Edited version of your private ruling

Authorisation Number: 1012485655594

Ruling

Subject: GST and the sale of property

Question:

Is your supply of your property situated at the specified location a taxable supply?

Decision:

No.

Relevant facts and circumstances

You are the owner of the property and residence situated at the specified location (the property).

You have never been registered for GST.

You and your spouse purchased the land as joint tenants and built your private residence on the property.

Your spouse conducted his business on the property from date of purchase till the specified date. You worked as a homemaker during this time.

You later became sole owner of the property.

You have subsequently realised that you will not be able to continue your spouse's business and have disposed of some of your business assets.

You entered into an agreement with another party who desired to use part of the property for their specified business.

You do not currently run any other businesses or carry on any other enterprises.

You now intend to sell the property.

You do not own any other real property.

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 9-40.

A New Tax System (Goods and Services Tax) Act 1999 Subsection 23-5(b)

A New Tax System (Goods and Services Tax) Act 1999 Section 23-15

A New Tax System (Goods and Services Tax) Act 1999 Paragraph 188-10(1)(b)

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

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

Reasons for decision

Under section 9-40 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), you must pay the GST payable on any taxable supplies that you make.

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

you make the supply for consideration,

the supply is made in the course or furtherance of an enterprise you carry on,

the supply is connected with Australia, and

you are registered or required to be registered for GST.

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

In this case, of relevance for consideration is paragraph 9-5(d) of the GST Act. That is, whether your supply of the property will require you to be registered for GST.

Section 23-5 of the GST Act states that you are required to be registered if you are carrying on an enterprise and your GST turnover meets the registration turnover threshold.

Under section 23-15 of the GST Act, the GST registration turnover threshold is currently $75,000. You will be required to register for GST if your GST turnover meets this turnover threshold.

Paragraph 188-10(1)(b) of the GST Act provides that an entity's GST turnover meets a particular threshold if the entity's current or projected GST turnover is at or above the turnover threshold. Section 188-20 of the GST Act states that 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 eleven months.

Subsection 188-25(a) of the GST Act, however, excludes certain supplies from your projected GST turnover calculations. It states that in working out 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

Paragraphs 32 - 34 of 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 discuss what constitutes capital assets.

'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'.'

In your case, you are in the process of selling your property which you have held from the specified date of purchase. You do not have any history of building and selling properties within a short timeframe. You have stated that after you became sole owner of the property, you realised you could not continue your husband's business. You do not currently run any other businesses or carry on any other enterprises. As you cannot continue your husband's business, you have disposed of the other specified business assets. The combination of these facts indicates that the property you are in the process of selling is a capital asset. This is because the property's realisation is not inherent in, or incidental to, the carrying on of any enterprise you conduct.

As the property is considered to be a capital asset, it will be excluded from your projected turnover calculations. Providing that any other enterprise you carry on does not put your current or projected GST turnover above $75,000, you will not be required to be registered for GST.