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Edited version of your written advice
Authorisation Number: 1051464605133
Date of advice: 11 December 2018
Ruling
Subject: GST and sale of real property
Question
Is the sale of your real property a taxable supply for GST purposes?
Answer
No.
Relevant facts and circumstances
You own the specified real property situated in Australia.
The property has been used for farming purposes by you and another entity to date.
You have rented out the property to a third party for farming purposes for a particular period.
Your GST turnover is currently under $75,000 and you are currently not registered for GST.
You have been approached by a potential purchaser to sell the property for development and subdivision.
You have not been made aware of the potential purchaser intending to carry on a farming business after the sale of the property.
You do not intend to conduct farming operations on the property after it has been sold.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 9-1
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
An entity makes a taxable supply where all the requirements under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) are met. One of the requirements for a supply to be a taxable supply is that the supplier is registered or required to be registered for the goods and services tax (GST). You are currently not registered for GST. Therefore, we need to consider whether you will be required to be registered when you sell your property.
Are you required to be registered?
Under section 23-5 of the GST Act, you are required to be registered if
● you are carrying on an enterprise; and
● your GST turnover meets the registration turnover threshold.
The applicable GST registration turnover threshold is $75,000. You have a GST turnover that meets the registration turnover threshold if your current GST turnover is at or above $75,000 and your projected GST turnover is not below $75,000.
In calculating your GST turnover under Division 188 of the GST Act, certain supplies are excluded. Section 188-25 of the GST provides that in working out your projected GST turnover, disregard:
(a) any supply made, or likely to be made, by you by way of transfer of ownership of a capital asset of yours; and
(b) any supply made, or likely to be made, by you solely as a consequence of:
(i) ceasing to carry on an enterprise; or
(ii) substantially and permanently reducing the size or scale of an enterprise.
Your current GST turnover is below $75,000. The sale of the property on which you have carried on farming activities and in respect of which you have carried on a leasing enterprise, will be the transfer of ownership of a capital asset of yours. As such, the sale of your property will be excluded from the calculation of your projected GST turnover and will not form part of the sum of your projected GST turnover. Accordingly, your GST turnover will not meet the registration turnover threshold as a result of the sale of the property. Hence, you will not be required to be registered for GST under section 23-5 of the GST Act.
As you are not registered for GST and will not be required to be registered for GST when you sell your property, all the requirements for a taxable supply under section 9-5 of the GST Act will not be met. Consequently, you will not be making a taxable supply when you sell the property.