Edited version of private advice

Authorisation Number: 1052368324476

Date of advice: 05 March 2025

Ruling

Subject: GST - partnership

Question 1

Is the partnership liable for GST in relation to the income received from leasing the property, in accordance with section 9-5?

Answer 1

Yes. As the partnership is registered for GST, they will be making taxable supplies in accordance with section 9-5 of the GST Act.

Question 2.

If the GST registration of the partnership is cancelled, will a GST adjustment be required in relation to the property?

Answer 2

There is no adjustment for GST purposes in relation to the property if the partnership cancels its GST registration.

Question 3

If the property is sold, do any GST implications need to be considered?

Answer 3

The implications in relation to GST on a potential sale of the property will depend on the partnership's registration status for GST purposes at the time of the sale and cannot be considered as part of this ruling.

This ruling applies for the following periods:

Financial year ending 30 June 20XX, to

Financial year ending 30 June 20XX.

The scheme commences on:

The date this private ruling is issued

Relevant facts and circumstances

•                The partnership purchased the property in approximately xxxx.

•                The property was used to run a business which was operated as a partnership, held in the names of the partners.

•                No rent was charged to the partnership.

•                The partnership is registered for GST.

•                The business ceased and the property is to be leased to an unrelated third party.

•                A lease agreement has been entered into.

•                The rental income as per the lease payments do not exceed $XX per annum.

•                The property purchase costs were shown in the partnership accounts as a non-current asset under land and buildings.

•                Expenses in relation to the property, such as council rates, water rates, insurance, repairs etc were expensed in the accounts and claimed by the partnership.

•                No expenses were claimed in relation to capital works deductions; however, depreciation was claimed for such things are air-conditioners, shelving, alarm system etc.

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 138-5

Reasons for decision

Question 1

Under section 9-5, 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 being carried 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.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

Although the partnership ceased operating the previous business, they are now carrying on a leasing enterprise in relation to the property.

As all the elements of section 9-5 are satisfied, the partnership will be making taxable supplies relating to the leasing of the property.

Question 2

The partnership is only required to remain registered for GST if their GST turnover is above $XX (registration threshold). However, an entity can elect to be registered for GST even if their turnover does not exceed the registration threshold.

In this case, the partnership is already registered for GST and any supplies that they make in relation to the leasing of the property will be subject to GST as the partnership is making taxable supplies. Should they wish to cancel their GST registration, they can do so from a date where they have not held themselves out to be registered for GST to their lessors.

Section 138-5 states what adjustments are required for cessation of GST registration.

S138-5 (1) you have an increasing adjustment if:

a)             your registration is cancelled; and

b)             immediately before the cancellation take effect, your assets include anything in respect of which you were, or are, entitled to an input tax credit.

In relation to the partnership's purchase of the property, the property was purchased in approximately xxxx and, as a result, the partnership was not entitled to claim input tax credits in relation to the purchase of the property.

Therefore, there will be no adjustment required in relation to the property should the partnership decide to cancel their GST registration.

Question 3.

How the property is treated when sold by the partnership will largely depend on the registration status of the partnership.

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