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Edited version of private ruling
Authorisation Number: 1011463310342
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Ruling
Subject: GST and sale of real property
Question
Are you making a taxable supply when you sell a specified property (the property)?
Answer
No, you are not making a taxable supply when you sell the property.
Relevant facts and circumstances
Your ruling is based on the following facts.
You are not registered for GST.
You acquired the property from a mortgagee in possession. The sale of the property to you was treated as a taxable supply.
Over the years, the premises on the property were converted into business premises and used for carrying on a specified business (the business) by previous owners.
The property is zoned residential.
There is only one building on the land.
The owner before you acquired the property a few years ago and run the business from the premises. The owner went into bankruptcy and closed the business. The mortgagee took possession of the property.
You and your family were able to take up residence in the property without the need for Council approval once the electricity was reconnected, about one week after settlement.
You commenced renovating the property about a year ago. You converted the property into a multi bedroom house. The work that you carried out does not amount to substantial renovations.
The renovations were completed recently. A development approval was not required as the work was carried out within the existing walls.
You spent a specified amount on materials and carried out the renovation works yourself.
The property is now converted into a house and can no longer be used to run the business in its current state.
You do not intend to carry out any further alternations or renovations to the property prior to its sale.
You have been residing in the property since its acquisition and this is your only place of residence.
You intend to sell the property to be able to settle a personal matter.
Since acquiring this property, you have not used the property in the course of an enterprise.
Currently, you do not own any other real properties. You have not developed or subdivided any other properties before. You have not bought and sold real properties before.
You are not carrying on any other enterprise.
Reasons for decision
Subsection 7-1(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that GST is payable on taxable supplies.
Section 9-5 of the GST Act provides that you make a taxable supply if:
(a) you make the supply for consideration
(b) the supply is made in the course or furtherance of an enterprise that you carry on
(c) the supply is connected with Australia, and
(d) you are registered or required to be registered.
However, a supply is not a taxable supply to the extent that it is GST-free or input taxed.
All of the conditions set out in section 9-5 of the GST Act must be satisfied in order for a supply to be taxable.
In your case, the sale of the property will be for consideration and will be connected with Australia as the property is located in Australia. Therefore, paragraphs 9-5(a) and 9-5(c) of the GST Act will be satisfied.
The issues that remain to be considered are whether the sale of the property is in the course of an enterprise that you carry on, whether you are required to be registered for GST and whether the sale of the property is GST-free or input taxed.
Whether the sale of the property is in the course of an enterprise that you carry on
'Enterprise' is defined under section 9-20 of the GST Act to include, among other things, an activity, or series of activities, done in the form of an adventure or concern in the nature of trade.
Miscellaneous Taxation Ruling MT 2001/6 explains the meaning of 'entity' and 'enterprise' for the purposes of the Australian business number (ABN). 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.
These public rulings provide that an adventure or concern in the nature of trade includes a commercial activity that does not amount to a business but which has the characteristics of a business deal. Such transactions are of a revenue nature. However, the sale of the family home, car and other private assets are not, in the absence of other factors, adventures or concerns in the nature of trade. The fact that the asset is sold at a profit does not, of itself, result in the activity being commercial in nature.
You advised that since the acquisition of the property, you have resided in the property. You converted the premises into a house that can no longer be used to carry on the business. You have not used the property for any income producing activities. This is your only place of residence and the reason that you are selling the property is because you need the funds to settle a personal matter.
You also stated that this is the only property that you own. You have not bought and sold any other properties and have not developed or subdivided any other properties before.
Based on the information that you have provided, we consider that the sale of the property is a sale of a private asset and therefore is not in the course of an enterprise that you carry on. Hence, the requirement of paragraph 9-5(b) of the GST is not met. Consequently, the sale of the property will not be a taxable supply as it does not meet all the requirements of section 9-5 of the GST Act.
It is not necessary to consider the other requirements of section 9-5 of the GST Act.
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