Edited version of your private ruling

Authorisation Number: 1012347689398

This edited version of your ruling will be published in the public register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.

Ruling

Subject: Goods and services tax (GST) and sale of property

Question

Will GST be payable on your sale of the property?

Answer

No.

Relevant facts and circumstances

Individual 1 and individual 2 (you) purchased a property located in Australia on a certain date.

You did not purchase the property to resell.

Your original intention was to build a family home and to live at this location.

Due to work commitments, you were not able to build on this block of land, as you were required to live in other parts of Australia and sometimes overseas.

Since returning to live in Australia, you have been located in a certain locality in a certain State or Territory; not in the State or Territory in which the property is located. You now intend to live in the certain locality that is in a different State or Territory to the State or Territory in which the property is located. Therefore, you do not want to hold onto the land any longer and are considering selling the property.

You did some development works on the property:

You have maintained the property.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 subsection 7-1(1)

A New Tax System (Goods and Services Tax) Act 1999 section 9-5

A New Tax System (Goods and Services Tax) Act 1999 section 9-40

A New Tax System (Goods and Services Tax) Act 1999 section 9-20

A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-20(1)(a)

A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-20(1)(b)

Reasons for decision

Summary

GST will not be payable on your sale of the property because the sale will be the mere realisation of a private capital asset.

Detailed reasoning

GST is payable by you where you make a taxable supply.

You make a taxable supply where you satisfy the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), which states:

You make a taxable supply if:

(a) you make the supply for *consideration; and

(b) the supply is made in the course or furtherance of an *enterprise that

you *carry on; and

(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.

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

Subsection 9-20(1) of the GST Act defines enterprise to include:

(a) an activity or series of activities done in the form of a business

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

Miscellaneous Taxation Ruling MT 2006/1 provides guidance on the meaning of enterprise for ABN purposes.

Goods and Services Tax Determination GSTD 2006/6 provides that MT 2006/1 can be relied on for GST purposes.

Paragraphs 262 and 263 of MT 2006/1 state:

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. (In an income tax context a number of public rulings have issued outlining relevant factors and principles from judicial decisions. See, for example, TR 92/3, TD 92/124, TD 92/125, TD 92/126, TD 92/127 and TD 92/128.)

Paragraph 244 of MT 2006/1 states:

244. An adventure or concern in the nature of trade includes a commercial activity that does not amount to a business but which has the characteristics of a business deal. Such transactions are of a revenue nature. However, the sale of the family home, car and other private assets are not, in the absence of other factors, adventures or concerns in the nature of trade. The fact that the asset is sold at a profit does not, of itself, result in the activity being commercial in nature.

Paragraph 254 of MT 2006/1 states:

254. If the activities on an objective assessment have the characteristics of trade, the person's motive is not relevant. It is relevant in those cases where the evidence is not conclusive. An intention to resell at the time of acquisition may be an indicator of the resale being an adventure or concern in the nature of trade.

We consider that your sale of the property will be the mere realisation of a private capital asset because of the following facts:

· You did not purchase the property to resell.

· Your original intention was to build a family home and to live at this location.

· Due to work commitments, you were not able to build on this block of land, as you were required to live in other parts of Australia and sometimes overseas.

· Since returning to live in Australia, you have been located in a certain locality in a certain State or Territory; not in the State or Territory in which the property is located. You now intend to live in the certain locality in a State or Territory that is different to the State or Territory in which the property is located. Therefore, you do not want to hold onto the land any longer and are considering selling the property.

Hence, your sale of the property will not be a supply you make in the course or furtherance of an enterprise that you carry on. Therefore, the requirement of paragraph 9-5(b) of the GST Act will not be satisfied. Hence, you will not make a taxable supply of the property as not all of the requirements of section 9-5 of the GST Act will be satisfied. Therefore, GST will not be payable on your sale of the property.