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Edited version of your private ruling
Authorisation Number: 1012603280222
Ruling
Subject: GST and sale of property
Question
Is the sale of the property a taxable supply?
Answer
No, the sale of the property is not a taxable supply.
Relevant facts and circumstances
The deceased acquired the property before 2000.
The property consists of acres of land which contained a dwelling used by the deceased as their residence.
When the dwelling was destroyed, the deceased did not replace it. Instead, they lived with friends and family until they entered into full medical care.
The property is primarily zoned as residential with a small portion zoned as general business. No action has been taken by the deceased or the executor to develop the land. The land has not been used as part of a business and has not been used to produce income.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 9-5 and
A New Tax System (Goods and Services Tax) Act 1999 section 40-65.
Reasons for decision
Taxation Ruling IT 2622 explains that upon the death of a taxpayer, the property of the deceased passes to their estate, the legal control over which is exercised by an executor or administrator. The executor or administrator, in effect, steps into the shoes of the deceased and winds up the deceased's personal affairs. This view does not only apply for income tax purposes, but equally applies for GST purposes.
Therefore, the sale of the property will be a taxable supply if it would have been taxable had the deceased sold it.
Section 9-5 of the A New Tax System (Goods and Services tax) Act 1999 (GST Act) states:
You make a taxable supply if:
(a) you make the supply for *consideration; and
(b) the supply is made in the course of 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 under section 195-1 of the GST Act)
For the purpose of paragraph 9-5(b) of the GST Act, it must be determined whether the sale of the property would constitute an enterprise.
Miscellaneous Taxation Ruling MT 2006/1 provides guidance on what constitutes an enterprise.
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. 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.
Furthermore, paragraphs 258-261 of MT 2006/1 discuss the difference between trade and investment assets and explain that 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. Examples of investment assets are rental properties, business plant and machinery, the family home, family cars and other private assets. The mere disposal of investment or capital assets does not amount to trade.
The deceased acquired the property prior to 2000 and held it for a long period of time using it as their residence. The property was not used as part of a business or any income producing activity. After the dwelling was destroyed, the deceased did not carry out any activity to develop the property. The executor also did not develop the property.
Based on the information provided, we consider that the sale of the property would not have amounted to carrying on an enterprise. The sale would have been a mere disposal of a private asset had the deceased sold the property. The requirement in paragraph 9-5(b) of the GST Act would not have been satisfied. Accordingly, the sale of the property is not a taxable supply.