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Edited version of your written advice
Authorisation Number: 1051284971441
Date of advice: 22 September 2017
Ruling
Subject: GST and sale of property
Question
Is the sale of your property subject to GST?
Answer
No. The sale of your property is not subject to GST.
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
● You owned property.
● You sold the property after you deregistered for GST.
● You operated an enterprise of primary production, property agistment and a riding school and were registered for GST.
● Your enterprise ceased at which time you cancelled your ABN and GST registration.
● You are not registered for GST as the relevant income is below the registration turnover threshold.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 (GST Act) 23-5 and
A New Tax System (Goods and Services Tax) Act 1999 (GST Act) 188-25.
Reasons for decision
These reasons for decision accompany the Notice of private ruling.
While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.
Under section 23-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) you are required to be registered where:
● you are carrying on an enterprise; and
● your GST turnover meets the registration turnover threshold.
If you carry on an enterprise, you must register for GST if your GST turnover is at or above the GST turnover threshold, that is, $75,000 or more. ($150,000 or more for non-profit organisations)
Your GST turnover will meet this threshold if either your current annual turnover or your projected annual turnover is at or above the threshold.
Your current GST turnover is the total of all taxable supplies you have made during a particular month and the preceding 11 months. Your projected GST turnover is the total of all taxable supplies you have made, and are likely to make, during a particular month and the following11 months.
In your case the amount you receive from the sale of the property will cause your projected GST turnover to exceed the registration turnover threshold.
However, section 188-25 of the GST Act states that in working out your projected GST turnover you can disregard the following:
● any supply made , or likely to be made, by way of transfer of a capital asset of yours; and
● any supply made , or likely to be made, by you solely as a consequence of :
● ceasing to carry on an enterprise; or
● substantially and permanently reducing the size or scale of an enterprise.
The effect of section 188-25 of the GST Act is to exclude certain supplies, such as capital supplies that would cause a person to cross the registration turnover threshold even though the person's ordinary turnover falls below that threshold.
As the sale of your property is a supply of a capital asset, section 188-25 of the GST Act allows you to exclude the consideration received from the sale in the calculation of your projected GST turnover. Generally, the term 'capital asset' refers to those assets that make up the profit yielding structure of an enterprise.
Therefore, unless you have made other taxable supplies which cause you to meet the registration turnover threshold, you are not required to be registered for GST.
GST is payable on taxable supplies. You are required to pay GST when you make a taxable supply. The term 'taxable supply' is defined in section 9-5 of the GST Act.
You make a taxable supply if:
● you make the supply for consideration; and
● the supply is made in the course or furtherance of your enterprise; and
● the supply is connected with Australia; and
● you are registered or required to be registered for GST.
However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.
As stated above, one of the requirements of a taxable supply is that the entity making the supply is registered or required to be registered for GST. Unless you satisfy all the requirements of a taxable supply when you sell your commercial property, you are not liable to pay GST on that supply.
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