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Edited version of your written advice

Authorisation Number: 1013056761175

Date of advice: 21 July 2016

Ruling

Subject: GST and sale of property

Question 1

Will the sale of the property be subject to the GST?

Answer

No. The sale of the property will not be subject to the GST.

Relevant facts and circumstances

A decade ago you bought a property.

The property has remained your principal place of residence continuously since it was purchased.

You also operated an enterprise on the property.

Your property is now on the market and is being sold.

You are not registered nor are you required to be registered for GST.

You will not be registered for GST at the time of sale.

The land on which the enterprise is located is in your name and not in the company's name.

You will in no way be involved with the development of the land. The property developers will be doing the development.

You have not sold properties before aside from your first home which was sold over ten years ago.

All residences on the property are more than five years old.

No renovations have been done to the residences in the last five years.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 (GST Act)

section 9-20

section 195-1

Reasons for decision

Carrying on an enterprise

Section 9-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides the definition of enterprise for GST purposes. This definition includes an activity or series of activities done in the form of a business; or in the form of an adventure or concern in the nature of trade.

The definition of 'business' in section 195-1 of the GST Act is the same as that in section 995-1 of the Income Tax Assessment Act 1997. The meaning of 'business' is considered in Taxation Ruling TR 97/11 which discusses the main indicators of carrying on a business. In order to be conducted 'in the form of a business' the activities would need to have the essential appearance or characteristics of a business.

You have held the land for many years and the property has remained your principal place of residence continuously since it was purchased. Therefore, based on the facts provided, after weighing all the relevant indicators, we are satisfied that your activities would not amount to a business of land development.

However, the term 'enterprise' also includes an activity or series of activities carried on 'in the form of an adventure or concern in the nature of trade'. An adventure or concern in the nature of trade may include isolated transactions that do not amount to a business, but which have the characteristics of a business deal.

The question of whether an entity is carrying on as an enterprise often arises where there are 'one-off' property transactions. The decision to be made is whether the activities are an adventure or concern in the nature of trade as opposed to the mere realisation of a capital asset.

Miscellaneous Taxation Ruling MT 2006/1 sets out guidelines on the meaning of the word 'enterprise' for the purpose of entities' entitlement to an Australian business number (ABN). Goods and Services Tax Determination GSTD 2006/6 confirms that the principles in MT 2006/1 apply equally to the term 'enterprise' for GST purposes.

Paragraph 265 of MT2006/1 details a list of factors that provide assistance in determining whether activities are an adventure or concern in the nature of trade. If several of the factors are present it may be an indication that an adventure or concern in the nature of trade is being carried on.

In this case, you acquired the property a decade ago. You have used the property as your principal place of residence continuously since it was purchased as well as for conducting an enterprise on the property.

You are not registered nor are you required to be registered for GST and you will not be registered for GST at the time of sale.

Further:

Therefore, you are doing the minimal activity required to achieve your objective of selling the property.

The activities carried out by you would not go beyond what is required by council's regulations. The fact that you have not been involved in any other land subdivision or property development activities in the past is also a relevant factor.

We acknowledge that the sale of the property may be profitable. However, this fact alone is not detrimental to the conclusion that the sale may not be an adventure or concern in the nature of trade. We refer to paragraph 244 of MT 2006/1 which states:

Having applied all the principles in MT 2006/1 to the present circumstances, we conclude that the sale of your land, does not amount to an enterprise for GST purposes. The sale of the property is regarded as the mere realisation of a capital asset. Consequently, the sale of the property will not be subject to GST.

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