Edited version of private advice

Authorisation Number: 1052046049330

Date of advice: 14 October 2022

Ruling

Subject: Sale of land

Question

Is GST payable with regard to the contract of sale?

Answer

No

Question

Is GST payable at the time of each deposit made under Special Condition 4?

Answer

No

This ruling applies for the following period:

XX August 20XX to XX August 20XX

The scheme commences on:

XX August 20XX

Relevant facts and circumstances

Since April 19XX, you have operated a business. In the same month you purchased a property and allocated part to your business and part to your private residence.

Historically, you have apportioned property related costs (council rates, etc.) in line with the above allocation.

At one time you were registered for GST however you are not currently registered for GST.

Recently, the land on which the property sits was rezoned. You have entered into a contract with a land developer who will subdivide the land into new vacant land for residences.

After the sale you will cease carrying on your business and retire.

The deposit is to be paid in three tranches.

The deposit is non-refundable except in the event that GST applies to the sale or the Seller is in default of the Contract and the Buyer validly terminates the Contract.

If GST applies to the sale of the Property by the Seller to the Buyer then the Contract shall come to an end and the Buyer and Seller will, in good faith, work to negotiate new Contract terms acceptable to each Party within 30 days. If an agreement cannot be reached, the Seller will refund the Buyer's Deposit.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section 7-1

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

A New Tax System (Goods and Services Tax) Act 1999 Section 9-23

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

A New Tax System (Goods and Services Tax) Act 1999 Section 23-15

A New Tax System (Goods and Services Tax) Act 1999 Section 188-20

A New Tax System (Goods and Services Tax) Act 1999 Section 188-25

A New Tax System (Goods and Services Tax) Regulations 2019 Section 23-15.01

Reasons for decision

Under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), you make a taxable supply if:

(a)  you make the supply for consideration; and

(b)  the supply is made in the course or furtherance of an enterprise that you carry on; and

(c)   the supply is connected with the indirect tax zone; and

(d)  you are registered or required to be registered.

As you're selling your property within Australia, for consideration, paragraphs 9-5(a) and (c) are satisfied.

In short, whether or not you are making a taxable supply will depend on whether the sale of land is made in the course or furtherance of an enterprise that you carry on and, as you are not currently registered, if you are required to be registered for GST.

Subsection 9-20(1) of the GST Act provides that an enterprise is an activity, or a series of activities, most relevantly done:

(a)   in the form of a business...

Per the facts, you began operating a business in April 19XX and have continued to do so since. Your business occupies a portion of the property. As the property was applied in carrying on your enterprise, the sale of the property is made in connection with your enterprise.

Section 23-5 of the GST Act provides that you are required to be registered if:

(a)  you are carrying on an enterprise; and

(b)  your GST turnover meets the registration turnover threshold.

Paragraph 23-15(1)(b) defines the registration turnover threshold, unless you are a non-profit body, to be an amount specified in the A New Tax System (Goods and Services Tax) Regulations 2019 (GST Regulations). This amount is $75,000 as specified by section 23-15.01 of the GST Regulations.

Under subsection 188-10(1) of the GST Act, you have a GST turnover that meets a particular turnover threshold if:

(b)  your projected GST turnover is at or above the turnover threshold.

Subsection 188-20(1) goes on to clarify that your projected GST turnover at a time during a particular month is the sum of the values of all the supplies that you have made, or are likely to make, during that month and the next 11 months, other than:

(a)  supplies that are input taxed; or

(b)  supplies that are not for consideration (and are not taxable supplies under section 72-5); or

(c)   supplies that are not made in connection with an enterprise that you carry on

However, subsection 188-25(a) of the GST Act provides an exception to the above. Any supply made, or likely to be made, by you solely as a consequence of ceasing to carry on an enterprise; or substantially and permanently reducing the size or scale of an enterprise is disregarded in working out your projected GST turnover.

As stated in the facts, you will cease to carry on your enterprise and retire after the sale. This means that when calculating your projected GST turnover, you disregard the supply of land that you're making.

To summarise, you will not be required to be registered as a result of the sale. As you are not registered or required to be registered, you are not making a taxable supply and will not have to pay GST on the sale.