| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your private ruling
Authorisation Number: 1012460325077
Ruling
Subject: Series of Activities in the form of an enterprise
Question
Will the sale of a stratum unit be a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
No
Relevant facts and circumstances
You and another acquired a property in November 20XX as tenants in common in equal shares.
At the time of acquisition there was a lease agreement in place which continued for approximately six weeks.
You lived in the house for approximately eighteen months before deciding to demolish the premises and construct a duplex building.
Construction was completed by the end of December 20YY and a Strata Subdivision approved by Council for two strata units.
The construction was not carried out as part of an enterprise for GST purposes.
The duplex building consisting of two separate dwellings arranged as a pair of semidetached cottages. The two separate units are similar with one being a mirror image of the other.
You live in one unit and the other tenant in common occupies the second unit.
You are contemplating either renting or selling one of the units.
You and another, as co-owners of the real property are not registered for GST
You are not involved in any tax law or common law partnership enterprise.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 7-1
A New Tax System (Goods and Services Tax) Act 1999 section 9-5
A New Tax System (Goods and Services Tax) Act 1999 section 9-20
A New Tax System (Goods and Services Tax) Act 1999 section 23-5
A New Tax System (Goods and Services Tax) Act 1999 section 45-35
A New Tax System (Goods and Services Tax) Act 1999 section 40-65
A New Tax System (Goods and Services Tax) Act 1999 section 40-75
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
Income Tax Assessment Act 1997 section 995-1
Reasons for decision
Summary
Because your activity is of a private or domestic nature; it is not in the course of an enterprise. Accordingly, should you decide to sell a stratum unit, it will not be a taxable supply under
section 9-5 of the GST Act because paragraph 9-5(b) will not be satisfied.
Detailed reasoning
Because your activity is of a private or domestic nature; it is not in the course of an enterprise. Accordingly, should you decide to sell a stratum unit, it will not be a taxable supply under section
9-5 0f the GST Act because paragraph 9-5(b) will not be satisfied.
Section 7-1 of the GST Act states that GST is payable on taxable supplies
One of the requirements for a taxable supply under section 9-5 of the GST Act, is that the supply must be made in the course or furtherance of an enterprise carried on by the supplier.
Carrying on an enterprise
Under section 9-20 of the GST Act the term 'enterprise' has a wide and variable connotation. The concept includes the activities of major banks and mining conglomerates, but also includes those of odd-job men and minor dealers in second-hand goods. The essence of the concept is an organised activity on a regular or recurrent basis in which goods or other property are acquired and sold, goods are produced for sale or services are provided for reward. It includes the turning of labour or skills to monetary account in a repetitious or regular way. But it does not include investing for an income return, unless the investment is part of a business of dealing in money. It does not include activity of a private or domestic nature or of a private recreational pursuit or hobby, and it does not include engagement as an employee or appointment to a salaried office.
Miscellaneous Tax Ruling MT 2006/1 - The New Tax System: the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian Business Number - considers the meaning of certain key words and phrases used to define an enterprise and provides assistance to entities in determining whether their activities constitute an enterprise and their entitlement to an Australian business number.
Goods and Services Tax Determination GSTD 2006/6 provides that MT 2006/1 has equal application to the meaning of 'entity' and 'enterprise' for the purposes of the GST Act.
The construction of premises for occupation as a personal residence by persons who are not in the business of building premises is an activity of a private or domestic nature; it is not in the course of an enterprise. This kind of activity does not satisfy the requirements of an enterprise as outlined in section 9-20 of the GST Act.
Conclusion
Because your activity is not in the course of an enterprise, the sale of a stratum unit, will not satisfy the requirements for a taxable supply under section 9-5 of the GST Act.