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Edited version of your private ruling
Authorisation Number: 1012552753563
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
You are not registered for GST.
You own a property located in Australia (the property).
You have owned the property for many years, having inherited it from your parent in a certain year. Whilst the property originally contained a dwelling in which you resided, the property has been vacant for many years, the dwelling having been demolished many years ago. You have not used the property for income generating purposes.
You have entered into a contract for sale of the property to a certain entity.
You are not engaged in an enterprise.
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 subsection 9-20(1)
A New Tax System (Goods and Services Tax) Act 1999 section 9-40
Reasons for decision
Summary
GST will not be payable on your sale of the property because the sale will not be a supply you make in the course or furtherance of an enterprise that you carry on.
Detailed reasoning
GST is payable by you on your taxable supplies.
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)
In accordance with subsection 9-20(1) of the GST Act, an enterprise includes the following:
(a) an activity or series of activities done in the form of a business
(b) an adventure or concern in the nature of trade, and
(c) leasing out property on a regular or continuous basis.
Miscellaneous Taxation Ruling MT 2006/1 provides guidance on the meaning of enterprise for GST purposes. Goods and Services Tax Determination GSTD 2006/6 provides that MT 2006/1 can be relied on for GST purposes.
In accordance with paragraph 244 of MT 2006/1, 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. 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.
In accordance with paragraph 263 of MT 2006/1, the mere realisation of a capital/investment asset is not an enterprise.
Paragraph 258 of MT 2006/1 distinguishes between trading assets and investment assets. It states:
258. United Kingdom cases categorise assets as either trading assets or investment assets. Assets purchased with the intention of holding them for a reasonable period of time, to be held as income producing assets or to be held for the pleasure or enjoyment of the person, are more likely not to be purchased for trading purposes.
You have held the property for a very long period of time and used it as a private asset. You have not used the property for income generating purposes.
You have not carried on an enterprise on the property and your sale of the property will not be an enterprise or part of an enterprise. The sale will be the mere realisation of a private capital asset.
Hence, you will not supply the property in the course or furtherance of an enterprise that you carry on. Therefore, the sale will not meet the requirement of paragraph 9-5(b) of the GST Act.
As not all of the requirements of section 9-5 of the GST Act will be met, you will not make a taxable supply of the property when you sell it. Hence, GST will not be payable on your sale of the property.