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Edited version of your written advice
Authorisation Number: 1013086722679
Date of advice: 8 September 2016
Ruling
Subject: GST and sale of property
Question
Will the sale of the property be a taxable supply?
Answer
No. The sale of the property will not be a taxable supply.
Relevant facts and circumstances
You own a property situated in the indirect tax zone as joint tenants.
The property consists of two parcels of land that were purchased in the late 19X0's and early 19X0's. Since the time of purchase, you used the property for farming.
You are not registered for GST together as a partnership.
Your GST turnover has been under the registration threshold due to the winding down of your business.
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.
The sale of the property will not occur within the next 12 months
You jointly own another property on which you carry out farming activities. You rent out the house on this property.
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 23-5,
A New Tax System (Goods and Services Tax) Act 1999 section 188-10,
A New Tax System (Goods and Services Tax) Act 1999 section 188-20 and
A New Tax System (Goods and Services Tax) Act 1999 section 188-25.
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. As such, the requirements in paragraphs 9-5(a) and 9-5(c) of the GST Act are satisfied.
Paragraph 9-5(b)
You own the property as joint tenants. The property contains your principal place of residence and you operate your business on the property. You formed a partnership to operate your business on the land and you also lease out other properties. Therefore, you are carrying on enterprises of vegetable growing and property leasing.
The term 'carrying on' an enterprise includes doing anything in the course of the commencement or termination of the enterprise. As such, the sale of the property will still be made in the course of carrying on your enterprises. Paragraph 9-5(b) of the GST Act is satisfied.
Paragraph 9-5(d)
As you are not registered for GST, it must be determined whether you are required to be registered.
Under section 23-5 of the GST Act, an entity is required to be registered if:
• it carries on an enterprise; and
• its GST turnover meets the registration turnover threshold.
Currently, the registration turnover threshold is $75,000 ($150,000 for non-profit bodies).
An entity's GST turnover meets the turnover threshold if:
• its current GST turnover is at or above the turnover threshold, and the Commissioner is not satisfied that its projected GST turnover is below the turnover threshold; or
• its projected GST turnover is at or above the turnover threshold.
You advised that your GST turnover has been under the threshold as you are winding down your business. Therefore, your current GST turnover is below the registration turnover threshold. What remains to be determined is whether your projected GST turnover is at or above the turnover threshold
The value of supplies that are not made in connection with an enterprise that an entity carries on is disregarded in working out its projected GST turnover. Also disregarded is any supply made by an entity by way of transfer of ownership of a capital asset of the entity.
The portion of the property used by you as your principal place of residence is of a private nature; thus, the sale would not be made in connection with your leasing enterprise.
The remainder of the property used in vegetable growing is a capital asset in your enterprise; thus, the sale would be a transfer of ownership of a capital asset.
The sale of any portion of the property would be excluded in working out your projected GST turnover. The proceeds of the sale of the property will not increase your GST turnover. Therefore, your projected GST turnover would be below the registration turnover threshold.
Accordingly, your GST turnover does not meet the registration turnover threshold and you are not required to be registered. The requirement in paragraph 9-5(d) of the GST Act is not satisfied.
As not all of the requirements in section 9-5 of the GST Act are satisfied, the sale of the property will not be a taxable supply.