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Edited version of your written advice
Authorisation Number: 1051178733311
Date of advice: 12 January 2017
Ruling
Subject: Sale of land
Question 1
Is the sale the property a taxable supply for GST purposes?
Answer
No
Relevant facts and circumstances
The applicants acquired a property in 19XX as joint tenants, which includes land and a residential home.
The property had been operated as farmland consistently since the start of ownership as follows:
• 19XX to 200X by party 1 as a sole trader
• 200X to 201X in partnership with party1 and party 2, and then by party 2 only as sole trader
• 201X to present the property was leased out to an unrelated third party market gardener.
Both farming and rental income never exceeded the GST turnover threshold.
The applicant was not required to register for GST purposes.
The applicants were approached by real estate developer(s) to sell the property for development and subdivision.
The applicant lived on the property since acquisition, until 199X.
The rent derived from leasing the house on the property and other business income sources did not exceed the GST registration threshold, thus there was not a requirement to register for GST purposes.
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 188-25.
Reasons for decision
The sale of the property is not a taxable supply because the applicant was not required to be registered for GST as the income generated on the land never exceeded the GST turnover threshold.
Detailed reasoning
The applicant did not reach the business registration turnover threshold (RTT) required in section 23-5 of the GST Act.
The applicant was not required to be registered for GST purposes in relation to the rental (and other business) income generated from the property.
Under section 188-25 of the GST Act the sale of the property would be disregarded when calculating the RTT in these circumstances (ceasing to carry on an enterprise).
Consequently we consider that the sale of the property will not be a taxable supply under section 9-5 of the GST Act and that the applicant will not be liable to remit GST on the sale.