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Edited version of your written advice
Authorisation Number: 1012767348136
Ruling
Subject: GST and sale of property
Question
Will you be making a taxable supply pursuant to section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 when you sell your property?
Answer
No, as you are neither registered nor required to be registered for GST, you have not satisfied all of the requirements for making a taxable supply. As such, GST is not applicable to the sale of your property.
Relevant facts and circumstances
You are not registered for GST.
You purchased property in the early 1970s (the Property).
You developed a market garden on the Property and operated the market garden with your spouse until a specified date.
At that time your children became involved in the business and you operated the market garden business through a number of business structures.
Initially, you operated the business in partnership with your children and subsequently restructured the entity and operated through a company structure.
You ceased to be involved in the business when you retired.
The company continued to operate the business on the Property until recently.
You received rental/lease income from the company until this time as payment for the use of the Property?
The Property is not currently being used or operated as a market garden business.
The Property is approximately X ha and contains a main residence, an old asbestos house, a large shed for storage and packing and a smaller shed
You intend to lease the Property for a few years and then sell it. You anticipate the rental will be less than $75,000 per annum.
Apart from the anticipated $xx leasing income, you will not be in receipt of any other business income. Your only other income source is from your self-managed superannuation fund.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999
Section 9-40
Section 9-5
Section 23-5
Division 188
Reasons for decision
Note: In this ruling, unless otherwise stated,
• all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)
• reference material(s) referred to are available on the Australian Taxation Office (ATO) website www.ato.gov.au
Section 9-40 provides that you are liable for GST on any taxable supply that you make.
The term 'taxable' supply is defined in section 9-5. One of the requirements of a taxable supply is that you are registered or required to be registered for GST. As you are not registered for GST, the issue in this case is whether you are required to be registered for GST.
Section 23-5 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 (currently $75,000 ($150,000 for non-profit bodies)).
The term 'enterprise' is defined in section 9-20 and includes activities done on a regular or continuous basis, in the form of a lease, licence or other grant of an interest in property. As such, we consider that you are carrying on an enterprise when you lease your property.
The next issue to consider is whether your GST turnover meets the registration turnover threshold of $75,000.
Division 188 contains provisions regarding the meaning of GST turnover. You will meet the GST turnover threshold if either:
• your 'current GST turnover' - your turnover for the current month and the previous 11 months - totals $75,000 or more ($150,000 or more for non-profit organisations)
• your 'projected GST turnover' - your total turnover for the current month and the next 11 months - is likely to be $75,000 or more ($150,000 or more for non-profit organisations).
In working out your projected GST turnover, you do not include amounts you receive for the sale of a business asset (such as the sale of a capital asset) or for any sale you made, or are likely to make, solely as a consequence of ceasing or substantially and permanently reducing the size of your business.
Given the facts of this case, we consider the sale of the Property to be the sale or transfer of a capital asset and proceeds from the sale would not be included when calculating your projected GST turnover.
If your current GST turnover reaches or is more than the GST turnover threshold but you satisfy the Commissioner that your projected GST turnover will be below the threshold, you do not have to register for GST.
Given your anticipated turnover from leasing the Property is below the registration turnover threshold, the fact that you do not receive any other business income and that the proceeds of the sale of the Property are not included in the calculation of your projected GST turnover, you are not required to register for GST.
As you are neither registered, nor required to be registered for GST, the sale of your property will not constitute a taxable supply and GST will not apply to the sale.