Edited version of private advice

Authorisation Number: 1051513688524

Date of advice: 9 May 2019

Ruling

Subject: GST and sale of real property

Question

Is the sale of the identified land under the specified Contract of Sale, a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999?

Answer

No.

Relevant facts and circumstances

·         You are an entity and you became the registered proprietor of the land which you inherited from Entity X more than a decade ago.

·         The land is situated in Australia.

·         Entity X purchased the land several decades ago and has conducted a primary production business on the land, involving fattening Angus steers and agisting horses.

·         With the land, you have also inherited horses owned by Entity X.

·         You have been managing the land, particularly fire prevention. You have only used the land to agist the inherited horses, as per the request in the will, until the last horse died. You did not receive any payment for agisting the horses.

·         You have decided to sell part of this land (identified land) due to the costs of maintaining this property, as well as the need for the money for the future.

·         You and a purchaser have signed a Contract of Sale for the sale and purchase of the identified land (Land) for the specified price.

·         You have not entered into any other contracts regarding the inherited property, at any stage, since inheriting the property.

·         You do not intend to sell the remainder of the property in the future.

·         You are not registered for GST.

·         You do not carry on any enterprise or business activities.

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 paragraph 9-5(a)

A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-5(c)

A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-5(d)

A New Tax System (Goods and Services Tax) Act 1999 section 23-5

A New Tax System (Goods and Services Tax) Act 1999 subsection 188-10(1)

A New Tax System (Goods and Services Tax) Act 1999 section 188-25

A New Tax System (Goods and Services Tax) Act 1999 section 195-1

Reasons for decision

GST is payable on taxable supplies.

You make a taxable supply if you meet the requirements of section 9-5 of the GST Act, which 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 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 in section 195-1 of the GST Act)

The sale of the Land will meet the requirements of paragraphs 9-5(a) and 9-5(c) of the GST Act. This is because the sale will be a supply made for consideration and the Land is located in Australia.

You are not registered for GST. Therefore, we need to determine whether you will be required to be registered for GST when you sell the Land that you previously inherited from Entity X and on which you have continued agisting the inherited horses until the last of the horses died.

Requirement to be registered for GST

Section 23-5 of the GST Act provides that an entity is required to be registered for GST purposes if both of the following requirements are met:

·         it is carrying on an enterprise; and

·         its GST turnover meets the registration turnover threshold (which is currently $75,000 for entities other than non-profit entities).

Registration turnover threshold

Subsection 188-10(1) of the GST Act provides that you have a GST turnover that meets the registration turnover threshold if:

·         your current GST turnover is at or above the registration turnover threshold, and the Commissioner is not satisfied that your projected GST turnover is below the registration turnover threshold, or

·         your projected GST turnover is at or above the registration turnover threshold.

Goods and Services Tax Ruling GSTR 2001/7 explains the meaning of GST turnover and the effect of section 188-25 of the GST Act on the calculation of projected GST turnover. GSTR 2001/7 is available on our website at www.ato.gov.au

In calculating your GST turnover under Division 188 of the GST Act, certain supplies are excluded. Section 188-25 of the GST Act provides that when calculating your projected GST turnover, you do not include any supplies made, or likely to be made by you:

·         by way of transfer of ownership of a capital asset, or

·         solely as a consequence of ceasing an enterprise or substantially and permanently reducing the size or scale of your enterprise.

On the facts provided, we consider that you will not satisfy all the requirements of section 23-5 of the GST Act. Consequently, you will not be required to be registered for GST at the time of sale of the Land. Therefore, the requirement of paragraph 9-5(d) of the GST Act will not be met.

As not all of the requirements of a taxable supply under section 9-5 of the GST Act will be met at the time of sale, the sale will not be a taxable supply.

Consequently, GST will not be payable on the sale of the Land that you have previously inherited from Entity X.