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Edited version of your written advice
Authorisation Number: 1012913679757
Date of advice: 17 November 2015
Ruling
Subject: Goods and services tax (GST) sale of property
Question
Is GST payable on your sale of the property located in Australia?
Answer
No. This is because
• your activity of allowing your related company to occupy the property is not considered to be an enterprise
• you have not carried on an any enterprise in relation to the property
• the sale of the property will not be a supply made in the course or furtherance of an enterprise that you carry on, and
• you will not be registered or required to be registered for GST when you sell the property.
Granting a licence to occupy property is listed as a type of enterprise in the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). However, activities done by individuals without a reasonable expectation of profit or gain are excluded from the definition of enterprise. You would not have a reasonable expectation of making a profit or gain from allowing your related company to occupy the property.
If your activity of allowing your related company to occupy the property was considered an enterprise, you still would not be required to be registered for GST because your GST turnover would be less than $75,000. The sale of the property would not push your GST turnover over $75,000 because sales of capital assets are excluded from projected GST turnover.
Even if your activity of allowing your related company to occupy the property was considered an enterprise, GST would still not be payable on your sale of the property because you are not registered for GST and you would still not be required to be registered for GST.
Miscellaneous Taxation Ruling MT 2006/1 provides guidance on the meaning of enterprise. Type in MT 2006/1 into an internet search engine.
Relevant facts and circumstances
Individual 1 and individual 2 (you) are not registered for GST.
You received a property located in Australia (the property) as a gift many years ago.
The property is classed as primary production land. The property is zoned General Residential Zone.
The property is approximately (number) hectares in area.
You have been registered proprietors of the property since a certain date.
The property was previously old general law land and was recently converted to the Torrens system.
You reside on the property in an established house that occupies a small portion of the property.
A business is conducted by company X (X) from the property. X is registered for GST. You are the directors and shareholders of X.
X has never paid rent to you and there is no lease between you and X.
X has made capital improvements to the land. There was no agreement between you and X that you would retain any capital improvements made to the land by X. X has the right to remove or sell any such improvements at its discretion.
You pay the Council rates on the property and X does not reimburse you for the Council rates.
Electricity is paid by X and at the end of the financial year a part of the amount is apportioned for personal use and shown as personal drawings.
X pays for water consumption and no allowance is made for personal use and it is too difficult to determine and/or monitor personal use and personal use is very minimal.
X pays insurance for the commercial buildings.
You do not get any benefit from allowing X to occupy the property apart from their payment of some of the holding costs as set out above.
Apart from the enterprise conducted by X, there is no other enterprise conducted from the property.
You do not conduct any enterprise in your own capacity at any location.
You have not undertaken any substantial renovations or repairs or modifications to the current dwelling on the property.
The premises on the property are not part of a resort, serviced apartment or hotel type setting.
You are now seeking to sell the property.
You will not subdivide or develop the property before sale to increase the sale price or make it more marketable.
No capital improvements will be done to the property by X in the month of settlement of sale.
The total contributions X makes towards the holding costs of the property, if any, in the month of settlement of sale would be under $75,000.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 subsection 7-1(1)
A New Tax System (Goods and Services Tax) Act 1999 section 9-5
A New Tax System (Goods and Services Tax) Act 1999 section 9-20
A New Tax System (Goods and Services Tax) Act 1999 section 9-40
A New Tax System (Goods and Services Tax) Act 1999 section 23-5
A New Tax System (Goods and Services Tax) Act 1999 paragraph 23-15(1)(b)
A New Tax System (Goods and Services Tax) Act 1999 Division 188