Edited version of private advice

Authorisation Number: 1051574498902

Date of advice: 12 September 2019

Ruling

Subject: GST and registration

Question

Are you required to be registered for GST in respect of the Land in your capacity as executor of a deceased estate on the basis that the disposal of the Land by you represents the disposal of a capital asset which can be excluded from the GST registration turnover threshold?

Answer

No. You are not required to be registered for GST in respect of the disposal of the Land in your capacity as executor of a deceased estate on the basis that, your projected GST turnover is below the turnover threshold in your circumstances because the disposal of the Land by you represents the disposal of a capital asset which would be disregarded in working out your projected GST turnover.

Relevant facts and circumstances

·        The Deceased carried out a primary production activity as a sole trader. The Deceased was previously registered for GST with effect from a certain date.

·        The Deceased passed away on a certain date after an illness.

·        Following the date of death, the property of the Deceased then passed to their estate (Deceased Estate).

·        The Deceased's cousins were appointed as the Executors of the Deceased Estate.

·        Probate of the Deceased Estate was granted by the Relevant Supreme Court on a certain date.

·        The GST registration of the Deceased was cancelled by the executors of the Deceased Estate with effect from a certain date.

·        You are in the process of administering the Deceased Estate in accordance with the last will and testament of the Deceased.

·        Included in the assets of the Deceased Estate is the Land.

The Land

·        Based on the last will and testament of the Deceased, you were directed to hold the Land for sale and to distribute the sale proceeds to the specified beneficiaries at the nominated amounts or percentages specified in the will.

·        Title of the Land was transferred to you on a certain date in your capacity as Executors of the Deceased Estate.

·        The Land is approximately X hectares.

·        There are no residential premises situated on the Land. It is vacant land that was used by the Deceased for primary production purposes.

·        You now intend to dispose of the Land in its existing state (i.e. as a whole, un-subdivided lot).

·        You have not undertaken any development or subdivision of the Land.

·        You have not altered or varied the purpose for which the Land was held.

·        You have sought the assistance of an independent third-party real estate agent to sell the Land.

·        Offers have been sought from prospective buyers by way of tender.

·        You have received an offer from a potential purchaser to purchase the Land and commenced contract discussions.

·        Preparation of Contract of Sale of Real Estate is currently underway.

The Deceased's activity on the Land

·        The Deceased carried out a simple primary production enterprise which consisted of running cattle and sheep on the Land with a view to selling either the offspring of the livestock, or their produce (for example, wool). On average, the total head of cattle and sheep on the land would not have exceeded a certain amount at any one time. The Deceased carried out the activities themselves and was therefore limited in what they could achieve on the Land. Their deteriorating health meant that there was minimal maintenance and upkeep of the Land over a prolonged period. As a result, there were significant amounts of general rubbish and scrap metal on the Land at the time of their passing which the executors have had to deal with and remove appropriately.

·        In the years prior to their passing, the Deceased suffered from ill health. As a result of this, the Deceased had been unable to carry on their farming business in any sort of meaningful way for at least X years prior to their passing.

·        The lack of activity in the years leading up to the passing of the Deceased would have resulted in nil activity statements with no GST liability.

·        By the time of the Deceased's passing, you consider that it is arguable that he had not been carrying on any farming business for several years. You consider that whether or not there was any form of enterprise is uncertain. In this regard you provide further information per below.

·        Other than the primary production enterprise, the Deceased has not conducted any other enterprises being conducted by the Deceased in respect of the Land.

The Activity of the Estate

·        On being appointed as Executor, you undertook the necessary activity to dispose of certain livestock and other assets held by the Deceased on their passing, and to deal with any outstanding taxation affairs for the Deceased.

·        In the course of carrying out the activities as Executor and in realising the assets of the Deceased Estate, you registered for GST with effect from a certain date.

·        You have not conducted any other enterprise in respect to the land other than to sell off any residual assets remaining on the Land from the primary production enterprise that had been conducted by the Deceased in previous years.

·        You registered for GST on the basis that the realisation of the assets of the Deceased Estate would exceed the $75,000 GST registration threshold. However, there was never any intention that the Deceased Estate would conduct any enterprise. The executors only acted to dispose of any assets held by the Deceased at their time of death in order to give effect to the wishes of the Deceased under their will and did not regard this as a continuation of the Deceased's activities. In your hindsight, given that the Deceased had ceased operations for some years prior to their death, and was very likely not carrying on an enterprise at the time of their death, you consider it arguable that a GST registration was not required.

·        You have since disposed of all livestock held by the Deceased. The majority of the sales occurred over a certain period, with the remaining livestock sold on a certain date.

·        Other sales conducted by you in realising the remaining assets of the Deceased Estate were sales of scrap metal that were laying on the Land and the sale of wool. You lodged BAS during the course of this activity and remitted GST on these sales. You also claimed input tax credits for any GST paid on costs associated with the sales.

·        Additionally, there was a clearing sale to dispose of any farming equipment and machinery situated on the Land and more recently, you disposed of some hay for approximately $X at a certain date.

·        All activity conducted by you have been to wind up any residual activity and assets that were remaining on the Land after the Deceased passed. Accordingly, to the extent that the Deceased was carrying on an enterprise at the time of their passing, you have only acted in the course of terminating that enterprise.

·        You have not acquired any new assets in carrying out duties under the will.

·        You have since cancelled your GST registration with effect from a certain date. Accordingly, at present, you are not currently registered for GST.

Relevant legislative provisions

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 188-15

A New Tax System (Goods and Services Tax) Act 1999 - section 188-20

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