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Edited version of private advice
Authorisation Number: 1051577885963
Date of advice: 10 September 2019
Ruling
Subject: GST and the use of valuation to work out margins
Question
1. Does the taxpayer's existing GST registration for an unrelated business activity impact the valuation date of section 75-10, subsection (3), according to item 2 of the table in the 'A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
2. Is the date of the valuation of the property to calculate the margin, as per section 75-10, subsection (3), according to item 2 of the table in the GST Act, the 1st July 2015, when the property became a taxable supply and the taxpayer would have been required to be registered?
3. Is the date of the valuation of the property to calculate the margin, as per section 75-10, subsection (3), according to item 2 of the table in the GST Act, the 1st July 2000, when the taxpayer was registered for GST for an unrelated business activity?
Answer
In this case item 2 of the table in subsection 75-10(3) of the GST Act will not apply. Of relevance is item 1 of the table and valuation of the interest is to be made as from 1 July 2000.
Relevant facts and circumstances
You acquired your principal residence prior to 2000.
The property was and remained your principal residence up until being subdivided recently. The asset was not purchased with any commercial intent. It was a private asset.
You are a sole trader and registered for GST on 1 July 2000 as you had a business.
You recently subdivided the property into numerous lots. One of the lots included your principal residence.
On one of the subdivided lots you built a new residential home for sale.
You will be applying the margin scheme to the sale as you meet the eligibility criteria.
You contend that had you not had a business unrelated to the development, you would not have been required to be registered for GST until the date when the property in question ceased to be your principal residence and had a commercial intent.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999
section 23-5; subsection 75-10(3), section 184-1
Reasons for decision
Relevance of your GST registration
You have been registered for GST as a sole trader since 1 July 2000 for a business of renting.
Section 184-1 of the A New Tax System (Goods and Services Tax) Act 1999,(GST Act) mentions that among other things 'entity' means an individual.
Under Division 23 of the GST Act it is the entitycarrying on the enterprise that is registered or required to be registered for GST purposes and not the enterprise/business. As you have chosen to register for GST, any taxable supplies that you make in all your enterprises will be subject to GST.
Similarly, for the purposes of the Australian Business Number (ABN), for an entity that has to carry on an enterprise to be entitled to an ABN, it is necessary to identify one activity or a series of activities that amount to an enterprise. If an entity carries on a number of activities, only one of those activities need constitute an enterprise in order for the entity to be entitled to an ABN. It is the entity and not the enterprise that is entitled to an ABN (paragraphs 154 and 155 of Miscellaneous Tax Ruling MT 2006/1 - The New Tax System: the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian Business Number).
This means that as a sole trader all supplies made in both businesses are subject to the GST legislation.
In this instance you advised us that you have been registered for GST since 1 July 2000. Therefore, in this case the date of valuation of the interest comes under item 1 of subsection 75-10(3) of the GST Act which provides that the date of valuation is 1 July 2000 when the supplier acquired the interest, unit or lease before 1 July 2000.
Items 2, 3 and 4 of the table in subsection 75-10(3) of the GST Act do not apply.