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Edited version of private ruling
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Ruling
Subject: GST and sale of residential property
Question 1
Will the sale of your property located in Australia subject to goods and services tax (GST)?
Answer
No, the sale of your property located in Australia is not subject to GST.
Relevant facts and circumstances
· You are not registered for GST.
· You do not own any other property and do not conduct any enterprise.
· You have resided in this residence for a number of years.
· The title of the property is in your name
· You wish to sell your property on your death and donate the proceeds to a charity organisation.
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 states:
You make a taxable supply if:
(a) you make the supply for *consideration; and
(b) the supply is made in the course of furtherance of an *enterprise that you *carry
on; and
(c) the supply is *connected with Australia; 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.
Note that the asterisks denote a defined term in the GST Act.
Subsection 9-10(1) of the GST Act states:
A supply is any form of supply whatsoever.
Paragraph 9-10(2)(d) of the GST Act further states:
(2) Without limiting subsection (1), supply includes any of these:
(d) a grant, assignment or surrender of *real property.
Therefore the sale of the Property is a supply for GST purposes. To be a taxable supply, it is therefore important to consider in the first instance whether the sale of the property was made in the course of furtherance of an enterprise that you carry on as per section 9-5 of the GST Act.
In the course of furtherance of an enterprise
Subsection 9-20(1) of the GST Act defines the term enterprise and includes as an enterprise the activity, or series of activities, done in the form of an adventure or concern in the nature of trade. An enterprise can therefore include a single activity such as the sale of real property such as residential premises.
It is therefore necessary to determine if the sale of the Property constitutes an activity done in the form of an adventure or concern in the nature of trade and hence an enterprise under subsection 9-20(1) of the GST Act.
Miscellaneous Taxation Ruling MT 2006/1 provides the Australian Tax Office (ATO) view on whether or not an activity constitutes an enterprise for the A New Tax System (Australian Business Number) Act 1999.
Goods and Services Tax Determination GSTD 2006/6 states that the Tax Office view given in MT 2006/1, can be applied equally to the term enterprise as used in the GST Act.
In the form of an adventure or concern in the nature of trade
Paragraphs 244, 258 and 263 of MT 2006/1 provide direction as to whether the sale of the Property can be considered an enterprise. They state:
244. … 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.
258. Assets purchased with the intention of holding them for a reasonable period of time, to be held as income producing assets or to be held for the pleasure or enjoyment of the person, are more likely not to be purchased for trading purposes.
263. The issue to be decided is whether the activities are an enterprise in that they are of a revenue nature as they are considered to be activities of carrying on a business or an adventure or concern in the nature of trade (profit making undertaking or scheme) as opposed to the mere realisation of a capital asset.
Sale of a private asset
In your case, the Property is not used to carry on an enterprise and the Property has been used as your principle place of residence for numerous years.
Consequently, given the way the Property is used, we consider that the sale of the Property is not commercial in nature, that is, its sale will not a profit making undertaking but rather the sale of your private asset.
Therefore you are not carrying on an enterprise for the purposes of the GST Act and consequently not making a taxable supply when the property will be sold. Hence the sale will not subject to GST.
GST is payable on taxable supplies that you make.
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