Private ruling: Enterprise
Date of advice: 30 April 2026
Published: 27 July 2026
Ruling period: 1 July 20YY to 30 June 20YY
Date scheme commenced: 1 June 20YY

Ruling: Q1: Will the proposed sale of <<address>> by <name> and <name> constitute a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999? | A1: No.

Relevant facts and circumstances: Name> and <name> (together, referred to as 'you') purchased <<address>> (the Property) as tenants in common for <amount> on <date> Settlement occurred on <date>. <name> is the <position> of <name> which is a direct-to-consumer online sales business for <name>. <name> is employed as a <position> for a <name> company. You are not registered for GST. Prior to purchasing the Property, you engaged your tax accountant to run a Property Investment Feasibility report on retaining the Property as a long-term rental investment. Your intention at the time of acquisition was to demolish the existing dwelling once the tenants vacated and construct x townhouses that would be held as a long-term investment to derive rental income and for capital growth. You do not have prior property development experience and have never undertaken any property development activities. You have previously owned other properties solely or jointly either as your main residence or as rental properties. Other than the Property, you currently own another rental property located <<address>>. The <name> Property was previously used as your main residence prior to your move to X in <date>. You financed the purchase of the Property and the construction of the townhouses by entering into x loan agreements (a home loan and an investment loan) with <name>. You did not claim any input tax credits on the construction of the townhouses as you intended to use it solely for making input taxed supplies of residential rent. Construction and leasing of the Property You contacted the local council and other relevant authorities to understand the planning and approval requirements prior to purchasing the site to determine if you could subdivide and construct the townhouses. The Property consisted of a dwelling that was tenanted at time of acquisition, but the dwelling was in a state of disrepair. Subdivision was approved on <date>, and the Property was subdivided into <<address>> (the Subdivided lots). You engaged <name> (a building company) on <date>, who recommended that the dwelling be demolished. <name> handled the entire process of subdivision and construction of the townhouses as you lacked the necessary skills, knowledge and equipment. The plan of subdivision and development application was submitted with <name> Council in <date>. The original tenants vacated the Property in <date>. The house was subsequently demolished on<date>. Construction of the x single-story townhouses on the Subdivided lots commenced on <date> and a certificate of occupancy for the townhouses was issued on <date>. In <date>, you commenced leasing out both of the newly constructed townhouses. Since construction was completed, both townhouses have been continuously leased out as long-term residential accommodation through a real estate agent. Lease renewals were executed in <date> extending the lease agreements with the current tenants to <date> and <date> respectively. Landlord disclosure statements completed in <date> stated that there was no intention to sell the Subdivided lots within the next x months. Change in circumstances and decision to sell You are currently renting in <name> and have experienced ongoing accommodation issues. Living in your <name> property is impractical due to your employment commitments and the long commute to work. You are seeking to acquire a principal place of residence closer to your workplace for long-term housing stability. To fund this acquisition without significantly increasing debt at the current interest rates, you have decided to sell the properties. The increased construction costs of the townhouses have significantly altered your financial position, and the Subdivided lots are the most practical assets to sell. You sought advice from real estate agents, financiers and tax professionals regarding the viability of selling the Subdivided lots. The townhouses are still currently being leased, and the tenants will be given appropriate notice to vacate the property. You do not intend to undertake any further development activities on the Subdivided lots prior to sale.

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 9-20 | A New Tax System (Goods and Services Tax) Act 1999 section 23-5 | A New Tax System (Goods and Services Tax) Act 1999 section 40-65 | A New Tax System (Goods and Services Tax) Act 1999 section 40-75 | A New Tax System (Goods and Services Tax) Act 1999 Subsection 188-10(1) | A New Tax System (Goods and Services Tax) Act 1999 section 188-15 | A New Tax System (Goods and Services Tax) Act 1999 section 188-20 | A New Tax System (Goods and Services Tax) Act 1999 section 188-25 | A New Tax System (Goods and Services Tax) Act 1999 section 195-1

Reasons for decision: Summary: In this ruling, • unless otherwise stated, all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) • all legislative terms of the GST Act marked with an asterisk are defined in section 195-1 of the GST Act. • all reference materials, published by the Australian Taxation Office (ATO), that are referred to are available on the ATO website ato.gov.au Section 9-5 provides that you make a taxable supply if: (a) you make the supply for consideration; and (b) the supply is made in the course or furtherance of an enterprise that you carry on; and (c) the supply is connected to the indirect tax zone (Australia); and (d) you are registered or required to be registered for GST. However, the supply will not be a taxable supply to the extent the supply is GST-free or input taxed. The sale of the Subdivided lots will be made for consideration and is located in Australia which satisfies paragraphs 9-5(a) and 9-5(c). We will need to consider whether the sale of the Subdivided lots is made in the course or furtherance of an enterprise that you carry on and if so, as you are not registered for GST, whether you are required to be registered (paragraphs 9-5(b) and 9-5(d) respectively). | Detailed Reasoning - In the course or furtherance of an enterprise: The term 'enterprise' is defined in section 9-20 and includes an activity, or series of activities done on a regular or continuous basis, in the form of a lease, licence or other grant of an interest in property (paragraph 9-20(1)(c)). The leasing of the townhouses constitutes an 'enterprise 'under this limb of the definition in section 9-20. The phrase 'carrying on' an enterprise is defined in section 195-1 to include doing anything in the course of the commencement or termination of the enterprise. The acquisition of the property, demolition of the primary residence, the building of the townhouses, rental and subsequent sale of the Subdivided lots are all considered to be done in the course or furtherance of your leasing enterprise. | Detailed Reasoning - Registration: Section 23-5 states that you are required to be registered for GST if: (a) you are carrying on an enterprise; and (b) your GST turnover meets the registration turnover threshold (currently $x). As mentioned above, your activities of purchasing the Property, demolition of the primary residence, the building of the townhouses, rental and subsequent sale of the Subdivided lots fall within the scope of 'carrying on an enterprise' thus satisfying paragraph 23-5(a) above. The next issue to consider is whether your GST turnover is $x or more. Subsection 188-10(1) provides that you have a GST turnover that meets the registration turnover threshold if: (a) your current GST turnover is at or above $x and the Commissioner is not satisfied that your projected GST turnover is less than $x or (b) your projected GST turnover is at or above $x. Your 'current GST turnover' is defined in section 188-15 as the sum of the values of all your supplies made in a particular month and the preceding x months. Your 'projected GST turnover' is defined in section 188-20 as the sum of the values of all your supplies made in a particular month and the following 11 months. Paragraphs 188-15(1)(a) and 188-20(1)(a) provide that input taxed supplies are disregarded when calculating your current and projected turnovers respectively. Your leasing of the townhouses is an input taxed supply (i.e. being a supply of residential premises that are neither commercial residential premises (hotel, motel, etc) nor accommodation in commercial residential premises). As such, rental proceeds in relation to the leasing of the townhouses are not included in the calculations of your 'current GST turnover' or your 'projected GST turnover'. Section 188-25 and states: In working out your projected GST turnover, disregard: (a) any supply made, or likely to be made, by you by way of transfer of ownership of a capital asset of yours; and (b) any supply made, or likely to be made, by you solely as a consequence of: (i) ceasing to carry on an enterprise; or (ii) substantially and permanently reducing the size or scale of an enterprise. Goods and Services Tax Ruling GSTR2001/7; Goods and services tax: meaning of GST turnover, including the effect of section 188-25 on projected GST turnover provides further explanation on what is meant by the term 'capital asset'. The meaning of 'capital assets' is discussed at paragraphs 31 to 36 of GSTR 2001/7, which states: | Detailed Reasoning - Meaning of 'capital assets': 31. The GST Act does not define the term 'capital assets'. Generally, the term 'capital assets' refers to those assets that make up 'the profit yielding subject' of an enterprise. They are often referred to as 'structural assets' and may be described as 'the business entity, structure of organisation set up or established for the earning of profits'. 32. 'Capital assets' can include tangible assets such as your factory, shop or office, your land on which they stand, fixtures and fittings, plant, furniture, machinery and motor vehicles that are retained by you to produce income. 'Capital assets' can also include intangible assets, such as your goodwill. 33. Capital assets are 'radically different from assets which are turned over and bought and sold in the course of trading operations'. An asset which is acquired and used for resale in the course of carrying on an enterprise (for example, trading stock) is not a 'capital asset' for the purposes of paragraph 188-25(a). 34. 'Capital assets' are to be distinguished from 'revenue assets'. A 'revenue asset' is 'an asset whose realisation is inherent in, or incidental to, the carrying on a business'. 35. If the means by which you derive income is through the disposal of an asset, the asset will be of a revenue nature rather than a capital asset even if such as disposal is an occasional or one-off transaction Isolated transactions are discussed further at paragraphs 46 and 47 of this Ruling. 36. Over the period that an asset is held by an entity, its character may change from capital to revenue or from revenue to capital. For the purposes of section 188-25 the character of an asset must be determined at the time of expected supply. The Property was not acquired for the primary purpose of resale but rather to derive rental income. Based on the above factors, we consider that the sale of the Subdivided lots will constitute the transfer of a capital asset and an activity that substantially reduces the size or scale of your enterprise for the purposes of section 188-25 and is therefore disregarded when calculating your projected GST turnover. Given the above, your GST turnover does not meet the registration turnover threshold, and you are not required to be registered for GST under section 23-5. | Detailed Reasoning - Conclusion: The sale of the Subdivided lots will be made in the course or furtherance of an enterprise you carry on, made for consideration and is located in Australia. However, you are neither registered nor required to be registered for GST. Consequently, you will not be making a 'taxable supply' when you sell the Subdivided lots as paragraph 9-5(d) is not satisfied. Please note that in the case you conduct similar activities in the future, the outcome may differ depending on the facts and overall impression at the time.