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Ruling

Subject: GST and sale of property

Questions

1. Are you required to be registered for goods and services tax (GST)?

2. Will you be liable to pay GST on your sale of the property?

Answers

No, you are not required to be registered for GST.

No, you are not liable to pay GST on your sale of the property.

Relevant facts and circumstances

You are not registered for GST.

Previously, you entered into a joint venture agreement with other entities to purchase land located in Australia and develop it into an apartment complex.

Following completion of the units, the title to one of the units (the property) was transferred to you.

After acquiring the property, you leased it as a private dwelling. This is your only source of income in the current financial year. You do not carry on any other business activity.

You have now decided to sell the property. You expect the sale price to be more than $75,000.

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 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 and

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

Reasons for decisions

Question 1

Section 23-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states:

You are required to be registered under this Act if;

· you are *carrying on an *enterprise; and

· your *GST turnover meets the *registration turnover threshold.

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

Enterprise is defined in section 9-20 of the GST Act to include an activity, or series of activities done on a regular or continuous basis, in the form of a lease, licence or other grant of an interest in property.

You are leasing the property, thus you are carrying on an enterprise for GST purposes. Paragraph 23-5(a) of the GST Act is satisfied.

For the purpose of paragraph 23-5(b) of the GST Act, subsection 188-10(1) of the GST Act provides that your GST turnover meets the registration turnover threshold if:

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

· your projected GST turnover is at or above the turnover threshold.

Currently, the registration turnover threshold is $75,000 ($150,000 for non-profit entities).

Current GST turnover

According to paragraph 188-15(1)(a) of the GST Act, input taxed supplies are disregarded in working out your current GST turnover. Section 40-35 of the GST Act provides that a supply of residential premises by way of lease is input taxed. Therefore, your turnover from leasing the property is not included in calculating your current GST turnover. As you do not carry on any other business activity, your current GST turnover does not exceed the registration turnover threshold.

Projected GST turnover

Your projected GST turnover at a time during a particular month is the sum of the values of all the supplies that you have made, or are likely to make, during that month and the next 11 months, not including input taxed supplies. If the settlement of the contract for sale of the property occurs in the next 11 months, it must be determined whether the sale will be included in calculating your projected GST turnover.

Section 188-25 of the GST Act provides that the following are disregarded in working out your projected GST turnover:

· any supply made, or likely to be made, by you by way of transfer of ownership of a capital asset of yours; and

· any supply made, or are like to be made, by you solely as a consequence of:

· ceasing to carry on an enterprise; or

· substantially and permanently reducing the size or scale of an enterprise.

Generally, the term 'capital assets' refers to those assets that make up 'the profit yielding subject' of an enterprise and can include factory, shop, office, and your land which are retained by you to produce income.

You own the property and use it to generate rental income; as such, the property is a capital asset of yours. Accordingly, the sale of the property will be disregarded in calculating your projected GST turnover.

As your GST turnover does not meet the registration turnover threshold, paragraph 23-5(b) of the GST Act is not satisfied. Therefore, you are not required to be registered for GST.

Question 2

GST is payable on any taxable supply that you make.

According to section 9-5 of the GST Act, you make a taxable supply if:

· the supply is made for consideration; and

· the supply is made in the course or furtherance of your enterprise; and

· the supply is connected with Australia; and

· you are registered or required to be registered.

All the conditions in paragraphs 9-5(a) to 9-5(d) of the GST Act must be met for your sale of the property to be a taxable supply.

You are not registered for GST and, as discussed in the answer to question 1, not required to be registered. Therefore, the requirement in paragraph 9-5(d) of the GST Act is not satisfied. Accordingly, your sale of the property will not be a taxable supply,

You will not be liable to pay GST on your sale of the property.