Private ruling: GST and sale of property
Published: March 2012

Ruling: Q1: Will the goods and services tax (GST) be applicable to the sale of the property located in Australia by the vendors? Advice No, GST will not be applicable to the sale of the property located in Australia by the vendors.


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 9-15; | A New Tax System (Goods and Services Tax) Act 1999 Section 9-20; and | A New Tax System (Goods and Services Tax) Act 1999 Section 9-25.

Reasons for decision: Detailed Reasoning - Who is the supplier of the property?: Based on the facts received, the property is owned as tenants in common by four individuals. We therefore need to examine whether the property will be supplied by each individual separately or by a partnership for GST purposes. Goods and Services Tax Ruling GSTR 2004/6 (available at www.ato.gov.au ) is about tax law partnerships and co-owners of property. According to GSTR 2004/6 co-owners of property are considered partners in a partnership for tax law purposes where they are in receipt of ordinary or statutory income jointly. Accordingly, it is the partnership of the four individuals ('partnership') that will be the supplier of the property. The next step is to consider the GST status of the sale of the property by the partnership. | Detailed Reasoning - GST status of the sale of the property: GST is payable on a taxable supply. Under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) you make a taxable supply if: § you make the supply for consideration; § the supply is made in the course of an enterprise that you carry on; § the supply is connected with Australia; and § you are registered or required to be registered for GST. However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. All the requirements in section 9-5 of the GST Act need to be satisfied for a supply to be a taxable supply. Based on the facts provided, the partnership will satisfy the requirements in paragraphs 9-5(a) and 9-5(c) of the GST Act as the supply of the property will be for consideration and the property is located in Australia. We therefore need to consider whether: § the sale of the property is in the course or furtherance of an enterprise that the partnership carries on (paragraph 9-5(b) of the GST Act); and § whether the partnership is required to be registered for GST (paragraph 9-5(d) of the GST Act). | Detailed Reasoning - Is the partnership carrying on an enterprise?: Section 9-20 of the GST Act defines an enterprise as, amongst other things, an activity or series of activities done: § in the form of a business; or § in the form of an adventure or concern in the nature of trade. Goods and Services Tax Determination GSTD 2006/6 and Miscellaneous Taxation Ruling MT 2006/1 provide guidance on the meaning of 'enterprise' for the purposes of section 9-20 of the GST Act. Paragraph 234 of MT 2006/1 provides that the term 'business' includes trade engaged in, on a regular or continuous basis. However, an adventure or concern in the nature of trade may be an isolated or one-off transaction that does not amount to a business but which has the characteristics of a business deal. However, paragraph 13 of GSTD 2006/6 and paragraph 244 of MT 2006/1 provide that 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. The fact that the asset is sold at a profit does not, of itself, result in the activity being commercial in nature. In this instance, the property that the partnership will sell is used as the family home by one of the partners. As such the sale of the property will not amount to an adventure or concern in the nature of trade as it is the mere realisation of a private asset. Paragraph 9-5(b) of the GST Act will therefore not be satisfied since the sale of the property will not be considered to be made in the course of an enterprise the partnership is carrying on. | Detailed Reasoning - Required to be registered for GST: As paragraph 9-5(b) of the GST Act is not satisfied there is no need to consider whether the partnership is required to be registered for GST. | Summary: The sale of the property by the partnership will not be a taxable supply since all the requirements in section 9-5 of the GST Act will not be met. No GST will be applicable to the sale.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Relevant facts: The property is located in Australia and is registered under the names of four individuals as tenants in common (partners). This partnership does not have an Australian business number (ABN) with the Australian Taxation Office and is not registered for GST in regard to the ownership of the property. | The partners have decided to sell the property to a potential purchaser after the land was rezoned to allow for subdivision. The potential purchaser will carry out all the subdivision work on the land after the purchase. The partners do not have a coherent plan for the subdivision of the land and have not borrowed any fund to facilitate the sale or development of the land. | One of the partners stays on the property as their principal place of residence while the partners secure the sale of the property to the potential purchaser.