Edited version of private advice

Authorisation Number: 1052389473992

Date of advice: 28 May 2025

Ruling

Subject: GST - sale of property

Question 1

Is the sale of the Property a taxable supply?

Answer 1

No.

This private ruling applies for the following periods:

xxxx to xxxx

The scheme commenced on:

xxxx

Relevant facts and circumstances

This private ruling is based on the facts and circumstances set out below. If your facts and circumstances are different from those set out below, this private ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You are not registered for Goods and Services Tax (GST), and were not registered for GST during the period to which this private ruling applies.

The property, the subject of this private ruling, is located at a specified address in Australia (the Property).

A specified business was conducted on the Property for many years prior to your acquisition of the Property.

You acquired the Property on a specified date (First Sale).

The Property includes a house fixed on the land, containing X bedrooms, X bathrooms, a kitchen and a garage. There are also other fixtures such as fences and a stable on the Property.

The contract of sale provided that:

a.              The contract was executed on a specified date.

b.              Part of the deposit was payable upon the signing of the contract and part on a specified date.

c.              Settlement was to take place X months from the date of signing the contract.

d.              The contract was not a terms contract.

e.              The price included GST (if any).

f.               You were entitled to vacant possession at settlement.

The settlement of the Property took place on a specified date.

The sale of the Property to you was not treated as a taxable supply.

A Residential Tenancy Agreement (Agreement) was made on XX May 20XX between you and a tenant (Tenant).

The Tenant is not an associate of yours as defined within section 318 of the Income Tax Assessment Act 1936.

The Agreement stated:

a.              It is a fixed term agreement from as specified date until a specified date.

b.              The Tenant must not assign or sub-let the whole or part of the premises without the written consent of the Landlord.

c.              The Landlord was to ensure that the premises were maintained in good repair during the term of the lease.

d.              If there was a need for urgent repair the Tenant had to notify the Landlord.

You rented out the Property for an amount that was less than $75,000 per annum.

During the tenancy period of the Tenant, a small number of horses were kept on the Property by the Tenant. According to your knowledge there was no active business conducted and the horses were not used for business purposes.

You were not carrying on any other enterprise other than the leasing of the Property.

You executed the Contract for Sale of Land (Contract) on a specified date as the vendor (Second Sale).

The Contract provided that:

a.              The Contract was signed on a specified date.

b.              The Settlement was due on a specified date.

c.              The Property was sold subject to the Agreement.

d.              The particulars of sale specify that the Contact is a terms contract.

e.              Special condition X states the purchaser will in addition to the deposit pay a monthly amount of $X on the specified day of each subsequent month for X months. The balance of the purchase price shall be payable at settlement.

f.               The particulars of sale specify that the price includes GST (if any).

g.              General condition X states that the purchaser does not have to pay the vendor any amount in respect of GST if the particulars of sale specify that the price includes GST (if any).

h.              General condition X states the purchaser is not obliged to pay any GST under this contract until a tax invoice has been given to the purchaser.

On a specified date, the purchaser carried out an inspection and took possession for the purpose of undertaking renovations on the Property.

Renovations ceased around a specified date

The Property remained vacant until a specified date.

The settlement of the Property on the Second Sale took place on a specified date.

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 23-5

A New Tax System (Goods and Services Tax) Act 1999 section 40-35

A New Tax System (Goods and Services Tax) Act 1999 section 188-10

A New Tax System (Goods and Services Tax) Act 1999 section 188-15

A New Tax System (Goods and Services Tax) Act 1999 section 188-20

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

A New Tax System (Goods and Services Tax) Act 1999 section 195-1

A New Tax System (Goods and Services Tax) Regulations 1999 section 23.15.01

Income Tax Assessment Act 1936 section 318

Reasons for decision

Section 9-40 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that you must pay the GST payable on any taxable supply that you make.

Section 9-5 of the GST Act provides that you make a taxable supply if:

(a) you make the supply for consideration

(b) the supply is made in the course or furtherance of an enterprise that you carry on

(c) the supply is connected with the indirect tax zone (Australia), and

(d) you are registered or required to be registered for GST.

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

The sale of the Property is made for consideration and the Property is located in Australia. Thus, the requirements of paragraphs 9-5(a) and 9-5(c) of the GST Act are met.

However, for section 9-5 of the GST Act to apply, it will also depend on whether the sale of the Property was made in the course or furtherance of an enterprise that you carried on, whether you were required to be registered for GST, and whether the supply was GST-free or input taxed.

Enterprise

Subsection 9-20(1) of the GST Act provides that an enterprise includes, among other things, an activity, or series of activities, done:

(a) in the form of a business

(b) in the form of an adventure or concern in the nature of trade

(c) on a regular continuous basis, in the form of a lease, licence or other grant of an interest in property

In your case, you derived income from leasing the Property on a regular and continuous basis. The leasing of the Property constitutes an 'enterprise' under paragraph 9-20(1)(c) of the GST Act.

The sale of the Property, which was used in the course of your leasing enterprise, is also a supply made in the course or furtherance of that enterprise. The sale of the Property therefore satisfies the requirement of paragraph 9-5(b) of the GST Act.

As you were not registered for GST when you sold the Property, consideration must be had to paragraph 9-5(d) of the GST Act as to whether you were required to be registered for GST when you sold the Property to the purchaser.

Registration

Section 23-5 of the GST Act provides that you are required to be registered for GST if:

(a) you are carrying on an enterprise, and

(b) your GST turnover meets the registration turnover threshold.

As discussed above, your leasing activities fall within the scope of 'carrying on an enterprise' thus satisfying paragraph 23-5(a) of the GST Act.

The A New Tax System (Goods and Services Tax) Regulations 1999, at section 23.15.01, sets the registration turnover threshold for entities, other than non-profit bodies, at $75,000 a year.

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

(a) your current GST turnover is at or above $75,000 and the Commissioner is not satisfied that your projected GST turnover is less than $75,000, or

(b) your projected GST turnover is at or above $75,000.

Your 'current GST turnover' is defined in section 188-15 of the GST Act as the sum of the values of all of your supplies made in a particular month and the preceding 11 months.

Your 'projected GST turnover' is defined in section 188-20 of the GST Act as the sum of the values of all of your supplies made in a particular month and the following 11 months.

Paragraphs 188-15(1)(a) and 188-20(1)(a) of the GST Act provide that input taxed supplies are disregarded when calculating your current and projected GST turnovers respectively. This means that if your rental of the Property was an input taxed supply of residential premises under section 40-35 of the GST Act (i.e. being a supply of residential premises that are neither commercial residential premises such as a hotel or motel, nor accommodation in commercial residential premises), then the rental proceeds are not to be included in the calculation of your current or projected GST turnovers.

Additionally, section 188-25 of the GST Act provides that in calculating your projected GST turnover, you disregard any supply made, or likely to be made, by you by way of transfer of ownership of a capital asset of yours.

Goods and Services Tax Ruling GSTR 2001/7 Goods and services tax: meaning of GST turnover, including the effect of section 188-25 on projected GST turnover, discusses the meaning of 'capital assets' at paragraphs 31 to 36:

Meaning of 'capital assets'

31. The GST Act does not define the term 'capital assets'. Generally, the term 'capital assets' refers to those assets that make up 'the profit yielding subject' of an enterprise. They are often referred to as 'structural assets' and may be described as 'the business entity, structure or organisation set up or established for the earning of profits'.

32. 'Capital assets' can include tangible assets such as your factory, shop or office, your land on which they stand, fixtures and fittings, plant, furniture, machinery and motor vehicles that are retained by you to produce income. 'Capital assets' can also include intangible assets, such as your goodwill.

33. Capital assets are 'radically different from assets which are turned over and bought and sold in the course of trading operations'. An asset which is acquired and used for resale in the course of carrying on an enterprise (for example, trading stock) is not a 'capital asset' for the purposes of paragraph 188-25(a).

34. 'Capital assets' are to be distinguished from 'revenue assets'. A 'revenue asset' is 'an asset whose realisation is inherent in, or incidental to, the carrying on of a business'.

35. If the means by which you derive income is through the disposal of an asset, the asset will be of a revenue nature rather than a capital asset even if such a disposal is an occasional or one-off transaction. Isolated transactions are discussed further at paragraphs 46 and 47 of this Ruling.

36. Over the period that an asset is held by an entity, its character may change from capital to revenue or from revenue to capital. For the purposes of section 188-25 the character of an asset must be determined at the time of expected supply.

In this case, you rented the Property to generate income and therefore the Property is your capital asset. As such, the sale of the Property constitutes the transfer of a capital asset for the purposes of section 188-25 of the GST Act and is therefore disregarded when calculating your projected GST turnover. This is the case regardless of the characteristics of the Property, that is, it does not matter whether the Property is wholly or partly residential or commercial.

Further, the renting of the Property was the only enterprise that you were undertaking when you sold the Property, which generated an income of less than $75,000 annually. Accordingly, there is no need to consider paragraphs 188-15(1)(a) and 188-20(1)(a) of the GST Act to determine whether the lease of the Property or any part of the Property was input taxed for the purpose of calculating your GST registration turnover threshold.

Given the above, your GST turnover did not meet the GST registration turnover threshold when you sold the Property. Therefore, you were not required to be registered for GST as the requirement of paragraph 23-5(b) of the GST Act was not met.

As you were not registered or required to be registered for GST when you sold the Property, paragraph 9-5(d) of the GST Act is not met.

Conclusion

The sale of the Property is made in the course or furtherance of your leasing enterprise, the sale is made for consideration and the Property is located in Australia. However, you were neither registered nor required to be registered for GST when you sold the Property.

Consequently, you did not make a 'taxable supply' when you sold the Property as the sale does not meet all the requirements of section 9-5 of the GST Act. The sale of the Property therefore is not subject to GST.

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