Edited version of your private ruling

Authorisation Number: 1012585944392

Ruling

Subject: GST and sale of tools at auction

Question

Is your sale of tools and used workshop goods subject to the goods and services tax (GST) when sold at an auction?

Advice

No, your sale of tools and used workshop goods is not subject to GST when sold at an auction because based on the information received you will not be carrying on an enterprise under paragraph 9-5(b) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when these tools and used workshop goods are sold at auction.

Relevant facts

You are registered for the GST because of the industrial property that you have been leasing.

You advised that the industrial property has not been leased lately and you intend to use the vacant industrial property for an auction sale.

You will sell tools and used workshop goods which you have collected over several years, at the auction. These tools and used workshop goods are neither connected to the leasing activity that you carry on nor are they associated to any business that was operated from the industrial property.

Relevant legislative provision

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

Reason for decision

GST is payable on a taxable supply. You make a taxable supply under section 9-5 of the GST Act 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 for GST.

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

All of the above requirements must be satisfied for a supply to be a taxable supply under section 9-5 of the GST Act.

When you sell the tools and used workshop goods which you have collected over several years at auction, you will satisfy paragraphs 9-5(a) and 9-5(c) of the GST Act as you will make the supply for consideration and the supply will be connected with Australia as the tools and workshop goods are supplied in Australia.

There is no provision in the GST Act that makes a supply of tools and workshop goods in Australia GST-free or input taxed.

We will now consider paragraphs 9-5(b) and 9-5(d) of the GST Act.

Paragraph 9-5(b) of the GST Act

You advised that the tools and used workshop goods are neither connected to the leasing activity that you carry on nor are they associated to any business that was operated from the industrial property. We therefore need to determine whether an enterprise is being carried on for the sale of these tools and used workshop goods.

Section 9-20 of the GST Act defines 'enterprise' to include, amongst other things, an activity, or series of activities, done in the form of a business or in the form of an adventure or concern in the nature of trade.

Paragraph 1 of Goods and Services Tax Determination GSTD 2006/6 (available at www.ato.gov.au) provides that the guidelines in MT 2006/1 are considered to apply equally to the term 'enterprise' as used in the GST Act and can be relied upon for GST purposes.

Miscellaneous Tax Ruling MT 2006/1 (available at www.ato.gov.au) provides guidance on the meaning of 'enterprise' for the purposes of entitlement to an Australian business number.

Whether or not an activity, or series of activities, constitutes an enterprise is a question of fact and degree having regard to all of the circumstances of the case.

Paragraph 234 of MT 2006/1 distinguishes between a business and an adventure or concern in the nature of trade. It provides that the term business would encompass trade engaged in on a regular or continuous basis. However, it goes on to say that an adventure or concern in the nature of trade may be an isolated or one-off transaction that does not amount to a business.

Based on the information provided, your proposed sale of the tools and used workshop goods at auction will be a one-off activity, and therefore is not an activity or series of activities done in the form of a business, or part of a series of trading activities. The next step is to consider whether your sale of the tools and used workshop goods at auction is an activity done in the form of an adventure or concern in the nature of trade.

Paragraph 244 of MT 2006/1 provides further guidance on adventures and concerns in the nature of trade. It 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.

From the information received, the tools and used workshop goods are private assets that you have gathered over several years. In this instance, you are not considered to carry on an activity in the form of an adventure or concern in the nature of trade. Paragraph 9-5(b) of the GST Act is not satisfied.

Paragraph 9-5(d) of the GST Act

Since we have determined that you are not considered to be carrying on an enterprise for the sale of the tools and used workshop goods paragraph 9-5(d) of the GST Act is not applicable.

Summary

Your sale of the tools and used workshop goods at an auction is not a taxable supply as all the requirements in section 9-5 of the GST Act are not satisfied. Accordingly, GST is not applicable to the sale.