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Edited version of your written advice
Authorisation Number: 1012842528189
Date of advice: 17 July 2015
Ruling
Subject: GST and the 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 as the supply of the property does not meet the requirements of a taxable supply as provided under section 9-5 of the GST Act which reads as follows:
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 the indirect tax zone; 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.
(terms marked with asterisks (*) are defined in section 195-1 of the GST Act)
The sale of the Property does not meet paragraph 9-5(d) of the GST Act as the couple is not registered or required to be registered at the time of sale of the Property. Further, the sale of the property comes within the meaning of an input taxed supply under section 40-65 of the GST Act as it is the supply of a residential premises (which is not a commercial residential premises or a new residential premises). Therefore, the sale of the property is not a taxable supply.
Relevant facts and circumstances
• A couple owned the property.
• A partnership (of which the two individuals were the partners), carried on an enterprise from the property.
• The partnership was registered for goods and services tax.
• There was no formal agreement between the partners and the partnership for the lease of the property to the partnership.
• The principal place of residence of the couple is also located on the property.
• A few years ago the partnership ceased carrying on the enterprise. The partnership did not carry on any other enterprises and as such will cancel its GST registration with effect from the date when the enterprise activities of the partnership ceased.
• A few months ago, the property was leased for residential purposes to a tenant as the couple moved out of their residential premises. The tenants have not been carrying on any enterprises from the property. This lease was not carried on under the partnership ABN. The lease was entered into by the two individuals in their individual capacities. The rental income from this rental enterprise will be declared in each individual's income tax return and not under a partnership income tax return.
• The couple intends selling the property to a third party (who is not the current tenant of the property).
• The property is not a new residential premises. There are several sheds located on the property which will also be included as part of the sale.
• The property has not been subdivided or the subject of any development activity.
Relevant legislative provisions
Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999
Section 40-65 of the A New Tax System (Goods and Services Tax) Act 1999