Edited version of private advice

Authorisation Number: 1051783564166

Date of advice: 01 December 2020

Ruling

Subject: Requirement to be registered for GST

Question:

Are you carrying on an enterprise for the purposes of GST and as a consequence required to be registered for GST?

Answer:

No, you are not carrying on an enterprise for the purposes of GST and therefore are not required to be register for GST.

Relevant facts and circumstances

•   You are individuals who do not have an Australian Business Number (ABN) and are not registered for goods and services tax (GST)

•   You purchased a property and constructed a residential premise in which you intended to reside.

•   Due to a change in circumstance you have decided to sell the 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 9-40

A New tax System (Goods and Services Tax) Act 1999 section 23-5

Schedule 1 to the Taxation Administration Act 1953 section 14-250

Reasons for decision

Summary

You are not carrying on an enterprise and as a consequence are not required to be registered for GST.

Detailed reasoning

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 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.

The sale of the property consists of a property which is located in Australia and the supply would be made for consideration. Therefore, the sale of the property would satisfy two elements outlined above (1&3). Accordingly, we need to determine whether the other two elements (2&4) 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.

You do not have an ABN in relation to a partnership, nor do you intend to register prior to or at settlement date of the property sale.

Are you carrying on an enterprise?

The term enterprise is defined for GST purposes in section 9-20 of the GST Act and includes, among other things, an activity or series of activities done:

-   in the form of a business (paragraph 9-20(1)(a)) or

-   in the form of an adventure or concern in the nature of trade (paragraph 9-20(1)(b)).

The phrase 'carry on' in the context of an enterprise includes doing anything in the course of the commencement or termination of the enterprise.

Miscellaneous Taxation ruling MT 2006/1 The New Tax System: the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian Business Number (MT 2006/1) provides the Tax Office view on the meaning of 'enterprise' for the purposes of entitlement to an ABN.

Goods and Services Tax Determination GSTD 2006/6 Goods and Services Tax: MT 2006/1 have equal application to the meaning of 'entity' and 'enterprise' for the purposes of the A New Tax System (Goods and Services Tax) Act 1999, provides that the discussion in MT 2006/1 applies equally to the term 'enterprise' as used in the GST Act and can be relied on the GST purposes.

In the form of a business

Paragraphs 170 to 179 of MT 2006/1 discuss factors to consider when determining whether an activity or series of activities are done in the form of a business. Paragraph 178 of MT 2006/1, with reference to Taxation Ruling 97/11 Income tax: am I carrying on a business of primary production lists indicators of carrying on a business:

-   a significant commercial activity;

-   an intention of the taxpayer to engage in commercial activity;

-   an intention to make a profit from the activity;

-   the activity will be profitable;

-   the recurrent or regular nature of the activity;

-   the activity is systematic, organised and carried on in a business-like manner and records kept;

-   the activities are of a reasonable size and scale;

-   a business of product; and

-   the entity has relevant knowledge or skill.

Paragraph 179 of MT 2006/1 states that there is no single test to determine whether a business is being carried on. Whilst each case might turn on its own particular facts, the determination of the question is generally the result of a process of weighing all the relevant indicators.

Application in your case

Given the facts of this case, we consider that the constructing of the property and the pending sale of the property, does not display the indicators of a 'business' as listed above.

Paragraph 245 of MT 2006/1 refers to 'the badges of trade' with paragraphs 247 to 257 discussing the various 'badges of trade' that may be taken into account when determining whether assets have the characteristics of 'trade' and are held for income producing purposes, or either as an investment asset for personal enjoyment.

While an activity such as the selling an asset may of itself amount to an enterprise, account should be taken of the other activities leading up to the sale to determine if an enterprise is or would be being carried on.

You originally purchased the property with which to construct a residential premise with the intention of this being your primary residence. Due to a change in circumstances you now wish to sell the property. This decision to sell was not conducted in a business-like manner as there was no business plan. The property was not bought into account as a 'business' asset and expenses have not been claimed as business expenses.

Given the above, we do not consider your activity of selling the property to constitute an adventure or concern in the nature of trade and as such are not an 'enterprise' for the purposes of GST. Therefore, the sale of the property would be considered a mere realisation of a capital asset.

GST registration

Section 23-5 of the GST Act provides that you are required to be registered for GST if you carry on an enterprise and your GST turnover meets the registration turnover threshold (currently $75,000).

As discussed, it is considered that the sale of the property would be a mere realisation of a capital asset and would not constitute an enterprise for GST purposes. As such you are not required to be registered for GST.

Conclusion

Your activity of selling the property will not be done in the furtherance of an enterprise. You are not required to register for GST. As such the pending sale of the property will not be a taxable supply and you will not be liable for GST on the sale in accordance with section 9-40 of the GST Act.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).