Edited version of private advice

Authorisation Number: 1051652498413

Date of advice: 30 March 2020

Ruling

Subject: Goods and services tax and registration

Question

Is the x required to be registered under section 23-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No.

This ruling applies for the following period: 1 January XXXX to 31 December XXXX

The scheme commences on: 1 January XXXX

Relevant facts and circumstances

You are a partnership of x. The partners are x. The trustee of x is the same entity, x.

You are registered for goods and services tax (GST).

You operate a x.

You acquired the property under a contract dated x. You were the recipient of a supply of a going concern.

You lease the sites to occupants. The occupant owns the home but leases the land on which the home sits from you. The home may be a manufactured home or a moveable dwelling such as a caravan. The occupant pays you site fees (rent) for the right to occupy the site. You have provided us with a copy of the x in respect to your leases.

Your lease of the various sites is a supply of commercial accommodation as defined in section 87-15 of the GST Act. However you have chosen, under section 87-25, not to apply Division 87 to any supplies of commercial accommodation that you make. Your lease of the sites is input-taxed under paragraph 40-35(1)(b) of the GST Act. You made this choice with effect from 1 January 2016.

The owner of the manufactured home may engage you to assist them in selling the same. Therefore, you derive commission income from selling such homes. You provided us with a copy of your x. However, your estimated commission income for this month and the next 11 months is less than $75,000.

You intend to sell the x. You provided us with a copy of the conditional offer from x. You accepted that offer. The sale will settle on x.

You intend to cancel your GST registration prior to the settlement of the sale of your x.

You are not carrying on any other enterprises.

After the settlement of the sale you will no longer carry on any enterprise.

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 subsection 188-10(1)

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

Reasons for decision

In this ruling:

• unless otherwise stated, all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)
• all terms marked by an *asterisk are defined terms in the GST Act
• all reference materials, published by the Australian Taxation Office (ATO), that are referred to are available on ato.gov.au

Requirement to be registered

As you are not registered for GST, we will consider whether you are required to be registered for GST.

Section 23-5 provides that you are required to be registered for GST if:

• you are carrying on an enterprise, and
• your GST turnover meets the GST registration turnover threshold, which is currently $75,000 for entities other than non-profit entities.

You are carrying on a leasing enterprise. In addition, you sell homes for a commission.

However, if your GST turnover does not meet the GST registration turnover threshold then you are not required to be registered. This being the case, you will not satisfy section 23-5.

Next, we will consider whether your GST turnover meets the GST registration turnover threshold.

GST registration turnover threshold

Subsection 188-10(1) provides that you have a GST turnover that meets the registration turnover threshold if:

• your current GST turnover is at or above the registration turnover threshold, and the Commissioner is not satisfied that your projected GST turnover is below the registration turnover threshold, or
• your projected GST turnover is at or above the registration turnover threshold.

The registration turnover threshold applicable to you is $75,000.

It is necessary to determine whether your projected GST turnover meets the threshold. You are required to be registered for GST if your projected GST turnover is at or above $75,000.

Your projected GST turnover is the sum of the values of all supplies made in a particular month plus the next 11 months.

Supplies that are disregarded when working out your projected GST turnover include:

• supplies that are input taxed
• supplies that are not for consideration (and are not taxable supplies under section 72-5 of the GST Act)
• supplies that are not made in connection with an enterprise that you carry on
• supplies that are not connected with Australia

Your lease of the sites is input taxed. Such supplies are disregarded when working out your projected GST turnover.

Furthermore, your estimated commission income from the sale of homes for this month and the next 11 months is less than $75,000.

In addition, section 188-25 provides that when calculating your projected GST turnover, you do not include any supplies made, or likely to be made by you:

• by way of transfer of ownership of a capital asset, or
• solely as a consequence of ceasing an enterprise or substantially and permanently reducing the size or scale of your enterprise.

Capital asset

The meaning of 'capital asset' is discussed in paragraphs 31 to 36 of Goods and Services Tax Ruling GSTR 2001/7 Goods and services tax: meaning of GST turnover, including the effect of section 188-25 on projected GST turnover (GSTR 2001/7).

The GST Act does not define the term "capital asset". However, GSTR 2001/7 explains that generally, the term capital assets refers to those assets that make up the profit yielding subject of an enterprise. They are often referred to as structural assets. They may be described as the business entity, structure or organisation set up or established for the earning of profits.

Capital assets are to be distinguished from revenue assets. A revenue asset is an asset whose realisation is inherent in, or incidental to, the carrying on of a business. If the means by which you derive income is through the disposal of an asset, the asset will be of a revenue nature rather than a capital asset even if such a disposal is an occasional or one-off transaction. Therefore, the character of an asset must be determined at the time of expected supply.

You hold the x in order to lease them to the occupants. You did not acquire the sites in order to derive income from their disposal. The x is therefore a capital asset. It follows then, that the disposal of the x is excluded from the calculation of your projected GST turnover.

You do not carry on any other enterprises. Your projected GST turnover is below $75,000. Your GST turnover does not meet the $75,000 GST registration turnover threshold. Therefore, you are not required to be registered under section 23-5.