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Edited version of your written advice
Authorisation Number: 1012752823035
Ruling
Subject: GST and requirement to be registered
Question
Will the sale of your commercial property be subject to goods and services tax (GST)?
Answer
No
Relevant facts and circumstances
You are not registered for GST.
You acquired a commercial property prior to the introduction of GST.
You lease out the property.
You registered for GST effective from 1 July 2000 (when GST was introduced).
At that time you were carrying on an enterprise of leasing (the commercial property) and you also conducted another business.
You ceased to carry on (sold) the other business in XXXX.
You do not carry on any other enterprise.
As your annual turnover from your leasing enterprise was below $75,000 you cancelled your GST registration effective from 30 June XXXX.
Your GST turnover is below $75,000.
You intend to sell the commercial property in the near future.
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 9-40
A New Tax System (Goods and Services Tax) Act 1999 Section 23-5
A New Tax System (Goods and Services Tax) Act 1999 Division 188
A New Tax System (Goods and Services Tax) Act 1999 Paragraph 188-25(a)
Reasons for decision
In this reasoning, all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).
Section 9-40 provides that you are liable for GST on any 'taxable supply' that you make. Section 9-5 provides that you make a 'taxable supply' if:
• you make the supply for consideration
• the supply is made in the course or furtherance of an enterprise that you carry on
• the supply is connected to Australia, and
• you are registered or required to be registered for GST.
However the supply will not be a taxable supply to the extent the supply is GST-free or input taxed.
In this case, you will be supplying the property for consideration and will be made in the course of carrying on your leasing enterprise (note: that the term 'carrying on' includes anything in the course of the termination of the enterprise). The property is connected to Australia and the supply will be neither GST-free nor input taxed.
In this case, as you are not registered for GST, the issue is whether you are required to be registered for GST.
Section 23-5 provides that you are required to be registered for GST if you are carrying on an enterprise and your GST turnover is $75,000 or more.
Section 9-20 provides that an enterprise includes an activity or series of activities done 'on a regular or continuous basis, in the form of a lease, licence or other grant of an interest in property'. As such, the renting or leasing of your commercial property would be considered to be carrying on an enterprise. You have advised that your GST turnover is less than $75,000.
The meaning of GST turnover is contained in Division 188. Section 188-10 provides that your GST turnover will meet the registration turnover threshold if:
a) your current turnover is at or above the threshold ($75,000) and the Commissioner is not satisfied that your projected turnover is below $75,000, or
b) your projected turnover is at or above $75,000.
Paragraph 188-25(a) provides that when calculating your projected turnover you disregard any supply made, or likely to be made, by way of transfer of ownership of a capital asset of yours.
We consider your commercial property to be classified as a capital asset and therefore your intended sale (transfer of ownership) would not be included in the calculation of your projected turnover.
Given the above, your GST turnover will not meet the registration turnover threshold of $75,000 and therefore you are not required to be registered for GST.
As you are neither registered nor required to be registered for GST, the sale of your commercial property will not constitute a 'taxable supply' and GST will not be applicable to the sale.
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