Edited version of private advice

Authorisation Number: 1051803186266

Date of advice: 08 February 2021

Ruling

Subject: GST and CGT on sale of property

Goods and services tax

Question 1

Is GST payable on the sale of your principal place of residence?

Answer

No

Question 2

Under the current ownership structure is GST payable on the sale of the farmland?

Answer

No

Income Tax

Question 3

Is CGT payable on the sale of your principle place of residence?

Answer

No

Question 4

Is CGT payable on the sale of your farmland?

Answer

No

This ruling applies for the following periods:

Year ended 30 June 2021

Year ended 30 June 2022

The scheme commences on:

1 July 2020

Relevant facts and circumstances

You purchased the properties before 1985 prior to your marriage.

There is a principle place of residence and farmland which is vacant land.

Subsequent to your marriage, the residential property was placed into the names of you and your spouse.

The residential property is the main place of residence and is not used in the farming enterprise.

The farmland remained in your name only.

You formed a partnership with your spouse to run a primary production business on the farmland. The partnership is registered for GST.

You are not registered for GST.

Your spouse is not registered for GST.

You leased the farmland to the partnership in 19XX for $X per annum. Whilst the leases have lapsed, they are in a holding over period and continue to operate.

The farmland was not supplied as capital contribution by you to the partnership. The farmland is owned by you and not the partnership and will be a private asset separate from partnership assets.

Pursuant to the terms of the Lease, the partnership paid all the expenses for the farmland, including rates, insurance, maintenance cost, etcetera.

You do not intend to supply the farmland as a going concern.

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 9-40

A New Tax System (Goods and Services Tax) Act 1999 section 40-65

A New Tax System (Goods and Services Tax) Act 1999 Division 188

Income Tax Assessment Act 1997 section 104-10(5)

Income Tax Assessment Act 1997 section 108-70(2)

Income Tax Assessment Act 1997 section 108-70(3)

Income Tax Assessment Act 1997 section 118-110

Income Tax Assessment Act 1997 section 118-140

Income Tax Assessment Act 1997 section 118-185

Income Tax Assessment Act 1997 section 118-190

Reasons for decision

Goods and services tax

Question 1

Section 9-40 of the GST Act requires that you pay GST on any taxable supply you make. Section 9-5 of the GST Act defines taxable supplies and excludes an input taxed supply from being a taxable supply. Section 40-65 of the GST Act provides that the sale of real property is input taxed but only to the extent that the property is residential premises to be used predominantly for residential accommodation.

You have told us that the residential property was used as your principal place of residence. The sale of your principal place of residence is input taxed under section 40-65 of the GST Act.

Question 2

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) expresses the Commissioner's view of how to calculate your GST turnover. GSTR 2001/7 distinguishes between a capital asset and a revenue asset and excludes the proceeds from the sale of a capital asset in calculating projected GST turnover.

The sale of the farmland by you is the sale of a capital asset, and therefore will not be taken into account in calculating your projected GST turnover. Therefore, you will not be required to be registered for GST in relation to your sale of the farmland and no GST is payable.

Income Tax

Main Residence

Generally, a capital gain or capital loss from a CGT event that happens to a dwelling that is your main residence (section 118-110 of the ITAA 1997) is not applicable.

In order to obtain a full exemption from CGT, the dwelling must have been your main residence for the entire period you owned it (section 118-110 and 118-185 of the ITAA 1997), must not have been used to produce assessable income (section 118-190 of the ITAA 1997) and any land on which the dwelling is situated should not be more than two hectares.

For this exemption to apply it must be established that a property is your main residence or home. Whether a dwelling is an individual's principle residence depends on the facts of each case. The factors to be taken into account include the length of time the individual lives in the dwelling, the connection of services, mailing address, and whether the individual has moved his personal belongings into the dwelling.

Pre-CGT assets

CGT exceptions under section 104-10(5) of the Income Tax Assessment Act (ITAA 1997) provide that:

A capital gain or capital loss you make is disregarded if:

(a)  You acquired the asset before 20 September 1985;

Application to your circumstances

As the property with the dwelling on it was used as your principal place of residence since your ownership period started a capital gain on the disposal of this property will be disregarded.

The farming property was purchased in 19XX, prior to capital gains tax (CGT), which makes it a pre-CGT asset. Therefore the capital gain from the sale of pre-CGT assets would be discarded under subsection 104-10(5) of the ITAA 1997 in the year it was sold.