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Edited version of your written advice

Authorisation Number: 1051221441940

Date of advice: 17 July 2017

Ruling

Subject: GST-free supply for nominal consideration

Question 1

Are the supplies of the real property and chattels GST-free under subparagraph 38-250(2)(b)(ii) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes. The supplies of the real property and chattels are GST-free.

Relevant facts and circumstances

    ● You are registered for GST and an endorsed charity for the purposes of section 195-1 of the GST Act.

    ● You acquired real property and operated an enterprise on the real property.

    ● You incurred costs to acquire fixtures and fittings for the buildings on the real property and made improvements to the land.

    ● You also incurred costs to acquire chattels to be used in the enterprise.

    ● You entered into a contract to supply the real property and chattels to a buyer.

    ● Using a reasonable apportionment method, it was determined that:

      the apportioned sale consideration received for the real property is less than 75% of the consideration you incurred to acquire the real property and bring it to the state it is in at the time of sale; and

      ● the apportioned sale consideration received for the chattels is less than 75% of the consideration you incurred to acquire the chattels.

Relevant legislative provisions

Subparagraph 38-250(2)(b)(ii) of the GST Act

Reasons for decision

Subparagraph 38-250(2)(b)(ii) of the GST Act provides that a supply is GST-free if:

    ● the supplier is an endorsed charity, a gift-deductible entity or a government school;

    ● the supply is not a supply of accommodation, and

    ● the consideration for the supply is less than 75% of the consideration the supplier provided, or was liable to provide, for acquiring the thing supplied.

The sale of the real property and the chattels is considered to be a mixed supply. Our view on what is a 'mixed supply’ is explained in Goods and Services Tax Ruling GSTR 2001/8 Goods and services tax: Apportioning the consideration for a supply that includes taxable and non-taxable parts. The Ruling explains that where a supply consists of more than one part, the supply could be either a 'mixed’ or a 'composite’ supply. A composite supply contains a dominant part and also something that is integral, ancillary or incidental to that part and is therefore treated as a single supply. However, where the supply has separately identifiable parts, the supply is a mixed supply. The GST status of the component parts of a mixed supply is determined separately.

The supply of the real property and the chattels is a mixed supply because the chattels do not form part of the building or land of the real property. Unlike fixtures and fittings, the chattels are not affixed to a building or land of the real property and the title to them does not automatically pass when the real property is sold.

As the supply of the real property and the chattels is a mixed supply, they must be considered separately under subparagraph 38-250(2)(b)(ii) of the GST Act. Paragraph 26 of GSTR 2001/8 provides that you can use any reasonable method to apportion the consideration for a mixed supply. However, the method you use must be supportable in the particular circumstances.

The supply of the real property is GST-free because all of the requirements of subparagraph 38-250(2)(b)(ii) of the GST Act are satisfied because:

    ● you are an endorsed charity for the purposes of section 195-1 of the GST Act;

    ● the supply is not a supply of accommodation; and

    ● the apportioned sale consideration for the supply of the real property is less than 75% of what you provided, or were liable to provide to acquire the real property and to bring it to the state it is at the time of sale.

Similarly, the supply of the chattels is GST-free because:

    ● you are an endorsed charity for the purposes of section 195-1 of the GST Act;

    ● the supply is not a supply of accommodation; and

    ● the apportioned sale consideration for the supply of the chattels is less than 75% of what you provided, or were liable to provide to acquire the chattels.