Edited version of your written advice

Authorisation Number: 1012834707034

Date of advice: 7 July 2015

Ruling

Subject: GST and requirement to be registered

Question

Are you required to be registered under section 23-5 of the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act)?

Answer

No, you are not required to be registered under section 23-5 of the GST Act, because your GST turnover does not meet the registration turnover threshold.

Relevant facts and circumstances

You are not registered for GST. You are the owner of real property. The Property consists of vacant land.

You acquired the Land in a specified year. The intention at the time the land was acquired was that you would derive lease income from letting the property to the specified entity. Furthermore, the property could ultimately be sold to fund a specified person's retirement.

From the date the land was acquired by you, it was leased to the specified entity for specified sum per year. The specified entity used the land for the purpose of carrying on its business. The business became commercially unviable to the specified entity, and so the lease of the land was offered to the public. The state of the specified industry was such that no external parties were interested in using the land for specified purposes.

You ceased to lease the land to any parties from specified date. The Australian Taxation Office cancelled your GST registration effective specified date.

You also have investments in various specified products.

You are currently in negotiations for the sale of the land. The property is to be supplied (sold) to a prospective buyer for specified sum.

You do not carry on any other activity apart from the activities mentioned above.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 23-5

A New Tax System (Goods and Services Tax) Act 1999 section 72-5

A New Tax System (Goods and Services Tax) Act 1999 subsection 188-10(1)

A New Tax System (Goods and Services Tax) Act 1999 section 188-25

Reasons for decision

Requirement to be registered

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, which is currently $75,000 for entities other than non-profit entities.

Where you are not conducting an enterprise or your GST turnover does not meet the registration threshold you are not required to be registered. We will consider first whether your GST turnover meets the registration turnover threshold.

Registration turnover threshold

Subsection 188-10(1) of the GST Act provides that you have a GST turnover that meets the registration turnover threshold if:

• your current GST turnover is at or above the registration turnover threshold, and the Commissioner is not satisfied that your projected GST turnover is below the registration turnover threshold, or

• your projected GST turnover is at or above the registration turnover threshold.

The registration turnover threshold applicable to you is $75,000.

Your current GST turnover is the sum of the values of all the supplies in a particular month plus the previous 11 months. In your case your current GST turnover is below $75,000. However, it is necessary to determine whether your projected GST turnover meets the threshold.

Your projected GST turnover is the sum of the values of all supplies made in a particular month plus the next 11 months.

The following are disregarded when working out your projected GST turnover:

• supplies that are input taxed

• supplies that are not for consideration (and are not taxable supplies under section 72-5 of the GST Act)

• supplies that are not made in connection with an enterprise that you carry on, or

• supplies that are not connected with Australia.

Any supply of your investments in various specified products is considered to be input taxed. Such supplies are disregarded when working out your projected GST turnover.

None of the above exclusions from projected GST turnover apply to the sale of the property.

However section 188-25 of the GST Act provides that when calculating your projected GST turnover, you do not include any supplies made, or likely to be made by you:

• by way of transfer of ownership of a capital asset, or

• solely as a consequence of ceasing an enterprise or substantially and permanently reducing the size or scale of your enterprise.

Capital asset

The meaning of 'capital asset' is discussed in paragraphs 31 to 36 of Goods and Services Tax Ruling GSTR 2001/7 Goods and services tax: meaning of GST turnover, including the effect of section 188-25 on projected GST turnover (GSTR 2001/7).

The GST Act does not define the term "capital asset". However, GSTR 2001/7 explains that generally, the term capital assets refers to those assets that make up the profit yielding subject of an enterprise. They are often referred to as structural assets. They may be described as the business entity, structure or organisation set up or established for the earning of profits.

Capital assets are to be distinguished from revenue assets. A revenue asset is an asset whose realisation is inherent in, or incidental to, the carrying on of a business. If the means by which you derive income is through the disposal of an asset, the asset will be of a revenue nature rather than a capital asset even if such a disposal is an occasional or one-off transaction. Therefore, the character of an asset must be determined at the time of expected supply.

In this case, you held the property in order to derive lease income from letting the property to the specified entity and other interested parties. The property is a capital asset. It follows that the disposal of the property would be excluded from the calculation of your projected GST turnover.

Your projected GST turnover is below $75,000. Your GST turnover does not meet the $75,000 registration turnover threshold. 

Therefore, you are not required to be registered under section 23-5 of the GST Act.