| Disclaimer This edited version has been archived due to the length of time since original publication.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 your private ruling
Authorisation Number: 1012037496601
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. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.
Ruling
Subject: GST and registration
Questions
1. Are you currently required to be registered for goods and services tax (GST)?
2. Will you be required to be registered for GST as a result of selling your properties?
3. Will your sale of the properties be a taxable supply?
Answers
1. No, you are not currently required to be registered for GST.
2. No, you will not be required to be registered for GST as a result of selling the properties.
3. No, your sale of the properties will not be a taxable supply
Relevant facts and circumstances
You are not registered for GST.
You are carrying on an enterprise of leasing commercial and residential properties (the properties)
The rental income from the commercial properties is under $75,000 per annum.
The lease of the properties is the only supply that you currently make. You do not have any other enterprise.
You entered into a contract for the sale of the properties. Settlement of the contract will occur on a specified date.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 9-5,
A New Tax System (Goods and Services Tax) Act 1999 section 23-5,
A New Tax System (Goods and Services Tax) Act 1999 section 188-10,
A New Tax System (Goods and Services Tax) Act 1999 section 188-15,
A New Tax System (Goods and Services Tax) Act 1999 section 188-20 and
A New Tax System (Goods and Services Tax) Act 1999 section 188-25.
Reasons for decisions
Question 1
Section 23-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states:
You are required to be registered under this Act if:
you are *carrying on an *enterprise; and
your *GST turnover meets the *registration turnover threshold.
(*denotes a term defined under section 195-1 of the GST Act).
In this case, you are carrying on an enterprise of leasing the properties. As such, paragraph
23-5(a) of the GST Act is satisfied.
For the purpose of paragraph 23-5(b) of the GST Act, subsection 188-10(1) of the GST Act provides that your GST turnover meets the registration turnover threshold if:
· your current GST turnover is at or above the turnover threshold, and the Commissioner is not satisfied that your projected GST turnover is below the turnover threshold; or
· your projected GST turnover is at or above the turnover threshold.
Currently, the registration turnover threshold is $75,000 ($150,000 for non-profit entities).
You advised that your GST turnover from leasing the commercial properties is less than $75,000. Furthermore, this is the only supply that you make currently apart from the lease of the residential properties which you excluded in calculating your GST turnover. However, in accordance with subsection 188-10(1) of the GST Act, it must also be determined whether your projected GST turnover is at or above the threshold.
Your projected GST turnover at a time during a particular month is the sum of the values of all the supplies that you have made, or are likely to make, during that month and the next 11 months, not including input taxed supplies. As the settlement of the contract for sale of the properties will occur in the next 11 months, it must be determined whether the sale is included in calculating your projected GST turnover.
Section 188-25 of the GST Act provides that the following are disregarded in working out your projected GST turnover:
· any supply made, or likely to be made, by you by way of transfer of ownership of a capital asset of yours; and
· any supply made, or likely to be made, by you solely as a consequence of:
· ceasing to carry on an enterprise; or
· substantially and permanently reducing the size or scale of an enterprise
Generally, the term 'capital assets' refers to those assets that make up 'the profit yielding subject' of an enterprise and can include factory, shop, office, and your land which are retained by you to produce income.
In this case you own the properties and use them to generate rental income; as such, the properties are capital assets of yours. Accordingly, the sale of the properties is disregarded in calculating your projected GST turnover.
As your GST turnover does not meet the registration turnover threshold, paragraph 23-5(b) of the GST Act is not satisfied. Therefore, you are not currently required to be registered for GST.
Question 2
The sale of the properties will be disregarded in calculating your projected GST turnover as explained above. The proceeds of the sale would not increase your GST turnover to meet the registration turnover threshold. Therefore, you will not be required to be registered for GST as a result of selling the properties.
Question 3
According to section 9-5 of the GST Act, you make a taxable supply if:
· the supply is made for consideration; and
· the supply is made in the course or furtherance of your enterprise; and
· the supply is connected with Australia; and
· you are registered or required to be registered.
All the conditions in paragraphs 9-5(a) to 9-5(d) of the GST Act must be met for your sale of the properties to be a taxable supply.
You are not registered for GST and, as discussed in the answers to questions 1 and 2, not required to be registered for GST. Therefore, the requirement in paragraph 9-5(d) of the GST Act is not satisfied. Accordingly, your sale of the properties will not be a taxable supply.
Additional information
Note that an entity's current and projected GST turnover is calculated at any time during a particular month. You must continually monitor your GST turnover to determine if you are required to be registered for GST.
If, on or before settlement of the contract for sale of the properties, your GST turnover meets the registration turnover threshold because of another enterprise that you will carry on, you will be required to be registered for GST and may be liable for GST on the sale.
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).
