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Edited version of private advice

Authorisation Number: 1051799052917

Date of advice: 18 February 2021

Ruling

Subject: GST and sale of real property

Question

Will you be making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 when you sell part of your property as vacant land?

Answer

No.

This ruling applies for the specified period.

The scheme commences on the specified date.

Relevant facts and circumstances

•         You are an entity and you are the sole proprietor of the specified property.

•         The property is on one title.

•         The property comprises land and a house.

•         The property has been used for residential accommodation and farming.

•         The farming business has been in operation for several decades.

•         You are now considering selling off part of the property.

•         You will be selling vacant land which will comprise land that has been used for farming.

•         You do not intend to conduct any works on the land in preparation for the sale.

•         You have not applied for subdivision. You are not considering the subdivision process yourself. You will not be financing any subdivision costs as you intend that these will be borne by the potential buyer/developer and not by you as the seller.

•         At this stage, there are no proposed buyers.

•         The main reason for considering the sale of the identified portion of the land is your struggle to meet the demands of high amount of the rates and costs of maintenance.

•         You do not have an ABN and you are currently not registered for GST.

•         You are not currently involved in any business or enterprise activities. Also, you have no intentions to conduct any business or enterprise activities in the next 12 months.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 7-1,

A New Tax System (Goods and Services Tax) Act 1999 section 9-5,

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

A New Tax System (Goods and Services Tax) Act 1999 subsection 188-10(1), and

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

Reasons for decision

Section 7-1 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that GST is payable on taxable supplies.

Under section 9-5 of the GST Act, you make a taxable supply if all the following requirements are satisfied:

•         you make the supply for consideration;

•         the supply is made in the course of carrying on an enterprise;

•         the supply is connected with the indirect tax zone;

•         you are registered or required to be registered for GST; and

•         the supply is neither GST-free nor input taxed.

Requirement to be registered for GST

Section 23-5 of the GST Act provides that an entity is required to be registered for GST purposes if both of the following requirements are met:

•         it is carrying on an enterprise; and

•         its GST turnover meets the registration turnover threshold (which is currently $75,000 for entities other than non-profit entities).

Registration turnover threshold

Subsection 188-10(1) of the GST Act provides that you have a GST turnover that meets the registration turnover threshold if:

•         your current GST turnover is at or above the registration turnover threshold, and the Commissioner is not satisfied that your projected GST turnover is below the registration turnover threshold, or

•         your projected GST turnover is at or above the registration turnover threshold.

In calculating your GST turnover under Division 188 of the GST Act certain supplies are excluded. Section 188-25 provides that when calculating your projected GST turnover, you do not include any supplies made, or likely to be made by you:

•         by way of transfer of ownership of a capital asset, or

•         solely as a consequence of ceasing an enterprise or substantially and permanently reducing the size or scale of your enterprise.

On the facts provided, your GST turnover will not meet the registration turnover threshold at the time of the proposed sale.

Consequently, you will not satisfy all the requirements of section 23-5 of the GST Act and you will not be required to be registered for GST at the time of your proposed sale of the identified portion of vacant land.

As you are currently not registered for GST and will not be required to be registered for GST at the time of sale, the sale will not meet all of the requirements for a taxable supply under section 9-5 of the GST Act. Consequently, the sale will not be a taxable supply and GST will not be payable on the sale of the identified portion of the land.

 

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