Private ruling: Enterprise and required to be registered for GST
Published: August 2013
Ruling period: From the tax period 1 July 2009 to 31 December 2012
Date scheme commenced: 1 July 200X

Ruling: Q1: Will you make a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) in relation to the sale of a homes built on land acquired in 200X? If so, how far back are you able to register for GST? | A1: Yes, your supply of the premises is a taxable supply. You may backdate your registration to the commencement of your enterprise. However, it is our policy, because of the four year rule under Subdivision 105-C of Schedule 1 to the Taxation Administration Act 1953 (TAA), not to backdate beyond four years.

Relevant facts and circumstances: You are registered with an Australian business number but are not registered for the goods and services tax (GST). In 200X you acquired a block of land with the intention of building a residence for sale at a profit. After receiving building approval, construction began in late 20XX. Your builder ceased business in 20YY. A new builder was engaged and the property was completed in 20ZZ. The property was listed for sale through local real estate agents and was sold in late 20ZZ with settlement occurring in the subsequent year. You requested a private ruling in relation to your enterprise midway through the subsequent year..

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 Division 7 | A New Tax System (Goods and Services Tax) Act 1999 Section 7-1 | A New Tax System (Goods and Services Tax) Act 1999 Division 9 | 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 23-10 | A New Tax System (Goods and Services Tax) Act 1999 Section 195-1 | Taxation Administration Act 1953, Schedule 1, Subdivision 105-C | Taxation Administration Act 1953, Schedule 1, Section 105-55

Reasons for decision: Summary: Section 7-1 of the GST Act provides that GST is payable on taxable supplies. The requirements for a taxable supply are detailed under section 9-5 of the GST Act. Goods and services tax ruling GSTR 2003/3, Goods and services tax: when is a sale of real property a sale of new residential premises?, provides guidance on when a sale of real property is taxable. GSTR 2003/3 provides, at paragraph 22, that a supply of residential premises by way of sale is a taxable supply where all the following conditions are met: · the residential premises are new residential premises as defined in section 40-75; · the new residential premises were not used for residential accommodation before 2 December 1998; · the supply is made for consideration; · the supply is made in the course or furtherance of an enterprise that the vendor carries on; · the residential premises are in Australia; and · the vendor is registered, or required to be registered. The issues in this case are whether you are carrying on an enterprise and whether you are required to be registered. | Detailed Reasoning - Carrying on an enterprise: Subsection 9-20(1) of the GST Act defines an enterprise as 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. Paragraph 9-20(2)(b) of the GST Act provides that an enterprise does not include an activity or series of activities done as a private recreational pursuit or hobby. Section 195-1 of the GST Act defines a business as any profession, trade, employment, vocation or calling, but does not include occupation as an employee. Miscellaneous Tax Ruling MT 2006/1 - provides assistance to entities in determining their entitlement to an Australian Business Number and considers the meaning of certain key words and phrases used to define an enterprise. Goods and Services Tax Determination GSTD 2006/6 provides that MT 2006/1 has equal application to the meaning of 'entity' and 'enterprise' for the purposes of the GST Act. Paragraph 265 of MT 2006/1 recognises that the question of whether an entity is carrying on an enterprise arises where there are 'one-offs' or isolated real property transactions. A factor that indicates that an adventure or concern in the nature of trade is being carried is that a building has been erected on the land. You have identified the following circumstances apply: · you acquired the land with the intention of having a building constructed for sale at a profit; · a builder was engaged to build a residence; and · the premises were sold. In these circumstances you are undertaking an enterprise as defined in section 9-20 of the GST Act. | Detailed Reasoning - Required to be registered for GST: You are required to be registered for GST if you are carrying on an enterprise; and your GST turnover meets the registration turnover threshold (see section 23-5 of the GST Act). Entities who are carrying on an enterprise in Australia and whose GST turnover is less than $75,000 (less than $150,000 for non-profit organisations) can choose to register for GST (see section 23-10 of the GST Act). Because you are undertaking an enterprise of property construction and the consideration you received from the sale exceeded the registration turnover threshold of $75,000, you are required to be registered. Your turnover will meet the registration turnover threshold during the period when you made the sale of the premises by exchanging the contract for sale i.e. in December 2012. When may you be registered for GST? You may be registered for GST if you are carrying on an enterprise irrespective of whether your GST turnover is at, above or below the registration turnover threshold. You may be registered for GST if you intend to carry on an enterprise from a particular date (see section 23-10 of the GST Act). Time limits on GST payments and credits Subdivision 105-C of Schedule 1 to the TAA imposes time limits on recovering unpaid net amounts of indirect taxes and payments of refunds and credits. In particular, section 105-55 of Schedule 1 to the TAA provides that you are not entitled to a refund or credit in respect of tax periods that are not within four (4) years of the end of the tax period unless you have notified the Commissioner of your entitlement. Your request for a private ruling in relation to your enterprise in 20ZZ is considered to be a suitable notification. Accordingly, you will not be required to pay net amounts or be entitled to claim input tax credits that are attributable to the tax periods prior to 1 July 2009. | Detailed Reasoning - Conclusion: Your activity in acquiring land and building premises for sale at a profit is an enterprise for GST purposes. You are required to be registered and may backdate your registration to the commencement of your enterprise. Time limits on GST payments and credits may apply to input tax credits that were attributable to tax periods prior to 1 July 2009.