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Authorisation Number: 1051240961925
Date of advice: 22 June 2017
Subject: GST and the sale of residential premises
Is goods and services tax (GST) payable on the sale of property located at xxx?
No, GST is not payable on the sale of the property located at xxx.
Relevant facts and circumstances
You are the current owners of the property located at xxx (property).
The property consists of several lots under several titles
The property was purchased by your parents (the parents).
The parents carried on an enterprise from the property.
You inherited the property from the parents.
You carried on an enterprise on the property.
You were registered for GST.
You no longer carry on this enterprise and have deregistered for GST.
Contained on the property are a house (which is being used by you as your principle place of residence), some sheds, kennels and fencing.
Since the cessation of your enterprise, you have started another enterprise (second enterprise) in small scale.
The combined turnover from the second enterprise is less than $75,000.
You are contemplating selling the property to a property developer under an options contract.
There will not be any works undertaken on the property from the time you enter into an options agreement to sell the property until the contract for sale is settled. Accordingly, the purchase price of the property does not reflect any improvements and/or development activities on land that may be undertaken by either you or a third party. The sale price is merely based on the supply and demand for similar land by prospective developers for future residential development.
The purchaser and/or any other entity will not be carrying on an enterprise (other than the second enterprise) until the sale contract is settled.
It is neither practical nor beneficial for you to sell the land separately in separate titles.
Relevant legislative provisions
Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999
Reasons for decision
GST is payable on a taxable supply.
A taxable supply is defined in section 9-5 of the GST Act as follows:
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 with the indirect tax zone; and
(d) you are *registered, or *required to be registered.
However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed.
(terms marked with asterisks (*) are defined in section 195-1 of the GST Act)
We are of the view that vendors are using the property for both private purposes and to carry on an enterprise.
Portion of the property that is being used in an enterprise
Given that the combined income from the second enterprise is less than $75,000, you are not required to be registered for GST for this activity.
The sale of the property to the extent it relates to the second enterprise that is being carried on is a capital asset of this enterprise. Given that sale proceed of a capital asset does not go towards the calculation of the projected GST turnover; you will not be meeting the registration turnover threshold for GST (which is currently $75,000). Accordingly, you are not required to be registered for GST because of the sale of the property.
Given that you are not registered or required to be registered for GST, the sale of the property that relates to the second enterprise is not a taxable supply.
Private portion of the property
The property to the extent it relates to your private purposes is also not a taxable supply. This is because supplies that are not made in the in the course of an enterprise do not meet the requirements of a taxable supply.
Accordingly, the sale of the property is not a taxable supply and such GST is not payable on the sale of the property.