Edited version of private advice

Authorisation Number: 1052045220146

Date of advice: 19 October 2022

Ruling

Subject: GST - property

Question

Will the sale of the property be a taxable supply in accordance with section 9-5 of the GST Act?

Answer

No, the sale of the property will not be a taxable supply in accordance with section 9-5 of the GST Act.

This ruling applies for the following period:

Financial year ending 30 June 20XX

The scheme commences on:

The date this ruling is issued

Relevant facts and circumstances

•         You purchased a block of land and constructed a residential premises on the site.

•         Your intention was to move into the property as your primary place of residence, however due to unforeseen circumstance you needed to sell the property.

•         The property was sold in XXXX.

•         You do not have an Australian business number (ABN).

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 subsection 9-30(2)

A New Tax System (Goods and Services Tax) Act 1999 section 9-40

A New Tax System (Goods and Services Tax) Act 1999 section 23-5

Reasons for decision

Under section 9-5 of the GST Act, an entity makes a taxable supply where the supply:

1.    is made for consideration; and

2.    is made in the furtherance of an enterprise being carried on; and

3.    in connected with the indirect tax zone; and

4.    is made by a supplier who is 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.

When the property was sold, the supply consisted of a property which was located in an indirect tax zone and the supply was for consideration. Therefore, the sale would satisfy 2 elements outlined above (1&3). Accordingly, we need to determine whether the other 2 elements (2&4) would also be satisfied. If this were the case, the supply would satisfy all requirements of section 9-5 of the GST act and would be a taxable supply.

Are you carrying on a business

The term enterprise is defined for GST purposes in section 9-20 of the GST Act and includes, among other thigs an activity or series of activities done:

•         in the form of a business (paragraph 9-20(1)(a)) or

•         in the form of an adventure or concern in the nature of trade (paragraph 9-20(1)(b)).

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 Tax Office view on the meaning of 'enterprise' as used in the GST Act and can be relied upon for GST purposes.

Goods and Services Tax Determination GSTD 2006/6 Goods and Services Tax: MT 2006/1 have equal application to the meaning of 'entity' and 'enterprise' for the purposes of the A New Tax System (Goods and Services Tax) Act 1999, provides that the discussion in MT 2006/1 applies equally to the term 'enterprise' as used in the GST Act and can be relied on the GST purposes.

In the form of a business

Paragraphs 170 to 179 of MT 2006/1 discuss factors to consider when determining whether an activity or series of activities are done in the form of a business. Paragraph 178 of MT 2006/1, with reference to Taxation Ruling 97/11 Income tax: am I carrying on a business of primary production lists indicators of carrying on a business:

•         a significant commercial activity;

•         an intention of the taxpayer to engage in commercial activity;

•         an intention to make a profit from the activity;

•         the activity will be profitable;

•         the recurrent or regular nature of the activity;

•         the activity is systematic, organised and carried on in a business-like manner and records kept;

•         the activities are of a reasonable size and scale;

•         a business of product; and

•         the entity has relevant knowledge or skill.

Paragraph 179 of MT 2006/1 states that there is no single test to determine whether a business is being carried on. Whilst each case might turn on its own particular facts, the determination of the question is generally the result of a process of weighing all the relevant indicators.

Application in this case:

Given the facts of this case. We consider that the sale of the property by you does not display the characteristics of a 'business' as listed above.

As the transaction may be described as one-off, we also need to consider the extended definition of 'enterprise' and whether these activities fall in the form of an adventure or concern in the nature of trade. MT 2006/1 provides guidance on the meaning of this expression.

An 'adventure or concern in the nature of trade' refers to transactions that have a commercial nature which are entered into for a profit-making purpose.

Paragraph 245 of MT 2006/1 refers to 'the badges of trade' while paragraphs 247 to 257 consider the six badges of trade being:

•         The subject matter of realisation

•         The length of period of ownership

•         The frequency or number of similar transactions

•         Supplementary work on or in connection with the property realised

•         The circumstances that were responsible for the realisation; and

•         Motive.

The subject matter of realisation

You acquired the land and constructed a residential property that was intended to be your primary place of residence.

The length of time pf ownership

You have owned the property for a short time.

The frequency and number of similar transactions

You have not previously undertaken a development or sale of this nature.

Supplementary work on or in connection with the property realised

Other than to engage the builder to construct the residence, there has been no other activities on this property other than to list it for sale.

The circumstances that were responsible for the realisation

The circumstances behind the decision to sell does not indicate it to be commercial in nature.

Motive

Although a profit may result from the sale of the property your initial intentions in relation to the property does not show that your intention in relation to this property was a profit making one.

Given the above, we do not consider your activity of selling the property to constitute an adventure or concern in the nature of trade and, as such, you are not carrying on an 'enterprise' for the purposes of GST in relation to the sale of this property.

Therefore, the sale of the property would not be a taxable supply in accordance with section 9-5 of the GST Act.

GST registration

Section 23-5 of the GST Act provides that you are required to be registered for GST if you carry on an enterprise and your GST turnover meets the registration turnover threshold (currently $75,000).

As detailed above, it is considered that the sale of the property would not be a taxable supply and the activity of selling the property would not constitute an enterprise for GST purposes. As such you are not required to be registered for GST.

Conclusion

Your activity of selling the property, will not be done in the furtherance of an enterprise. You are not required to be registered for GST. As such you will not be liable for GST on the sales in accordance with section 9-40 of the GST Act.