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Edited version of private advice
Authorisation Number: 1051897796107
Date of advice: 15 September 2021
Ruling
Subject: GST and sale of property
Question
Is the proposed supply of Property 1 and Property 2 by the owners to a purchaser 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 Property 1 and Property 2 by the owners is not a taxable supply as they are not registered or required to be registered for GST. Consequently, the sale is not subject to GST.
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
Individual X acquired Property 1 a number of years ago which consisted of residential premises. This property has been leased since it was aquired.
Individual Y and Individual Z aquired Property 2 a number of years ago which also consisted of residential premises that have been leased since it was acquired.
Property 1 and Property 2 are adjoining properties.
The owners of Property 1 and Property 2 have propsed a subdivision of property which has nearly been approved by Council.
As Property 1 and Property 2 are adjoining properties the Owners are proposing to sell their property/ies as existing residential premises to a purchaser together with the relevant development approvals.
The Owners have not commenced any works or development of Property 1 and/or Property 2, however upon sale of the two properties the Owners will assign the development consent to the purchaser.
The Owners are not registered for GST.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 9-5