Edited version of private ruling

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Ruling

Subject:

GST and sale of land by a statutory trustee.

Question 1:

Is a person, acting in the capacity of a statutory trustee, an entity for the purposes of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer 1

No, a person acting in the capacity of a statutory trustee is not an entity for the purposes of the GST Act. The entity involved in the sale of the land is the trust for which the person is statutory trustee.

Question 2

Is a person acting in the capacity of a statutory trustee, making a taxable supply when they sell a block of land and therefore required to be registered for goods and services tax (GST)?

Answer 2

No, the person acting in the capacity of a statutory trustee, is not making a taxable supply, when the relevant block of land is sold. Therefore, the person is not required to be registered for GST.

Relevant facts and circumstances

A vacant block of land was owned by two persons.

They applied to the Court to appoint a statutory trustee.

The role of the statutory trustee was to arrange for the sale of the property.

A statutory trustee was appointed by the Courts.

The property is a vacant block which had been subdivided

The subdivision occurred prior to the appointment of the statutory trustee.

The title to the property has been transferred to the statutory trustee.

Since their appointment, the statutory trustee has organised for the sale of the property and has subsequently entered into a contract for the sale.

The statutory trustee is not arranging for any development of the land, such as gas, power, water connections, or access roads.

The contract price for the sale of the land exceeds the registration turnover threshold.

Reasons for decision

Question 1

The term 'entity' is defined in section 184-1 of the GST Act as follows:

Entity means any of the following:

(a) an individual;

(b) a body corporate;

(c) a corporation sole;

(d) a body politic;

(e) a *partnership;

(f) any other unincorporated association or body of persons;

(g) a trust;

(h) a *superannuation fund.

(*denotes a term defined in section 195-1 of the GST Act )

A trust is given statutory status as an entity under subsection 184-1(1) of the GST Act. A trust is not a legal person and therefore, must be represented by the trustee for the trust. Accordingly, there will only be one Australian Business Number (ABN) registration and that will be in the name of the trust.

The question of whether an entity is carrying on an enterprise is examined in Miscellaneous Tax Ruling MT 2006/1(MT 2006/1). This Ruling provides assistance to entities in determining their entitlement to an ABN. This Ruling considers the meaning of certain key words and phrases used to define:

an entity; and

an enterprise.

In regard to a trust, paragraph 68 of MT 2006/1 states:

68. 'Trust' is not a defined term. It can be described as:

An obligation enforceable in equity which rests on a person (the trustee) as owner of some specific property (the trust property) to deal with that property for the benefit of a certain person (the beneficiary) or persons, or for the advancement of certain purposes.

A trust itself is not a legal person and therefore must be represented by the trustee for the trust…

Paragraphs 72 and 73 of MT 2006/1 state:

72. The (GST) Act does not create two separate entities - the trust and trustee - but rather the relevant entity is the trust, with the trustee standing as that entity if legal personality is required. A consequence of this is that there will only ever be one ABN registration for the trust and only one ABN issued irrespective of the number of trustees for the trust.

73. As stated, rights and obligations cannot be placed directly upon a trust. Therefore, the trustee is the legal person who may create rights and have obligations in relation to the trust property. The trustee is the legal person who is taken to be the trust entity and holds the ABN for the trust or superannuation fund. In addition the trustee is obliged to meet obligations under the ABN Act such as the obligation to provide information under section 15.

In conclusion, the trust for which the statutory trustee acting is an entity for GST purposes, but not the trustee.

Question 2

The term 'taxable supply' is defined in section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) as follows:

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 Australia; and

(d) you are *registered or *required to be registered.

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

In this case, sale of the property is for consideration and the supply is connected with Australia. As such, paragraphs (a) and (c) of section 9-5 of the GST Act are satisfied. We need to consider whether the supply is able to satisfy the remaining paragraphs of section 9-5 of the GST Act.

The activities carried out by the statutory trustee must be examined to see if they can be regarded as the carrying on of an enterprise.

Section 9-20 of the GST Act provides that, amongst other things, an enterprise is an activity or a series of activities done:

in the form of a business

in the form of an adventure or concern in the nature of trade; or

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

Paragraph 234 of MT 2006/1 states, an adventure or concern in the nature of trade may be an isolated transaction that does not amount to a business, but which has the characteristics of a business deal.

Further, at paragraphs 262 and 263 MT 2006/1 states:

262. The question of whether an entity is carrying on an enterprise often arises where there are 'one-offs' or isolated real property transactions.

263. The issue to be decided is whether the activities are an enterprise in that they are of a revenue nature as they are considered to be activities of carrying on a business or an adventure or concern in the nature of trade (profit making undertaking or scheme) as opposed to the mere realisation of a capital asset...

Paragraph 265 of MT 2006/1 lists a number of factors which can be used to determine whether activities in relation to a sale of property are done under a profit-making undertaking or scheme.

These factors are as follows:

there is a change of purpose for which the land is held;

additional land is acquired to be added to the original parcel of land;

the parcel of land is brought into account as a business asset;

there is a coherent plan for the subdivision of the land;

there is a business organisation (for example, a manager, office and letterhead);

borrowed funds financed the acquisition or subdivision;

interest on money borrowed to defray subdivisional costs was claimed as a business expense;

there is a level of development of the land beyond that necessary to secure council approval for the subdivision; and

buildings have been erected on the land.

In determining whether activities relating to isolated transactions are an enterprise or are the mere realisation of a capital asset, it is necessary to examine the facts and circumstances of each particular case. This may require a consideration of the factors outlined above. However, there may also be other relevant factors that need to be weighed up as part of the process of reaching an overall conclusion. No single factor will be determinative. Rather, it will be a combination of factors that will lead to a conclusion as to the character of the activities.

Paragraph 270 of MT 2006/1 states:

270. In isolated transactions, where land is sold that was purchased with the intention of resale at a profit (which would be ordinary income) the Commissioner considers these activities to be an enterprise. This would be so whether the land was sold as it was when it was purchased or whether it was subdivided before sale. An enterprise would be carried on in this situation because the activities are business activities or activities in the conduct of a profit making undertaking or scheme and therefore an adventure or concern in the nature of trade.

In applying the above factors to your case we find that:

there has been no change of purpose for which the land was held;

no additional land was acquired and added to the original parcel of land;

the parcel of land was not brought into account as a business asset;

no plan of subdivision was carried out by the statutory trustee;

there was no business organisation;

no borrowed funds were used to finance the acquisition of the land;

the land was not developed, ie no access roads were put onto the land, nor were gas, water or power supplied to the lots; and

no buildings were erected on the land.

Generally, the sale of a private asset is not, in the absence of other factors an adventure or concern in the nature of trade.

Having considered the above factors, it is our view that the statutory trustee is not carrying on an enterprise when he sells the block of land. He was appointed to arrange for the sale of the property and the title has merely been transferred to him to enable him to carry out this task.

Further, under section 23-5 of the GST Act an entity is required to be registered for GST, if:

it carries on an enterprise and

its GST turnover meets the registration turnover threshold.

As the statutory trustee is not carrying on an enterprise, he is not required to be registered.

For an entity to have made a taxable supply, all of the requirements of section 9-5 of the GST Act must be met. The statutory trustee does not satisfy paragraph 9-5(b) and is therefore not making a taxable supply when he sells the block of land.