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Edited version of private advice
Authorisation Number: 1051535246986
Date of advice: 26 June 2019
Ruling
Subject: GST on sale of commercial property
Question
Is the sale of the commercial property a taxable supply?
Answer
No
Relevant facts and circumstances
A partnership entered into a contract of sale of a commercial property on xx xx xxx, with settlement to occur on xx xx xxx.
The partnership was not registered or required to be registered for GST.
Relevant legislative provisions
Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 GST Act
Section 23-5 of the A New Tax System (Goods and Services Tax) Act 1999 GST Act
Section 9-40 of the A New Tax System (Goods and Services Tax) Act 1999 GST Act
Reasons for decision
Under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) an entity makes a taxable supply where the supply:
1. is made for consideration; and
2. is made in the course or furtherance of an enterprise that you carry on; and
3. is connected with the indirect tax zone; and
4. is made by a supplier who is registered, or required to be registered for GST.
In this case, the property being sold consists of a property which is located in Australia and the supply will be made for consideration. In addition, the receipt of rental income by the partnership constitutes an enterprise of leasing. Therefore, the sale of the property would satisfy three of the elements outlined above (1, 2 & 3). Accordingly, we need to determine whether element four would also be satisfied. If this were the case, the supply of the property would satisfy all requirements of section 9-5 of the GST Act and would be a taxable supply.
GST registration
Section 23-5 of the 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 (currently $75,000).
The partnerships turnover does not exceed the $75,000 registration threshold as required under the GST Act.
Therefore, the fourth element under section 9-5 of the GST Act is not satisfied and as a result the sale of the commercial property is not a taxable supply.
Conclusion
The selling of the commercial property does not meet the definition of a taxable supply and the partnership is not liable for GST on the sale in accordance with section 9-40 of the GST Act.
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