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Edited version of your written advice
Authorisation Number: 1012700471381
Ruling
Subject: GST and sale of a property
Question:
Will the sale of the property situated in Australia (the property) be subject to goods and services tax (GST)?
Answer:
No.
Under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), 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.
Section 23-5 of the GST Act provides that you are required to be registered for GST if you are carrying on an enterprise and your GST turnover meets the registration turnover threshold (of $75,000 for a business or $150,000 for non-profit). In working out your projected GST turnover, paragraph 188-25(a) of the GST Act requires that you disregard any supply made or are likely to be made, by you by way of transfer of ownership of a capital asset of yours.
Based on the information provided, you are not registered for GST and the sale of the property would be excluded from the calculation of your GST turnover because it will be a transfer of a capital asset. Therefore, as you are neither registered nor required to be registered for GST, your sale of the property does not satisfy all the requirements of a taxable supply under section 9-5 of the GST Act and is not subject to GST.
Relevant facts and circumstances
Mr and Mrs X purchased a farm situated in Australia (the property) as joint tenants in the 1980's.
The property consists of several acres of land. At the time of purchase, the only improvement on the property was some fences.
In the 1980's, Mr and Mrs X transported a house to the property and connected it to services, built a shed and set up irrigation piping for farming on the property.
Mr and Mrs X have occupied the house on the property as the family residence from the time the house was installed on the property.
In the 1980's, Mr and Mrs X carried on an intensive business on the property under the partnership of 'Mr and Mrs X'.
Later in the 1980's, Mr and Mrs X terminated the partnership of Mr and Mrs X and formed a new partnership which included their two children, as partners. This new partnership traded as the partnership of 'A B, C and D'.
The partnership of 'A, B, C and D' was registered for GST from 1 July 2000 to 200X.
The partnership of A, B, C and D' carried on the business on the property.
Mr and Mrs X leased the property to the partnership of 'A, B, C and D'. This was the only enterprise that Mr and Mrs X carried on from 1 July 2000. The consideration paid to Mr and Mrs by the partnership for the lease was limited to council rates and water rates incurred on the property. The consideration for the lease never exceeded $75,000 in any 12 month period.
In 200X, Mr and Mrs X and their children purchased another several acre farmland in Australia as tenants-in-common. The partnership of 'A, B, C and D' carried on the business on the property.
Later in 200X, the partnership of 'A, B, C and D' ceased to carry on the business and a family company, 'Family Pty Ltd' (the company) took over the business. The company is registered for GST.
The company is carrying on the business on both properties.
Mr and Mrs X are leasing the property to the company. The consideration paid to Mr and Mrs X by the company for the lease is limited to council rates and water rates incurred on the property. The consideration for the lease has never exceeded $75,000 in any 12 month period.
Since 1 July 2000, Mr and Mrs X have not carried on any other enterprise other than leasing the property. The total amount of consideration Mr and Mrs X have received for leasing the property has never exceeded $75,000 in any 12 month period.
Mr and Mrs X will not carry on any subdivision work on the property before sale.
Mr and Mrs X are not registered for GST as individuals or as a partnership.
The estimated sale price of the property is $XX million.
Recently, the property passed on to, as the surviving joint tenant after the death of their spouse. You do not carry on another enterprise as a sole trader and are not registered for GST.
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 23-5
A New Tax System (Goods and Services Tax) Act 1999, Section 188-25