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Edited version of private advice
Authorisation Number: 1051837504349
Date of advice: 12 May 2021
Ruling
Subject: GST and sale of commercial property
Question
Will the partnership be required to register for GST and collect GST on the sale of the commercial property located in Australia under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
No. The partnership will not be required to register for GST under section 23-5 of the GST Act when it sells the commercial property and therefore the sale will not be a taxable sale under section 9-5 of the GST Act. As the sale will not be taxable, the partnership does not need to collect GST on the sale.
The sale of the commercial property is a sale of a capital asset that is disregarded when the projected annual turnover of the partnership is calculated for GST registration purposes under section 188-25 of the GST Act. The rental income from the farmhouse and the interest earned from term deposit are for input taxed supplies which are disregarded in calculating the partnership's annual turnover under sections 188-15 and 188-20 of the GST Act. Accordingly, the projected annual turnover of the partnership will be below the GST registration threshold of A$75,000 when the sale is made.
As the partnership will not be required to register for GST under section 23-5 of the GST Act at the time the sale is made, the sale will not satisfy all the requirements of a taxable sale under section 9-5 of the GST Act.
Relevant facts and circumstances
In 19XX the partnership (you) entered into a contract with a developer for the purchase of a new commercial building located in Australia.
The property was leased after the purchase.
Currently you are not registered for GST and do not receive any rental income for the property.
The property is currently on the market for lease and for sale as vacant possession. The reason for selling the property is for the partners' retirement. If the property is leased, the property will be taken off the market for sale.
You own another property which is being used as your private residence. You also own a rural land with an old small farmhouse. You currently rent the farmhouse but do not receive any income for the rural land. Other income that you receive is from interest earned from term deposit.
You do not intend to buy any other commercial property while waiting for this property to be sold.
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 23-5
A New Tax System (Goods and Services Tax) Act 1999 Division 188-25
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