| Disclaimer This edited version will be removed from the Database after 30 September 2025. If you believe the issues detailed in this edited version warrant retention in an alternative form, email publicguidance@ato.gov.au This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of private ruling
Authorisation Number: 1011565853373
This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.
Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.
Subject: GST and the sale of land by a mortgagee in possession
Question
Are you, a mortgagee in possession, making a taxable supply under subsection 105-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when you sell vacant land, located in Australia (Land), belonging to a debtor?
Answer
No.
Relevant facts and circumstances
You are registered for goods and services tax (GST).
You are a mortgagee in possession of the land.
You are entitled under the terms of the mortgage to sell the land and apply the proceeds towards the satisfaction of any debt owed to you by the debtor in relation to the land.
The debtor (an individual) has provided you with a written and signed statement that they are the registered owner of the land, are not registered for GST and that the property was used primarily for producing a type of animal; feed.
The debtor used the land for private purposes (grazing their animals and growing feed for animal food).
Relevant legislative provisions
A New Tax System (Goods and Services Tax) 1999
Section 9-5
Paragraph 9-10(2)(d)
Subsection 105-5(1)
Subsection 105-5(3)
Reasons for decision
Summary
The sale of the land would not have been taxable had it been made by the debtor.
Detailed reasoning
Subsection 105-5(1) of the GST Act provides that a supply made by an entity is a taxable supply if:
(a) the entity supplies the property of the debtor to a third party in satisfaction of a debt that the debtor owes to the entity; and
(b) had the debtor made the supply, the supply would have been a taxable supply.
However, subsection 105-5(3) of the GST Act further provides that the supply is not a taxable supply if:
(a) the debtor has given you a written notice stating that the supply would not be a taxable supply if the debtor were to make it, and stating fully the reasons why the supply would not be a taxable supply; or
(b) if you cannot obtain such a notice - you believe on the basis of reasonable information that the supply would not be a taxable supply if the debtor were to make it.
In your case, the sale of the land is a grant of real property and hence is a supply for GST purposes (paragraph 9-10(2)(d) of the GST Act).
Also, you are selling the debtor's land to a third party in satisfaction of a debt that the debtor owes to you in relation to the land, therefore, the requirement in paragraph 105-5(1)(a) of the GST Act is satisfied.
However, in accordance with the requirements of subsection 105-5(3) of the GST Act, the debtor has provided you with a written notice stating that they are not registered for GST and that the land has primarily been used for growing hay. You also believe, given that the land was used for private purposes by the debtor (grazing the debtor's animals and growing feed for animal food) that the supply would not be taxable under section 9-5 of the GST Act if the debtor were to make it. Hence subsection 105-5(3) of the GST Act is also satisfied.
Accordingly, you are not making a taxable supply under subsection 105-5(1) of the GST Act when you sell the debtor's land.
Copyright notice
© Australian Taxation Office for the Commonwealth of Australia
You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).
