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Edited version of your written advice

Authorisation Number: 1013067434618

Date of advice: 9 August 2016

Ruling

Subject: Sale of property

Question 1

Is the sale of the unit a taxable supply for GST purposes?

Answer

No, the sale of the unit is not a taxable supply for GST purposes. The entity is not liable for GST on the sale and it cannot claim any input tax credits for any acquisitions it makes in relation to the sale.

Relevant facts and circumstances

The entity is not registered for GST.

Prior to the commencement of the GST, the entity built strata titled units with the intention of, leasing them out. The units were commercial premises.

The entity leased the units and over a long period of time, the entity sold the units. There is now one remaining unit.

The remaining unit had always generated rental income below the registration turnover threshold.

The remaining unit is now vacant and has not been leased over a significant period of time. The entity has now put the remaining unit on the market for sale.

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 23-15

A New Tax System (Goods and Services Tax) Act 1999 Paragraph 23-5(b)

A New Tax System (Goods and Services Tax) Act 1999 Paragraph 188-10(2)(a)

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

Reasons for decision

GST is only payable on taxable supplies. One of the requirements for a taxable supply is that the entity is registered or required to be registered for GST [paragraph 9-5(d)].

The entity is not registered for GST. The question thus turns on whether the entity is required to be registered for GST.

Was the entity required to be registered for GST?

Paragraph 23-5(b) of the GST Act requires an entity to be registered for GST if their GST turnover meets the registration turnover threshold - see section 23-15 (currently $75,000).

The entity will meet the registration turnover if its:

Based on the facts provided, the entity's current turnover is below $75,000.

Regarding the entity's projected turnover, we will take into account supplies the entity is likely to make in its enterprise in the current month and the succeeding eleven months [subsection 188-20(1)]. The entity is likely to sell the unit in the next 11 months for more than $75,000. However, paragraph 188-25(a) of the GST Act provides that supplies of a capital asset are not included in the calculation of projected turnover. Since the entity derived rental income from the unit, it is a capital asset of its enterprise of renting out commercial premises. The sale of the unit is therefore not taken into account in the entity's projected turnover. The entity does not meet the projected turnover threshold and it is not required to be registered for GST.

Will the entity be making a taxable supply when it sells the unit?

The entity will not be making a taxable supply under section 9-5 of the GST Act when it sells the unit because it is not registered or required to be registered for GST. The sale of the unit is not subject to GST

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