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This edited version has been archived due to the length of time since original publication.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.

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Edited version of your private ruling

Authorisation Number: 1012291825039

Ruling

Subject: Sale of property

Sale of residential property

Question 1:

Will your supply of the property be a taxable supply?

Answer:

No

Relevant facts and circumstances

You are not registered for GST.

You own the property.

The property originated from the subdivision of a 4 hectare property owned by your parent. The original 4 hectare property was acquired in the 1950s and was used by your parent and family as a principal residence as well as for running of a primary production business. You wished to reside on the land with your own family and hence the subdivision was completed and a block was gifted to you in YYYY.

The property already has a house on the property which was constructed in YYYY and used as residence by your parent and family. You now reside in this house with your family. The property is used primarily by you for personal purposes.

Entity A operates an enterprise on a portion of the land. You took over the running of the enterprise from your parent in YYYY. You ran the enterprise as a sole trader until YYYY, when the operation of the enterprise was taken over by Entity A.

There is no written lease agreement between you and Entity A.

Entity A did not make any lease payments to you. However, it did pay some of the cost of the council rates.

The property was recently rezoned.

The rezoning was initiated and managed by the local shire council which applied to a wide area in the locality.

You did not actively pursue the rezoning and were a mere passive participant in the process.

You have executed a sale contract to sell the property.

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 9-20

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 188-25

A New Tax System (Goods and Services Tax) Act 1999 section 195-1

Reasons for decision

You make a taxable supply where you satisfy the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), which states:

You make a taxable supply if:

However, the supply is not a *taxable supply to the extent that it is *GST-free

or *input taxed.

(*Denotes a term defined in section 195-1 of the GST Act)

Therefore, the conditions for making a taxable supply include that you are carrying on an enterprise and are either registered or required to be registered for GST.

As defined in subsection 9-20(1) of the GST Act an enterprise includes an activity, or a series of activities, done:

You have allowed Entity A to use part of the property on a continuous basis since YYYY. In return the trust has paid some of the property rates. This constitutes a lease, albeit an informal lease for a nominal amount. These actions constitute an enterprise in accordance with the above definition.

You have made a supply for consideration of property located in Australia. Therefore the supply is connected with Australia.

The property is held solely in your name. You are not registered for GST. Therefore it needs to be determined whether you are required to be registered.

As provided in section 23-5 of the GST Act, you are required to be registered if:

Section 188-10 of the GST Act provides that your GST turnover is calculated with reference to your current GST turnover and your projected GST turnover.

As provided in subsection 188-10(2) of the GST Act, your GST turnover does not exceed a particular threshold if:

Before the sale (settlement) of your property, your current GST turnover consists only of the payment of rates by Entity A. However, at the time of settlement of your property, the sale proceeds will also be included in your current GST turnover, which will consequently exceed the registration turnover threshold.

Therefore, if your projected GST turnover also exceeds the registration turnover threshold, you will exceed the registration threshold.

Paragraph 188-25(a) of the GST Act provides that in working out your projected GST turnover, you disregard any supply made, or likely to be made, by you by way of transfer of ownership of a capital asset of yours. The property that you are selling is a capital asset and the proceeds of the sale will not be included in your projected GST turnover.

It follows that your GST turnover will not meet the registration turnover threshold and you are not required to be registered for GST.

As you are neither registered, nor required to be registered for GST, the sale of the property will not be a taxable supply.

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