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Edited version of private advice
Authorisation Number: 1051515129242
Date of advice: 9 May 2019
Ruling
Subject: Goods and services tax and property
Question
Was your supply of specified property a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
Yes.
This ruling applies for the following period:
Year ending 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
You (specified name) are a partnership and registered for GST effective from specified date. Relevantly you own the following properties.
Specified property
In specified date you acquired specified property from a related family trust. It was vacant land. You acquired the specified property in order to build a holiday home for the use by associates.
Specified property
You also own another property which contains a specified item which you lease.
Specified item
You acquired a third property in specified date located at specified address. A specified item was located on the property and you leased it out to an entity which operated the specified item.
The GST exclusive annual gross rental income from leasing out the specified items is at or above $75,000.
Due to a breakdown of family relationships you did not proceed with the planned development of the specified property and decided to sell it instead. It was sold as vacant land and the sale was to settle on specified date.
You did not carry on any farming business in relation to the specified property.
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 195-1
Reasons for decision
Section 9-5 provides that you make a taxable supply if:
(a) you make the supply for consideration; and
(b) the supply is made in the course or furtherance of an enterprise that you carry on; and
(c) the supply is connected with the indirect tax zone (ie Australia); and
(d) you are registered, or required to be registered.
However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.
For the supply of your specified property to be a taxable supply, all of the requirements in section 9-5 must be satisfied.
Leasing meets the definition of enterprise as per section 9-20. In your case you have leased out at least two of your properties and as a result, received lease income that meant you were required to be registered for GST pursuant to section 23-5.
In addition you acquired the specified property in order to build a house and supply accommodation from the proposed premises to associates. When you acquired the property with this intention, that activity met the condition of an enterprise and as set out above the leasing of those premises to associates would also have met the definition of enterprise. However you terminated that enterprise by selling the specified property.
Carrying on an enterprise is defined in the GST Act to include doing anything in the course of the commencement or termination of the enterprise. Therefore the sale of the vacant land terminated the enterprise and therefore the sale was in the course of your enterprise. In your case you made the supply for consideration. The supply is made in the course or furtherance of your leasing enterprise. The property is in Australia. You are registered for GST.
In addition, your supply of the specified property is not GST-free nor input taxed under the GST Act.
Therefore, your supply of the specified property is a taxable supply.
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