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Edited version of your written advice
Authorisation Number: 1013026858214
Date of advice: 3 June 2016
Ruling
Subject: GST and sale of property
Question
Is the sale of the property a taxable supply?
Answer
Yes. The sale of the property is a taxable supply to the extent that the supply is not input taxed.
Relevant facts and circumstances
You are registered for GST together as a partnership.
You own a property situated in Australia as joint tenants.
The property consists of two parcels of land that were purchased in the late 1960's and early 1970's. Since the time of purchase, you used the property for farming.
The property contains a house that is your principal place of residence.
A property developer approached you to buy the property. The property developer does not intend to use the property for farming.
You jointly own another property on which you carry out farming activities. You rent out the house on this property.
You own a property from which you receive rental income.
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 40-65
Reasons for decision
GST is payable on a taxable supply.
Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states:
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.
(* denotes a term defined under section 195-1 of the GST Act)
Your sale of the property is for consideration and is connected with the indirect tax zone. You are registered for GST. As such, the requirements in paragraphs 9-5(a), 9-5(c) and 9-5(d) of the GST Act are satisfied.
You own the property as joint tenants. The property contains your principal place of residence and your business operates on the property. You formed a partnership to operate your business on the land and you also lease out other properties. Therefore, as a GST-registered partnership, you are carrying on enterprises of farming and property leasing. The sale of the property is made in the course of your enterprises; and thus, paragraph 9-5(b) of the GST Act is also satisfied.
Accordingly, the sale of the property is a taxable supply to the extent that the supply is not input taxed.
Input taxed supply
Section 40-65 of the GST Act provides that a sale of real property is input taxed, but only to the extent that the property is residential premises to be used predominantly for residential accommodation (regardless of the term of occupation).
Therefore, the sale of the property is input taxed to the extent of the part of the property that contains your principal place of residence.
Apportionment
Section 9-80 of the GST Act provides that, where a supply is partly taxable and partly input taxed, the value of the supply is to be apportioned between the taxable and non-taxable (that is, input taxed) parts of the supply.
A supply which contains both taxable and non-taxable parts is referred to as a mixed supply. Goods and Services Tax Ruling GSTR 2001/8 provides guidance on the GST treatment of mixed supplies, and in particular, provides methods and examples that you may use to apportion the consideration for a supply that contains separately identifiable taxable and non-taxable parts. The general principle provided in the ruling is that an entity can use any reasonable method of apportionment that is supportable under the circumstances. Records must be retained to support the method of apportionment that you have used.