Private ruling: GST and supply of property
Date of advice: 8 April 2021
Published: June 2021
Ruling period: 1 July 20XX till 31 December 20XX
Date scheme commenced: 1 April 20XX

Ruling: Q1: Is the proposed sale by Mr and Mrs X (together the Owners) of the Property a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: No. Section 9-5 of the GST Act provides that you make a taxable supply if: • you make the supply for consideration; • the supply is made in the course or furtherance of an enterprise that you carry on, • the supply is connected with the indirect tax zone (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. In this case, it is accepted that the sale of the Property is not a supply that is made in the course or furtherance of an enterprise that the Owners carry on. Consequently, the sale is not a taxable supply and is not subject to GST. Note, 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) provides the Commissioner' view on the meaning of on an enterprise. MT 2006/1 provides that assets can change their character from investment, which is capital in nature, to trade and therefore revenue in nature (paragraphs 258 to 260). If the activities on an objective assessment have the characteristics of trade, the person's motive is not relevant (paragraph 254). The characteristics of trade are explained in paragraphs 243 to 261 and include the length of period of ownership and the frequency or number of similar transactions. Particular attention is drawn to paragraph 251 of MT 2006/1 which states: 251. The greater the frequency of similar transactions the greater the likelihood of trade.

Relevant facts and circumstances: Mr and Mrs X (together the Owners) purchased a property. At the time of acquisition, the property consisted of a non-habitable residential premise. It was the intention of the Owners to subdivide the property and build two dwellings, one to live in by the Owners and the other to be developed by a partnership (the Partnership) operated by the Owners for sale. The existing dwelling was demolished, and the property was subdivided into the two lots known as Lot 1 and Lot 2 (the Property or Lot 2). Neither the Owners nor the Partnership have claimed any input tax credit in respect of the development costs of Lot 2, however the Partnership did claim input tax credits in respect of the development of Lot 1. Lot 1 was sold by the Partnership as a taxable supply of new residential premises. The GST on the taxable supply of this property was calculated using the margin scheme and the amount was reported by the Partnership in the business activity statement in the relevant tax period. Over the period when subdivision and demolition occurred, the Owners lived in another home for which primary place of residence has been claimed. The Owners had the birth of their second child and shortly after birth, the child was diagnosed with a serious development condition. The Owners existing main residence was sold and once settlement occurred, they moved to their newly constructed home in Lot 1. The issues with the child however have deemed the property unsuitable for purpose. As there is a requirement for assistance with care and so that the Owners parents can move in to assist with the caring of their child a property with space for a granny flat would be suitable for the Owners circumstances.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) 1999 Section 9-5