Edited version of your written advice

Authorisation Number: 1051286495560

Date of advice: 18 October 2017

Ruling

Subject: GST registration and the sale of commercial property

Question 1

Are you required to be registered from the relevant dates?

Answer

You are required to be registered for GST up to and including one of the relevant dates

You are not required to be registered for some of the relevant dates.

Question 2

Will the Commissioner, on application by you made in accordance with subsection 25-55(1) of the GST Act, cancel your GST registration with effect on and from a relevant date, if so which relevant date?

Answer

The Commissioner on application by you will cancel your GST registration effective on the date specified in your application provided the Commissioner is satisfied you are not required to be registered for GST on that date.

Question 3

If the answer to Question 2 is, in respect of the relevant dates, in the affirmative and you apply for cancellation with effect on and from the relevant dates, will you have to pay GST in respect of the supply of the property which you have made under the contract?

Answer

If you request to cancel your GST registration effective from one of the relevant dates specified and the Commissioner cancels your registration effective on the date you specify, you will not be liable to pay GST on the sale of the property.

Question 4

Assuming that your GST registration is not, in fact, retrospectively cancelled with effect from some time prior to the completion of the contract, do you have to pay GST in respect of the supply of the property which you have made under the contract?

Answer

Yes, if you are registered for GST at the date of settlement you will be liable to pay GST on the sale of the property.

Relevant facts and circumstances

● You owned the property which has commercial premises.

● You purchased the property and paid GST in respect of the acquisition and claimed an input tax credit.

● You are presently registered for GST. You account for GST on a cash basis.

● At the time you entered into the contract, the property was leased to tenants on monthly oral tenancies.

● You own a residential property that is leased to tenants as a residence. The residential property is only used to make input taxed supplies.

● Pursuant to the contract, you transferred the property to the transferees described in the Transfer document

● Your projected GST did not meet the GST turnover threshold.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 188-10

A New Tax System (Goods and Services Tax) Act 1999 subsection 25-55(1)

A New Tax System (Goods and Services Tax) Act 1999 section 25-55

A New Tax System (Goods and Services Tax) Act 1999 section 188-15

A New Tax System (Goods and Services Tax) Act 1999 section 188-25

A New Tax System (Goods and Services Tax) Act 1999 section 40-75

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

A New Tax System (Goods and Services Tax) Act 1999 subsection 25-60(1)

Reasons for decision

Section 23-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that you are required to be registered for GST if you are carrying on an enterprise and your GST turnover meets the registration turnover threshold.

An entity that is required to be registered for GST cannot have its registration cancelled.

Section 25-55 of the GST Act provides that the Commissioner must cancel your registration if:

(a) you have applied for cancellation of registration in the approved form; and

(b) at the time you applied for cancellation of registration, you had been registered for at least 12 months; and

(c) the Commissioner is satisfied that you are not required to be registered.

Section 188-10 of the GST Act is relevant for working out whether your GST turnover meets, or does not exceed, a turnover threshold. In calculating the electronic lodgment, registration and tax period turnover thresholds, you have a GST turnover that meets a particular turnover threshold under subsection 188-10(1) of the GST Act when:

(a) your current GST turnover is at or above the turnover threshold, and the Commissioner is not satisfied that your projected GST turnover is below the turnover threshold; or

(b) your projected GST turnover is at or above the turnover threshold.

‘GSTR 2001/7 Goods and services tax: meaning of GST turnover, including the effect of section 188-25 on projected GST turnover’ provides:

Section 188-15 defines 'current GST turnover'. Subject to the exclusions listed in paragraph 14, 'current GST turnover' at any time during a particular month is the sum of the values of all the supplies that you made, or are likely to make, during the current month and the preceding 11 months.

12. Section 188-20 defines 'projected GST turnover'. Subject to the exclusions listed in paragraph 14, 'projected GST turnover' at a time during a particular month is the sum of the values of all the supplies that you made, or are likely to make, during that month and the next 11 months.

14. The following supplies are excluded from the calculation of current GST turnover and projected GST turnover:

● supplies that are input taxed

● supplies that are not for consideration (and are not taxable supplies under section 72-5);

● supplies not made in connection with an enterprise that you carry on…

Paragraph 29 of GSTR 2001/7 covers further supplies that will be disregarded in calculating projected GST turnover.

In regard to whether your GST turnover meets, or does not exceed, a turnover threshold GSTR 2001/7 provides:

16. Whether you have a GST turnover that meets or does not exceed a particular turnover threshold depends on an objective assessment of your projected GST turnover and current GST turnover. An 'objective assessment' is one that a reasonable person could be expected to arrive at having regard to the facts and circumstances which apply to your enterprise at the relevant time. The Commissioner will accept your assessment of these turnovers unless he has reason to believe that your assessment was not reasonable.

17. Under sub-section 188-10(1), you meet a particular threshold if your projected GST turnover is at or above the threshold. You also meet a turnover threshold if your current GST turnover is at or above the turnover threshold and it is not possible to conclude that your projected GST turnover is below the threshold. This will occur if your projected GST turnover is also above the relevant threshold, or if your circumstances are such that it is not possible to calculate a projected GST turnover. In either of these situations, the Commissioner can not be satisfied that your projected GST turnover is below the turnover threshold.

18. Similarly, under sub-section 188-10(2), you have a GST turnover that does not exceed a particular turnover threshold if your projected GST turnover is at or below that threshold. You also do not exceed a turnover threshold if your current GST turnover is at or below the turnover threshold and it is not possible to conclude that your projected GST turnover is above the threshold. This will occur if your projected GST turnover is at or below the relevant threshold or your circumstances are such that it is not possible to calculate a projected GST turnover. In either of these situations, the Commissioner can not be satisfied that your projected GST turnover is above the turnover threshold.

19. Although your current GST turnover and your projected GST turnover may be capable of being determined on every day during a month, there is no requirement for continuous recalculation. However, under the GST Act there are obligations if you meet or exceed a particular threshold and there is an opportunity for you to make certain elections if you do not exceed a particular threshold. Therefore, you should be aware of the relevant thresholds likely to affect you and consider whether your turnover may be sufficiently close to the relevant thresholds to make a review prudent…

You own a residential property that is leased for residential purposes and is not new residential premises under section 40-75 of the GST Act. The supply by way of leasing of the residential property is an input taxed supply. Input taxed supplies are excluded from the calculation of current GST turnover and projected GST turnover pursuant to paragraph 188-20(1) (a) of the GST Act.

GSTR 2001/7 provides the following on supplies to be disregarded under section 188-25:

29. Section 188-25 modifies the effect of section 188-20 by excluding certain supplies made when working out your projected GST turnover. Section 188-25 requires you to disregard the following when calculating your projected GST turnover:

(a) any supply made, or likely to be made, by you by way of transfer of ownership of a capital asset of yours; and

(b) any supply made, or likely to be made, by you solely as a consequence of:

(i) ceasing to carry on an enterprise; or

(ii) substantially and permanently reducing the size or scale of an enterprise.

Is the sale of the property the transfer of ownership of a capital asset?

We consider that the sale of the property constitutes the transfer of ownership of a capital asset under section 188-25(a) and is therefore excluded from your projected GST turnover. In regard to the meaning of 'capital assets' refer to GSTR 2001/7 paragraphs 31 to 36.

Under paragraph 188-10(2) (b) of the GST Act an entity is not required to be registered if its projected annual turnover is at or below the turnover threshold.

On application from you, on what date will the Commissioner backdate your cancellation of GST registration?

In coming to our decision, we have taken into consideration Law Administration Practice Statement PS LA 2011/8 the registration of entities.

Subsection 25-60(1) of the GST Act provides that the Commissioner must decide the date on which the cancellation of a GST registration takes effect. The date of effect of cancellation may be any day occurring before, on or after the day on which the Commissioner makes the decision to cancel the registration.

PS LA 2011/8 specifies at paragraphs 82 and 83:

82. The Commissioner will not cancel the registration with effect from a date on which the entity was required to be registered, and will not usually do so from any date when the entity was operating as if it were registered for GST.

83. When an entity that was required to be registered applies to cancel its registration, the Commissioner will ordinarily accept the cancellation date the entity chooses, provided that the entity:

● was not required to be registered after that date

● was entitled to be registered before that date

● has been registered for 12 months, and

● has at that date ceased operating on a GST-registered basis.

PS LA 2011/8 at paragraph 86 states:

86. The Commissioner will be satisfied that an entity has stopped operating (or never operated) on a GST-registered basis from a certain date if, from that date or an earlier date, the entity:

● did not hold themselves out to other businesses as being registered for GST

● did not issue any tax invoices or adjustment notes

● did not claim any input tax credits, special transitional credits or indirect transitional credits, and

● has made a declaration to the ATO that satisfies all of the above points.

Based on the information provided, the Commissioner accepts that the business did not hold itself out as being registered for GST to other businesses after one of the relevant dates.

The Commissioner considers that you were required to be registered for GST up to and including one of the relevant dates as you operated on a GST registered basis.

Taking into consideration the information provided, the Commissioner on application by you will backdate your GST registration cancellation to one of the relevant dates nominated by you.

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