meaning of entity carrying on an enterprise for the purpose of entitlement to an Australian Business Number. Goods and Services Tax Determination GSTD 2006/6 states that the discussion in MT 2006/1 is considered to apply equally to the term 'enterprise' as used in the GST legislation and can be relied upon for GST purposes. Paragraph 234 of MT 2006/1 states that generally, a business includes a trade that is engaged in on a regular or continuous basis, while an adventure or concern in the nature of trade may be an occasional or one-off transaction that does not amount to a business but has the characteristics of a business deal. On the information you have provided, you are not currently carrying on a business or enterprise. However, a one-off sale of a property can fall within the definition of an enterprise which provides that an enterprise can be carried on in the form of an adventure or concern in the nature of trade. Therefore, it is necessary to consider whether the sale of the property will be an enterprise in itself. Paragraph 244 of MT 2006/1 explains: 'An adventure or concern in the nature of trade includes a commercial activity that does not amount to a business but has characteristics of a business deal. Such transactions are of a revenue nature. However, the sale of the family home, car and other private assets are not, in the absence of other factors, adventures or concerns in the nature of trade.' Based on the information provided, you bought the property with the intention of residing in the property and have done so since purchase. The property has never been used for business purposes during your ownership and you have not claimed any input tax credits or income tax deductions in relation to the property. You have not developed the property previously and you do not intend to make improvements to the property. Accordingly, we consider that you are not engaged in an enterprise in relation to the sale of the property as the transaction in itself does not exhibit the commercial characteristics of a business or commercial arrangement. The disposal of the property will be the mere realisation of your private asset. Accordingly, the sale of the property will not be made in the course or furtherance of an enterprise that you carry on. As the supply of the property does not meet the requirement in paragraph 9-5(b) of the GST Act, you will not be making a taxable supply. Accordingly, GST is not payable on the supply.

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