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Edited version of private advice
Authorisation Number: 1051514078891
Date of advice: 22 May 2019
Ruling
Subject: Sale of property
Question 1
Are you required to be registered for GST as a consequence of the sale of the property?
Answer
No, you are not required to be registered for GST as a consequence of the sale of the property.
Question 2
Is the sale of the property subject to GST?
Answer
No, the sale of the property is not subject to GST.
Relevant facts and circumstances
You are the owner of a property.
You have entered into a contract of sale to sell the property.
You have been renting the property to a third party on which you paid GST for a number of years.
After the third party vacated the property, you provided your property to an associate that is registered for GST for no consideration.
Costs of holding property such as rates and land tax were paid by the associate. The total of these costs was less than $75,000
Relevant legislative provisions
Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999
Division 25 of the A New Tax System (Goods and Services Tax) Act 1999
Subdivision 72-5 of the A New Tax System (Goods and Services Tax) Act 1999
Reasons for decision
Question 1
An entity is required to be registered for GST where it's GST turnover meets the registration turnover threshold of $75,000 or more.
You were not registered nor required to be registered for GST as your turnover from leasing the property did not meet the registration turnover threshold. It was required to determine whether sub-division 72-A of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) (which is about associates) applied to this case and thus it was necessary for you to consider the market rate of the property when calculating your GST turnover. As the associate was registered for GST sub-division 72 A does not apply.
Accordingly, the question is whether the sale proceeds from the sale of the property made you required to be registered for GST.
The property is a capital asset of the leasing enterprise that you have been carrying on. Pursuant to section 118-25 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) sale proceeds of capital assets are disregarded from the calculation of an entity's projected turnover. Accordingly, you are not required to take into account the sale proceeds of the sale of the property. Consequently, given your GST turnover remains below the registration turnover threshold of $75,000, you are not required to be registered for GST.
Question 2
A supply is subject to GST if it is a taxable supply. A taxable supply is defined in section 9-5 of the GST Act as follows:
(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
(terms marked with asterisks (*) are defined in section 195-1 of the GST Act)
One of the requirements of section 9-5 of the GST Act is that the entity making the supply is registered or required to be registered for GST at the time of making the supply. Given that we have established in Question 1 that you are not required to be registered for GST (and you are not registered for GST at the time of sale of the property), the sale of is not a taxable supply and therefore is not subject to GST.