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  • Registration

    Where a supplier is unregistered, are the following disregarded for the purposes of section 188-25 of the GST Act in determining whether the supplier has an annual turnover which meets the registration threshold :-

    The sale to a single purchaser of:

    (a) (i) land with standing timber on the land at time of sale of the land;
    (ii) land together with already felled timber;

    (b) grazing permits?

    Answers

    (a)(i) Land with standing timber.

    Until the timber is severed from the land it is considered to be part of the land. Provided the land is considered to be a capital asset, the proceeds from the sale will be excluded from the vendor's projected annual turnover. Please note, where the standing trees are acquired as trading stock, Section 188-25 of the GST Act will not apply.

    In addition, if the sale is solely as a consequence of the supplier ceasing to carry on his enterprise or permanently reducing the size or scale of his enterprise, the proceeds from the sale of the timber and land will be excluded from the supplier's projected annual turnover.

    Whether or not the timber is ready for harvest at the time of sale of the land will not affect the application of section 188-25 of the GST Act in respect of the sale. The important point is whether or not the timber is separate from the land at the time of the sale.

    (ii) Land together with already felled timber.

    Where the timber is felled and therefore severed from the land and is sold prior to the sale of the land, the supply of the timber will be considered to be a separate supply. The proceeds from the sale of the land (capital asset) will not be included in calculating the supplier's projected annual turnover. The proceeds from the sale of the timber will only be excluded from the calculation if the sale is solely as a consequence of the supplier ceasing to carry on his enterprise or permanently reducing the size or scale of his enterprise.

    (b) grazing permits

    The proceeds from the sale of grazing permits will be excluded from the supplier's projected annual turnover as they are from the supply by way of transfer of ownership of a capital asset.

    Explanation

    Subject to any specific statutory provision to the contrary, anything growing on the land is considered to be part of the land. In Taxation Ruling TR 95/6 (HL), a number of issues concerning forestry operations are discussed. Trees form part of the land on which they grow and while standing do not constitute trading stock. However, trees on hand at the end of a year of income that have been felled for the purpose of manufacture or sale in the course of carrying on a business of forest operations constitute trading stock.

    Capital assets are those assets that are used to yield profit. Unlike trading stock, capital assets are not bought and sold to generate a trading profit in the course of carrying on an enterprise.

    Section 188-25 of the A New Tax System (Goods and Services Tax) Act 1999 ('the GST Act') provides:

    In working out your projected annual 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.

    This section provides that when calculating projected annual turnover, supplies that fall within paragraph 188-25(a) or paragraph 188-25(b) are not included.

    Question (a) (i) and (ii)

    Where land is sold with standing timber as a capital asset, paragraph 188-25(a) will apply and the proceeds of the sale will not be included in calculating the supplier's projected annual turnover. If paragraph 188-25(a) cannot be satisfied, paragraphs 188(b)(i) and (ii) need to be considered.

    To satisfy sub-paragraphs 188-25(b)(i) or (ii), the sale of the timber and land must be solely due to the fact that the supplier is ceasing the business altogether or because the size and scale of the business is being permanently reduced. Only then will the proceeds of the sale not be included in calculating the supplier's projected annual turnover.

    If the timber is severed and sold it is considered to be trading stock and the proceeds from the sale will be included in calculating the supplier's projected annual turnover. However, if the timber is sold solely as a consequence of the supplier ceasing to carry on his enterprise or permanently reducing the size or scale of his enterprise then the supply will not be included in the supplier's projected annual turnover.

    Question (b)

    As grazing permits are generally considered to be capital assets, paragraph 188-25(a) will usually apply and the proceeds of the sale will not be included in calculating the supplier's projected annual turnover.

    GSTR 2001/D1: how does section 188-25 affect the calculation of 'projected annual turnover' for the purposes of the GST Act?

    15.2 Ceasing registration

    15.2.1 - When Does 21 Days Following the Cessation of Registration Commence

    Question

    In relation to applications to cancel GST registration, when does the 21 days following date of cessation of an enterprise referred to in section 25-50 the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)commence?

    Answer

    Section 25-50 of the GST Act requires that if you are registered and you are not carrying on an enterprise, you must apply to the Commissioner in the approved form for cancellation of your registration. You must lodge your application within 21 days after the day on which you ceased to be carrying on any enterprise.

    The 21 days referred to in section 25-50 of the GST Act commences on the day after the day on which the enterprise ceased. For example, if the enterprise ceased on 1 September, the calculation of the 21 days commences from 2 September and continues for 21 days, inclusive of the 21st day. That is, the 21 day period ceases on 22 September.

    The Commissioner will notify you of any decision that is made in relation to the cancellation of your registration. The date on which cancellation takes effect may be any day occurring before, on or after the day of the decision.

    Explanation

    Section 25-50 of the GST Act provides that:

    "If you are registered and you are not carrying on any enterprise, you must apply to the Commissioner in the approved form for cancellation of your registration. You must lodge your application within 21 days after the day on which you ceased to be carrying on any enterprise."

    Section 25-55 of the GST Act provides that:

    "(1) The Commissioner must cancel your registration if:

    (a) you have applied for cancellation of registration in the approved form; and

    (b) at the time you applied for cancellation of registration you had been registered for at least 12 months; and
    (c) the Commissioner is satisfied that you are not required to be registered.

    (2) The Commissioner must cancel your registration (even if you have not applied for cancellation of your registration) if:

    (a) the Commissioner is satisfied that you are not carrying on an enterprise; and

    (b) the Commissioner believes on reasonable grounds that you are not likely to carry on an enterprise for at least 12 months.

    (3) The Commissioner must notify you of any decision he or she makes in relation to you under this section. If the Commissioner decides to cancel your registration, the notice must specify the date of effect of the cancellation."

    Section 25-60 of the GST Act provides that:

    " (1) The Commissioner must decide the date on which the cancellation of your registration under subsection 25-55(1) or (2) takes effect. That date may be any day occurring before, on or after the day on which the Commissioner makes the decision."

    Therefore, within 21 days of ceasing to carry on an enterprise, you must lodge an application to cancel your GST registration. The 21 days commences on the day after the day on which you ceased to be carrying on any enterprise.

    The Commissioner must cancel your registration if you have applied in the approved form, have been registered for at least 12 months and is satisfied that you are not required to be registered. In addition, the Commissioner must cancel your registration if the Commissioner is not satisfied that you are carrying on an enterprise and the Commissioner believes on reasonable grounds that you are not likely to carry on an enterprise for at least 12 months.

    The Commissioner will notify you of any decision that is made in relation to the cancellation of your registration. The date on which cancellation takes effect may be any day occurring before, on or after the day of the decision.

    An entity's concluding tax period will be determined with reference to when it ceases to carry on an enterprise.

    Section 27-40 of the GST Act provides that:

    • an entity's concluding tax period is taken to have ceased:
    • at the end of the day before death, bankruptcy, liquidation or receivership;
    • at the end of the day on which cessation occurred; or
    • at the end of the cancellation day.

    Section 31-10 of the GST Act provides that a final GST return must be given to the Commissioner on or before the 21st day of the month following the end of the tax period (or the following month if the tax period ended during the first 7 days of the month), or within such further period as the Commissioner allows. This allows for the Commissioner to exercise a discretion in situations where an extension of time is required to finalise all business dealings.

    15.2.2 - Concluding GST return

    Question

    When does a GST return in relation to a concluding tax period need to be lodged?

    Answer

    Subsection 27-40(1A) of the GST Act provides that an entity's concluding tax period ceases at the end of the day on which the enterprise ceases. Section 27-40 of the GST Act also stipulates other circumstances in which an enterprise is taken to have ceased (refer below).

    A GST return must be provided in relation to a concluding tax period on or before the 21st day of the month following the end of that tax period. Section 31-10 (refer below) provides requirements in relation to this. It should be noted that the Commissioner does have a discretion under paragraphs 31-10(1)(b) and (2)(b) of the GST Act to grant extensions of time to lodge final returns.

    Explanation

    Section 25-50 of the GST Act provides that:

    "If you are registered and you are not carrying on any enterprise, you must apply to the Commissioner in the approved form for cancellation of your registration. You must lodge your application within 21 days after the day on which you ceased to be carrying on any enterprise."

    Section 25-55 of the GST Act provides that:

    "(1) The Commissioner must cancel your registration if:

    (a) you have applied for cancellation of registration in the approved form; and

    (b) at the time you applied for cancellation of registration you had been registered for at least 12 months; and

    (c) the Commissioner is satisfied that you are not required to be registered.

    (2) The Commissioner must cancel your registration (even if you have not applied for cancellation of your registration) if:

    (a) the Commissioner is satisfied that you are not carrying on an enterprise; and

    (b) the Commissioner believes on reasonable grounds that you are not likely to carry on an enterprise for at least 12 months.

    (3) The Commissioner must notify you of any decision he or she makes in relation to you under this section. If the Commissioner decides to cancel your registration, the notice must specify the date of effect of the cancellation."

    Section 25-60 of the GST Act provides that:

    " (1) The Commissioner must decide the date on which the cancellation of your registration under subsection 25-55(1) or (2) takes effect. That date may be any day occurring before, on or after the day on which the Commissioner makes the decision."

    Therefore, within 21 days of ceasing to carry on an enterprise, you must lodge an application to cancel your GST registration. The 21 days commences on the day after the day on which you ceased to be carrying on any enterprise.

    The Commissioner must cancel your registration if you have applied in the approved form, have been registered for at least 12 months and is satisfied that you are not required to be registered. In addition, the Commissioner must cancel your registration if the Commissioner is not satisfied that you are carrying on an enterprise and the Commissioner believes on reasonable grounds that you are not likely to carry on an enterprise for at least 12 months.

    The Commissioner will notify you of any decision that is made in relation to the cancellation of your registration. The date on which cancellation takes effect may be any day occurring before, on or after the day of the decision.

    An entity's concluding tax period will be determined with reference to when it ceases to carry on an enterprise.

    Section 27-40 of the GST Act provides that:

    • an entity's concluding tax period is taken to have ceased:
    • at the end of the day before death, bankruptcy, liquidation or receivership;
    • at the end of the day on which cessation occurred; or
    • at the end of the cancellation day.

    Section 31-10 of the GST Act provides that a final GST return must be given to the Commissioner on or before the 21st day of the month following the end of the tax period (or the following month if the tax period ended during the first 7 days of the month), or within such further period as the Commissioner allows. This allows for the Commissioner to exercise a discretion in situations where an extension of time is required to finalise all business dealings.

      Last modified: 07 Jan 2005QC 17858