| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of private advice
Authorisation Number: 1051634082942
Date of advice: 11 February 2020
Ruling
Subject: GST on sale of property
Question
Is the sale of the property a taxable supply under section 9-5 of A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
No.
Section 9-5 of the GST Act states, you make a taxable supply if:
· You make the supply for consideration; and
· The supply is made in the course or furtherance of an enterprise that you carry on; and
· The supply is connected with the indirect tax zone; and
· You are registered, or required to be registered for GST.
However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.
You have to meet all the requirements of section 9-5 of the GST Act for the sale to be a taxable supply.
You are carrying on an enterprise of farming, the sale of the property is for consideration and the property is in the indirect tax zone. You are not currently registered for GST, so what remains to be determined is whether you are required to be registered for GST.
Sections 23-5 and 23-15 of the GST Act state that you are required to register for GST if you are carrying on an enterprise, and your registration turnover threshold is $75,000. Your current turnover is less than $75,000.
Pursuant to section 188-10 of the GST Act, you have a GST turnover that meets a particular turnover if:
· Your current GST turnover is at or above the turnover threshold, and the Commissioner is not satisfied that your projected GST turnover is below the turnover threshold; or
· Your projected GST turnover is at or above the turnover threshold.
The Commissioner is required to be satisfied that your projected turnover is over the turnover threshold given that your current turnover threshold as advised by you is below the turnover threshold.
The Commissioner states at paragraph 31 of GSTR 2001/7 Goods and services tax: meaning of GST turnover, including the effect of section 188-25 on projected GST turnover that generally the term 'capital assets' refers to those assets that make up 'the profit yielding subject' of an enterprise. As the property in this case is an asset that helps the business to produce profit, it is a capital asset.
In working out your projected turnover, section 188-25 of The GST Act says to disregard any supply made, or likely to be made, from the sale of a capital asset. As established above, capital assets include land. Therefore, the sale of land is disregarded in calculating your projected turnover.
The sale of land takes place when settlement occurs. Your current GST turnover at the time of settlement may be above the turnover threshold. As one cannot predict the sale of capital assets with certainty, the Commissioner is satisfied that your projected GST turnover may remain below the turnover threshold. This is based on the assumption that the turnover from business activities does not meet the $75,000 turn over threshold.
You do not satisfy both limbs of the GST turnover test and as a consequence do not satisfy the fourth limb of section 9-5 of the GST Act as you are not registered and not required to be registered.
This ruling applies for the following period:
11 February 2020 - 30 June 2022
The scheme commences on:
11 February 2022
Relevant facts and circumstances
· You own a property consisting of a residential home and a business portion used as farmland.
· Your business income is under $75,000.
· You are not registered for GST.
· Settlement of the property will take place in 2 years.
· The residential part of the property is currently being leased out.
· The purchaser of the property does not intend to continue farming on the land.
Relevant legislative provisions
Paragraph 31 of GSTR 2001/7 Goods and services tax: meaning of GST turnover, including the effect of section 188-25 on projected GST turnover
Section 23-10 of A New Tax System (Goods and Services Tax) Act 1999
Section 23-15 of A New Tax System (Goods and Services Tax) Act 1999
Section 188-10 of A New Tax System (Goods and Services Tax) Act 1999
Section 188-25 of A New Tax System (Goods and Services Tax) Act 1999
Section 9-5 of A New Tax System (Goods and Services Tax) Act 1999
Section 38-480 of A New Tax System (Goods and Services Tax) Act 1999