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Edited version of private advice
Authorisation Number: 1051868629000
Date of advice: 26 July 2021
Ruling
Subject: GST and sale of residential property
Question
Will the sale of the property be subject to GST?
Answer
No. The sale of the property will not be subject to GST as the sale will not be a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).
The sale will be a sale of a private asset that will not have the characteristics of a business deal; thus, is not an adventure or concern in the nature of trade. Therefore, the sale will not be made in the course of an enterprise that the vendors are carrying on.
The vendors will need to notify the purchaser in writing that they do not have a withholding obligation and they do not need to pay a withholding amount from the contract price of the property to the Australian Taxation Office (ATO) when purchasing the property. This can be included in the sale contract or in a separate document prior to settlement.
This ruling applies for the following period:
1 July 2021 to 30 June 2022
Relevant facts and circumstances
In early 19XX, the vendors purchased a vacant land located in Australia (the property).
The property is xx hectares and is zoned rural (Zone RU1, Primary Production).
The vendors purchased the property to build a residential house and to have a few pets such as horses. They built the house in 19XX.
The property has never been used for farming activities to produce income.
One of the vendors operates a business as a sole trader. The business listed the property's address as its postal address. The vendor performs work at home, but the property would not be classified as a place of business under Taxation Ruling TR 93/30. Clients do not come to the vendor's home and there is no advertising visible from the road that would indicate that a business is being conducted on the property.
The vendors are not registered for GST individually, or together as a partnership.
The vendors did not seek any subdivision approval in respect of the property. The property cannot be subdivided because of the current zoning which has a minimum subdividable area of 80 hectares.
The property is not currently on the market for sale. The vendors would like to sell the property in late 2021 and have started talking to potential real estate agents.
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