Private ruling: GST and sale of real property
Published: March 2015

Ruling: Q1: Is the sale of the Property a taxable supply? | A1: No. For the sale to be a taxable supply all the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) must be satisfied. The sale satisfies the requirements of paragraphs 9-5(a), 9-5(b) and 9-5(c) of the GST Act as follows: • the sale is made for consideration • the sale is made in the course of the leasing enterprise that you are carrying on and • the sale is connected with Australia because the Property is in Australia. However, the requirement of paragraph 9-5(d) of the GST Act is not satisfied because you are not registered. Furthermore, you are not required to be registered for GST because you do not meet the registration turnover threshold. The sale of the Property constitutes a transfer of ownership of a capital asset and the proceeds from the sale are excluded in the calculation of your projected GST turnover. Therefore, as not all the requirements of section 9-5 of the GST Act are met, the sale of the Property is not a taxable supply.

Relevant facts and circumstances: ABC Pty Ltd was the service entity for A's business. You ceased carrying on the enterprise as a service entity as at a certain date when A died. You are not currently carrying on any other enterprise. You were registered for GST but cancelled the registration recently. After A's death until the registration was cancelled, nil activity statements were lodged. In a certain year, you purchased the Property. It was used informally to access A's property at ABC St. At the time of the purchase there was no intention to develop either the Property or ABC St. The Property was vacant land when you purchased it and remains vacant land. From time to time, the neighbour's livestock grazed on the grass to help keep grass levels manageable. The sale to you of the Property was a taxable supply and the GST was calculated using the margin scheme. No GST credits have been claimed in respect of the Property. A number of years later, development approval was given for the construction of a number of staged townhouses. No works were ever commenced on the site and due to financial constraints the development could not be pursued. It was then decided that the land would be sold, ideally to a developer with the development approval in place. The Property continued to be marketed and for a certain period they were marketed 'on and off' attracting little interest. The development approval expired a few years ago. As no works were commenced, the approval was unable to be extended under the 'substantial commencement' provisions. The Property and ABC St were again marketed on the basis that development approval has been given but has since lapsed. You are in the process of selling Property. The contract of sale for the Property and ABC St are interdependent. The total sale price is $XXX. The buyer has expressed intention to develop the land.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 Section 9-5 | Section 9-20 | Section 23-5 | Section 188-5 | Section 188-10 | Section 188-15 | Section 188-20 | Section 188-25