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

Ruling: Q1: Are you liable to pay GST on the sale of the property? | A1: No. A supply is taxable supply if it meets all the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). One of the requirements of a taxable supply is that you are registered or required to be registered for GST (paragraph 9-5(d) of the GST Act). You are not registered for GST. Under section 23-5 of the GST Act, an entity is required to be registered for GST if: (a) it is carrying on an enterprise, and (b) its GST turnover meets the registration turnover threshold of $75,000. You are carrying on a leasing enterprise. However, based on the information provided, your GST turnover does not meet the registration turnover threshold of $75,000. This is because the property is a capital asset that is used in your leasing enterprise and pursuant to section 188-25 of the GST Act, the proceeds from the sale of a capital asset are disregarded when calculating an entity's projected GST turnover for the purposes of GST registration. Therefore, you are not required to be registered for GST. As you are not registered or required to be registered for GST, the supply of the property is not a taxable supply as it does not meet all the requirements of section 9-5 of the GST Act. Therefore, you are not liable to pay GST when you sell the property.

Relevant facts and circumstances: You own a commercial property. You intend to sell the property to a developer. You purchased the property in YYYY. At the time of the purchase the property was leased to a specified entity. The rent was below the registration turnover threshold of $75,000. The tenant vacated the property in YYYY and you obtained a new tenant. The property is currently leased at the market rent to an unrelated entity. There is a commercial lease in place. The rent is less than $75,000 per annum inclusive of outgoings. You have not developed the property and will not develop it before the sale. The leasing enterprise is the only enterprise that you carry on. You are not and have never been registered for GST.

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 23-5. | A New Tax System (Goods and services Tax) Act 1999 Section 188-25.