Edited version of your private ruling

Authorisation Number: 1012518860925

Ruling

Subject: Goods and services tax (GST) and sale of property

Question

Will GST be payable by you on your sale of the property?

Answer

No.

Relevant facts and circumstances

Two individuals (you) own a property located in Australia (the property).

You intend to sell the property.

You formerly operated a business as a partnership on the property. The partnership ceased its activities a number of years ago.

The partnership is no longer registered for GST or a registered business.

The property has been used solely as your residence since the partnership ceased its activities.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 subsection 7-1(1)

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 9-40

Reasons for decision

Summary

GST will not be payable by you on your sale of the property because it will not be a supply you make in the course or furtherance of an enterprise you carry on.

Detailed reasoning

GST is payable by you on taxable supplies that you make.

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:

(a) you make the supply for *consideration; and

(b) the supply is made in the course or 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.

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

In accordance with subsection 9-20(1) of the GST Act, enterprise includes:

· an activity or series of activities done in the form of a business

(paragraph 9-20(1)(a)) and

· an adventure or concern in the nature of trade (paragraph 9-20(1)(b) of the GST Act).

Miscellaneous Taxation Ruling MT 2006/1 provides guidance on the meaning of enterprise for ABN purposes.

Goods and Services Tax Determination GSTD 2006/6 provides that MT 2006/1 has equal application to the meaning of enterprise for the purposes of the GST Act and can be relied on for GST purposes.

Paragraphs 262 and 263 of MT 2006/1 discuss one-off real property transactions. They state:

262. The question of whether an entity is carrying on an enterprise often arises where there are 'one-offs' or isolated real property transactions.

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. (In an income tax context a number of public rulings have issued outlining relevant factors and principles from judicial decisions. See, for example, TR 92/3, TD 92/124, TD 92/125, TD 92/126, TD 92/127 and TD 92/128.)

In accordance with paragraph 244 of MT 2006/1, 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.

Paragraph 259 of MT 2006/1 discusses investment assets. It states:

259. Examples of investment assets are rental properties, business plant and machinery, the family home, family cars and other private assets. The mere disposal of investment assets does not amount to trade.

In accordance with paragraph 75 of Goods and Services Tax Ruling GSTR 2003/13, we consider that the supply, sale or disposal of business assets will be in the course or furtherance of the enterprise in which those assets are used.

In accordance with paragraph 7 of Goods and Services Tax Ruling GSTR 2003/6, the GST Act does not apply to private assets.

Paragraph 39 of Goods and Services Tax Ruling GSTR 2003/6 discusses sales of private assets. It states:

39. The Explanatory Memorandum to A New Tax System (Goods and Services Tax) Bill 1998 states:

'In the course or furtherance' is not defined, but is broad enough to cover any supplies made in connection with your enterprise. An act done for the purpose or object of furthering an enterprise, or achieving its goals, is a furtherance of an enterprise although it may not always be in the course of that enterprise. 'In the course or furtherance' does not extend to the supply of private commodities, such as when a car dealer sells his or her own private car. See Case N43 (1991) 13 NZTC 3361.

The partnership enterprise ceased a number of years ago and you have used the property solely as your residence since then. Hence, your sale of the property will be the mere realisation of a private investment asset rather than a sale of a business asset. Therefore, your sale of the property will not be a supply made in the course or furtherance of an enterprise that you carry on. Hence, the requirement of paragraph 9-5(b) of the GST Act will not be met.

As you will not meet all of the requirements of section 9-5 of the GST Act, you will not make a taxable supply of the property when you sell it. Therefore, GST will not be payable by you on your sale of the property.

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