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Edited version of private advice
Authorisation Number: 1051889160882
Date of advice: 27 August 2021
Ruling
Subject: GST and supply of property
Question
Is the supply by Entity X of the Property a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
No
Section 9-5 of the GST Act provides that you make a taxable supply if:
• you make the supply for consideration;
• the supply is made in the course or furtherance of an enterprise that you carry on,
• the supply is connected with the indirect tax zone (Australia); 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.
In this case, it is accepted that the sale of the Property is not a taxable supply as you are not registered or required to be registered for GST. As such you do not meet the requirements for making a taxable supply.
Note, Miscellaneous Taxation Ruling MT 2006/1 The New Tax System: the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian Business Number (MT 2006/1) provides the Commissioner' view on the meaning of on an enterprise.
MT 2006/1 provides that assets can change their character from investment, which is capital in nature, to trade and therefore revenue in nature (paragraphs 258 to 260). If the activities on an objective assessment have the characteristics of trade, the person's motive is not relevant (paragraph 254). The characteristics of trade are explained in paragraphs 243 to 261 and include the length of period of ownership and the frequency or number of similar transactions. In particular attention is drawn to paragraph 251 of MT 2006/1 which states:
251. The greater the frequency of similar transactions the greater the likelihood of trade.
Relevant facts and circumstances
Entity X (you) is registered with an Australian Business Number (ABN). You are not currently registered for GST.
You conduct an enterprise of leasing property as well as conducting XXXXX activities on property that you own.
Over XX years ago you acquired a property (the Property). This property consisted of existing residential premises and did not include GST.
Since acquiring the Property, you have leased the residential premises to a tenant till late 20XX after which time you commenced development of the Property into another house.
You demolished the existing residential premises and built another premise (the Premise).
It was your intention to build the Premise so that you could continue to rent and derive an income.
Construction of the Premise was completed recently, however since its completion you decided that you would list the Property for sale as you no longer wanted to proceed with leasing the premises yourself.
The Premises is yet to be occupied.
Upon sale of the Property you will no longer be leasing any premises.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 Section 9-5