Edited version of private advice

Authorisation Number: 1051583812743

Date of advice: 23 September 2019

Ruling

Subject: GST and carrying on an enterprise

Question

Are you carrying on an enterprise and as a consequence would the sale of your property be subject to the GST at settlement withholding provisions?

Answer

No. You are not carrying on an enterprise and as a result the sale of the property is not subject to the GST at settlement provisions.

This ruling applies for the following period:

Year ending 30 June 2020

Relevant facts and circumstances

·        You owned a residential property which was your primary residence.

·        You purchased the property in December 2016 and due to the presence of asbestos in the property you demolished the house and built a new residential premise. This is the existing property as it now stands.

·        You were the sole owner of the property

·        Due to personal circumstances, you decided to sell the property.

·        You are not registered or required to be registered for GST.

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 section 9-20

Reasons for decision

Under section 9-5 of the GST Act, an entity makes a 'taxable supply' where the supply:

1.     Is made for consideration; and

2.     Is made in the course or furtherance of an enterprise that you carry on; and

3.     Is connected with the indirect tax zone; and

4.     Is made by a supplier who is registered or required to be registered, for GST.

The property sold, consisted of a property which is located in the indirect tax zone and the supply was made for consideration. Therefore, the sale of the property satisfies 2 elements outlined above (1 & 3). Accordingly, we need to determine whether the other 2 elements (2 & 4) would be satisfied and there would be a taxable supply.

Are you carrying on an enterprise?

The term enterprise is defined for GST purposes in section 9-20 of the GST Act and includes, among other things, an activity or series of activities done;

·        In the form of a business (paragraph 9-20(1)(a)) or

·        In the form of an adventure or concern in the nature of trade (paragraph 9-20(1)(b)).

The phase 'carry on' in the context of an enterprise includes doing anything in the course of the commencement or termination of the enterprise.

Miscellaneous Taxation Ruling MT 2006/1 - The New Tax System: the meaning of an entity carrying on an enterprise for the purposes of entitlement to an Australian Business Number (MT 2006/1) provides the Tax Office view on the meaning of 'enterprise' for the purposes of entitlement to an Australian Business Number (ABN).

Good and Services Tax Determination GSTD 2006/6 - Goods and Services Tax: does MT 2006/1 have equal application to the meaning of 'entity' and 'enterprise' for the purposes of the A New Tax System (Goods and Services Tax) Act 1999 provides that the discussion in MT 2006/1 applies equally to the term 'enterprise' as used in the GST Act and can be relied on for GST purposes.

In the form of a business

Paragraphs 170 to 179 of MT 2006/1 discuss factors to consider when determining whether an activity or series of activities are done in the form of a business. Paragraph 178 of MT 2006/1, with reference to Taxation Ruling 97/11 - Income tax: am I carrying on a business of primary production? lists indicators of carrying on a business:

·        A significant commercial activity;

·        A purpose and intention of the taxpayer to engage in commercial activity;

·        An intention to make a profit from the activity;

·        The activity is or will be profitable;

·        The activity is systematic, organised and carried on in a businesslike manner and records are kept;

·        The activities are of a reasonable size and scale;

·        A business plan exists;

·        Commercial sales of product; and

·        The entity has relevant knowledge or skill.

Paragraph 179 of MT 2006/1 states there is no single test to determine whether a business is being carried on. Whilst each case might turn on its own particular facts, the determination of the question is generally the result of a process of weighting all the relevant indicators.

Application to your case

Given the facts of your case, we consider that the activity of selling the property does not constitute an enterprise being run by you as it was the sale of your primary place of residence and the sale is not a taxable supply.

While an activity such as the selling of an asset may in itself amount to an enterprise, account should be taken of the other activities leading up to the sale to determine if an enterprise was being carried on.

Conclusion

Given the above, we do not consider your activity of selling this property constituted an adventure or concern in the nature of trade and as such the sale does not form part of an 'enterprise' for the purposes of GST. Therefore, the sale of the property was a mere realisation of a capital asset and is not a taxable supply for GST purposes.