Edited version of private advice

Authorisation Number: 1052174780062

Date of advice: 8 December 2023

Ruling

Subject: GST - the sale of property

Question 1(a)

The Contract of Sale is not on the Revised Terms.

If the Contract of Sale is not on the Revised Terms, are The Executor and Individual A a partnership as defined in section 195-1 and will the supply of Lot XX by The Executor and Individual A by way of sale result in the formation of a partnership for GST purposes?

Answer

No, The Executor and Individual A are not a partnership as they do not satisfy the definition of a partnership for GST purposes under section 195-1 by reference to the meaning given in subsection 995-1(1)of theIncome Tax Assessment Act 1997 (ITAA 1997).

Regarding the sale of Lot XX, The Executor and Individual A will each be making a supply of their respective interests in Lot to the purchaser. These supplies will also not result in the formation of a partnership entity.

Question 1(b)

If the Contract of Sale is not on the Revised Terms, and the answer to question 1(a) is "Yes", are The Executor and Individual A (as a partnership) carrying on an enterprise under section 9-20?

Answer

Not necessary to answer.

Question 1(c)

If the Contract of Sale is not on the Revised Terms, and the answer to question 1(b) is "Yes, are The Executor and Individual A (as a partnership) required to be registered for GST under section 23-5?

Answer

Not necessary to answer.

Question 1(d)

If the Contract of Sale is not on the Revised Terms, is the supply of Lot XX by The Executor and Individual A (as a partnership) by way of sale, a taxable supply under section 9-5 and subject to GST?

Answer

No. As determined in question 1(a) there is no partnership between The Executor and Individual A therefore there is no taxable supply under section 9-5.

Question 1(e)

The Contract of Sale is on the Revised Terms.

If the Contract of Sale is on the Revised Terms, are The Executor and Individual A a partnership as defined in section 195-1 and will the supply of Lot XX by The Executor and Individual A by way of sale result in the formation of a partnership for GST purposes?

Answer

No, The Executor and Individual A are not a partnership as they do not satisfy the definition of a partnership for GST purposes under section 195-1 by reference to the meaning given in subsection 995-1(1)of the (ITAA 1997).

Regarding the sale of Lot XX, under the revised terms The Executor and Individual A will each be making a supply of their respective interests in Lot XX to the purchaser. These supplies will also not result in the formation of a partnership entity.

Question1(f)

If the Contract of Sale is on the Revised Terms, and the answer to question 1(e) is "Yes", are The Executor and Individual A (as a partnership) carrying on an enterprise under section 9-20?

Answer

Not necessary to answer.

Question 1(g)

If the Contract of Sale is on the Revised Terms, and the answer to question 1(f) is "Yes", are The Executor and Individual A (as a partnership) required to be registered for GST under section 23-5?

Answer

Not necessary to answer.

Question 1(h)

If the Contract of Sale is on the Revised Terms, is the supply of Lot XX by The Executor and Individual A (as a partnership) by way of sale a taxable supply under section 9-5 and subject to GST?

Answer

No. As determined in question 1(e) there is no partnership between The Executor and Individual A therefore there is no taxable supply under section 9-5.

Question 2(a)

The Contract of Sale is not on the Revised Terms.

If the Contract of Sale is not on the Revised Terms, are The Executor and The Trust (as a partnership) carrying on an enterprise under section 9-20?

Answer

No. The Executor and The Trust are 'in receipt of income jointly' in respect of the rental proceeds generated from the lease of the residential premises on Lot YY to a third party. As such, the parties are a tax law partnership as defined and an entity for GST purposes.

However, in this case the Commissioner does not consider the leasing enterprise to be carried on by the partnership entity.

The Commissioner considers the leasing enterprise is carried on by The Executor and the Trust each in their own right as a co-owner in respect of their respective interests in the property.

Question 2(b)

If the Contract of Sale is not on the Revised Terms, and the answer to question 2(a) is "Yes", are The Executor and The Trust (as a partnership) required to be registered for GST under section 23-5?

Answer

Not necessary to answer.

Question 2(c)

If the Contract of Sale is not on the Revised Terms, is the supply of Lot MM, Lot YY, Lot 301, and Lot 804 by the The Executor and The Trust (as a partnership) by way of sale a taxable supply under section 9-5 and subject to GST?

Answer

No. The Commissioner considers the leasing enterprise is carried on by The Executor and The Trust each in their own right as a co-owner in respect of their respective interests in the property.

Question 2(d)

The Contract of Sale is on the Revised Terms.

If the Contract of Sale is on the Revised Terms, are The Executor and The Trust (as a partnership) carrying on an enterprise under section 9-20?

Answer

No. The Executor and The Trust are 'in receipt of income jointly' in respect of the rental proceeds generated from the lease of the residential premises on Lot YY to a third party. As such, the parties are a tax law partnership as defined and an entity for GST purposes.

However, in this case the Commissioner does not consider the leasing enterprise to be carried on by the partnership entity.

The Commissioner considers the leasing enterprise is carried on by The Executor and The Trust each in their own right as a co-owner in respect of their respective interests in the property.

Question 2(e)

If the Contract of Sale is on the Revised Terms and the answer to question 2(d) is "Yes", are The Executor and The Trust (as a partnership) required to be registered for GST under section 23-5?

Answer

Not necessary to answer.

Question 2(f)

If the Contract of Sale is on the Revised Terms, is the supply of Lot MM, Lot YY, Lot KK, and Lot PP by The Executor and The Trust (as a partnership) by way of sale a taxable supply under section 9-5 and subject to GST?

Answer

No. The Commissioner considers the leasing enterprise is carried on by The Executor and The Trust each in their own right as a co-owner in respect of their respective interests in the property.

Question 3(a)

The Contract of Sale is not on the Revised Terms.

If the Contract of Sale is not on the Revised Terms, is The Executor carrying on an enterprise under section 9-20?

Answer

Yes, The Executor is carrying on the enterprises of licencing or granting permission of the use of its interest in the Land to The Trust and as discussed above, leasing residential premises to a third party. These activities fall within the scope of paragraph 9-20(1)(c) and amount to an enterprise for GST purposes.

Question 3(b)

If the Contract of Sale is not on the Revised Terms, and the answer to question 3(a) is "Yes", is The Executor required to be registered for GST under section 23-5?

Answer

No, under section 23-5 the Executor is not required to be registered for GST in relation to a sale of its interest in the Land.

Whilst The Executor is carrying on an enterprise, The Executor's turnover does not meet the GST registration turnover threshold.

Turnover generated from the lease on the residential premises are excluded from current and projected turnover calculations (paragraph 188-15(1)(a) and paragraph 188-20(1)(a) respectively).

In addition, the Commissioner considers the sale of The Executor's interests in the various Lots to be a transfer of a capital asset. Pursuant to paragraphs 188-25(a) and 188-25(b) the proceeds from the sale will be disregarded in working out its projected GST turnover and accordingly the projected turnover will not meet the GST registration turnover threshold.

This is provided that The Executor does carry on any other enterprise or enterprises with GST turnover that meets the GST registration turnover threshold of $75,000.

Question 3(c)

If the Contract of Sale is not on the Revised Terms, is the supply by The Executor of its interest in Lot MM, Lot YY, Lot XX, Lot KK, and Lot PP by way of sale a taxable supply under section 9-5 and subject to GST?

Answer

No, the supply by The Executor of its interest in the relevant lots by way of sale will not be a taxable supply as defined under section 9-5 and GST will not be payable on the sale.

This is because The Executor is not required to be registered for GST as determined in question (3)(b).

In addition, the sale of Lot YY will be input taxed under section 40-65 to the extent the supply of The Executor s interest in Lot YY is residential premises to be used predominantly for residential accommodation.

Question 3(d)

The Contract of Sale is on the Revised Terms.

If the Contract of Sale is on the Revised Terms, is The Executor carrying on an enterprise under section 9-20?

Answer

Yes, The Executor is carrying on the enterprises of licencing or granting permission of the use of its interest in the Land to the Trust and as discussed above, leasing residential premises to a third party. These activities fall within the scope of paragraph 9-20(1)(c) and amount to an enterprise for GST purposes.

Question 3(e)

If the Contract of Sale is on the Revised Terms, and the answer to question 3(d) is "Yes", is The Executor required to be registered for GST under section 23-5?

Answer

No, the supply by The Executor of its interest in the relevant lots by way of sale will not be a taxable supply as defined under section 9-5 and GST will not be payable on the sale.

This is because The Executor is not required to be registered for GST.

Whilst The Executor is carrying on an enterprise, The Executor's turnover does not meet the GST registration turnover threshold.

In addition, the Commissioner considers the sale of The Executor's interests in the various Lots to be a transfer of a capital asset. Pursuant to paragraph 188-25(a) the proceeds from the sale will be disregarded in working out its projected GST turnover and accordingly the projected turnover will not meet the GST registration turnover threshold.

This is provided that The Executor does carry on any other enterprise or enterprises with GST turnover that meets the GST registration turnover threshold of $75,000.

Question 3(f)

If the Contract of Sale is on the Revised Terms, is the supply by The Executor of its interest in Lot MM, Lot YY, Lot XX, Lot KK, and Lot PP by way of sale a taxable supply under section 9-5 and subject to GST?

Answer

No, the supply by The Executor of its interest in the relevant lots by way of sale will not be a taxable supply as defined under section 9-5 and GST will not be payable on the sale.

This is because The Executor is not required to be registered for GST as determined under question (3)(e).

In addition, the sale of Lot YY will be input taxed under section 40-65 to the extent the supply of The Executor's interest in Lot YY is residential premises to be used predominantly for residential accommodation.

Question 4(a)

The Contract of Sale is not on the Revised Terms.

If the Contract of Sale is not on the Revised Terms, is Individual A carrying on an enterprise under section 9-20?

Answer

Yes, Individual A is carrying on the enterprise of licencing or granting permission of the use of its interest in Lot XX to The Trust. This activity falls within the scope of paragraph 9-20(1)(c) and amounts to an enterprise for GST purposes.

Question 4(b)

If the Contract of Sale is not on the Revised Terms, and the answer to question 4(a) is "Yes", is Individual A required to be registered for GST under section 23-5?

Answer

No. Whilst Individual A is carrying on an enterprise, Individual A's turnover does not meet the GST registration turnover threshold.

The Commissioner considers the sale of Individual A's interests in Lot XX to be a transfer of a capital asset. Pursuant to paragraph 188-25(a) the proceeds from the sale will be disregarded in working out Individual A's projected GST turnover and accordingly the projected turnover will not meet the GST registration turnover threshold.

This is provided that Individual A does not carry on any other enterprise or enterprises with GST turnover that meets the GST registration turnover threshold of $75,000.

Question 4(c)

If the Contract of Sale is not on the Revised Terms, is the supply by Individual A of his interest in Lot XX by way of sale a taxable supply under section 9-5 and subject to GST?

Answer

No, the supply by Individual A of its interest in Lot XX by way of sale will not be a taxable supply under section 9-5 and GST will not be payable on the sale. This is because Individual A is not required to be registered for GST under section 23-5 as determined in question 4(b).

Question 4(d)

The Contract of Sale is on the Revised Terms.

If the Contract of Sale is on the Revised Terms, is Individual A carrying on an enterprise under section 9-20?

Answer

Yes, Individual A is carrying on the enterprise of licencing or granting permission of the use of its interest in Lot XX to The Trust. This activity falls within the scope of paragraph 9-20(1)(c) and amounts to an enterprise for GST purposes.

Question 4(e)

If the Contract of Sale is on the Revised Terms, and the answer to question 4(d) is "Yes", is Individual A required to be registered for GST under section 23-5?

Answer

No. Whilst Individual A is carrying on an enterprise, Individual A's turnover does not meet the GST registration turnover threshold.

The Commissioner considers the sale of Individual A's interests in Lot XX to be a transfer of a capital asset. Pursuant to paragraph 188-25(a) the proceeds from the sale will be disregarded in working out Individual A's projected GST turnover and accordingly the projected turnover will not meet the GST registration turnover threshold.

This is provided that Individual A does not carry on any other enterprise or enterprises with GST turnover that meets the GST registration turnover threshold of $75,000.

Question 4(f)

If the Contract of Sale is on the Revised Terms, is the supply by Individual A of his interest in Lot XX by way of sale a taxable supply under section 9-5 and subject to GST?

Answer

No. Whilst Individual A is carrying on an enterprise, Individual A's turnover does not meet the GST registration turnover threshold.

The Commissioner considers the sale of Individual A's interests in Lot XX to be a transfer of a capital asset. Pursuant to paragraph 188-25(a) the proceeds from the sale will be disregarded in working out Individual A's projected GST turnover and accordingly the projected turnover will not meet the GST registration turnover threshold.

This is provided that Individual A does not carry on any other enterprise or enterprises with GST turnover that meets the GST registration turnover threshold of $75,000.

Question 5(a)

The Contract of Sale is not on the Revised Terms.

If the Contract of Sale is not on the Revised Terms, is the supply by the Trust of its interest in Lot MM, Lot YY, Lot KK, and Lot PP by way of sale a taxable supply under section 9-5 and subject to GST?

Answer

Yes. The supply by the Trust of its share of interests in Lot MM, Lot YY, Lot KK, and Lot PP by way of sale is a taxable supply under section 9-5 and GST is payable on the sale, to the exclusion of the extent the supply of the Trust's interest in Lot YY is residential premises to be used predominantly for residential accommodation.

The extent to which The Trust's supply of its interest in Lot YY is residential premises to be used predominantly for residential accommodation is considered an input taxed supply pursuant to section 40-65.

Question 5(b)

The Contract of Sale is on the Revised Terms.

If the Contract of Sale is on the Revised Terms, is the supply by The Trust of its interest in Lot MM, Lot YY, Lot KK, and Lot PP by way of sale a taxable supply under section 9-5 and subject to GST?

Answer

Yes. The supply by The Trust of its share of interests in Lot MM, Lot YY, Lot KK, and Lot PP by way of sale is a taxable supply under section 9-5 and GST is payable on the sale, to the exclusion of the extent the supply of The Trust's interest in Lot YY is residential premises to be used predominantly for residential accommodation.

The extent to which The Trust's supply of its interest in Lot YY2 is residential premises to be used predominantly for residential accommodation is considered an input taxed supply pursuant to section 40-65.

This ruling applies for the following period:

Relevant facts and circumstances

Details relating to the Owners

The Executor and The Trust (Jointly) are not registered for GST. Similarly, the Executor and Individual A (Jointly) are not registered for GST.

The Executor and Individual A (separately) are also not registered for GST.

Land means Lot MM Lot YY, Lot XX, Lot KK, and Lot PP collectively

Table 1 Ownership of Land

The Land has, throughout its ownership history, been used wholly and exclusively for the purpose of running a primary production business. The reference to the Land being used for the purposes of a primary production business is exclusive of that part of Lot YY which contains a residence. The primary production business involves sheep and cattle farming and is currently operated by The Trust.

In respect of any sale of the Land:

Lot YYcontains a house which has been periodically leased out by the The Executor and The Trust for several years.

The Trust and the other owners have not bought or sold any other land following the execution of an earlier Deed. The earlier Deed allowed for the Sale of the Land and payment in instalments. The purchaser was unable to meet their contractual obligations and the Land was returned to the owners in the same ownership proportions as the Land had been held prior to the sale of the Land under the Contract of Sale.

The Land will continue to be used by the The Trust to operate the primary production business until the Land is sold.

To date, no works have been undertaken to prepare the Land for an englobo sale or for subdivision. The personal involvement of the Owners to date has been minimal.

Save as outlined above if the Revised Terms apply, the Owners will not, undertake any development on the Land.

The Owners did not, market the Land for sale directly and engaged a third party to act as their agent. The agent was responsible for requesting expressions of interest, approaching suitable purchasers, assessing offers, and assisting with selecting the potential purchaser of the Land.

The Owners do not have any, intention to undertake any property development or subdivision in respect of the Land.

Contract of Sale

There is a Contract of Sale that evidences terms for the sale as well as revised terms that apply should certain conditions be satisfied.

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

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

A New Tax System (Goods and Services Tax) Act 1999 section 40-65

A New Tax System (Goods and Services Tax) Act 1999 section 40-75

A New Tax System (Goods and Services Tax) Act 1999 section 188-15

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) Act 1999 section 195-1

Income Tax Assessment Act 1997 section 995-1

Reasons for decision

Question 1- The Executor and Individual A

Detailed reasoning

A partnership is defined in section 195-1 of the GST Act by reference to the definition of 'partnership' in subsection 995-1(1) of the ITAA 1997. That definition states:

partnership means:

(a) an association of persons (other than a company or a limited partnership) carrying on business as partners or in receipt of ordinary income or statutory income jointly; or

(b) a limited partnership.

The first limb of paragraph (a) of the definition of partnership refers to 'an association of persons (other than a company or limited partnership) carrying on business as partners'.

This reflects the general law definition of a partnership, which is 'the relation which subsists between persons carrying on a business in common with a view of profit'. This type of partnership is referred to as a general law partnership.

The second limb of paragraph (a) of the definition of partnership includes as a partnership an association of persons (other than a company or limited partnership) 'in receipt of ordinary income or statutory income jointly'.

This type of partnership is referred to as a tax law partnership.

Goods and Services Tax Ruling GSTR 2003/13 Goods and services tax: general law partnerships (GSTR 2003/13) explains that a general law partnership is formed when persons commence carrying on business together with a view of profit under an agreement, either written or oral. The 'relation' or the 'association' is one that arises under an agreement.

Goods and Services Tax Ruling GSTR 2004/6 Goods and services tax: tax law partnerships and co-owners of property (GSTR 2004/6) explains that in a GST context, the concept of 'receipt of ordinary income or statutory income jointly' is central to the existence of a tax law partnership.

In this case,

•    The Executor and Individual A each owns 50% interest in Lot XX.

•    There is no partnership agreement, co-ownership agreement or any other form of relevant agreement between the Executor and Individual A in respect of the lot.

•    The Executor and Individual A permit (grant a licence to) The Trust to operate a primary production business on Lot XX by way of an informal and oral arrangement. There is no written agreement and no fee payable by The trust to The Executor and Individual A.

•    In relation to the outgoings of Lot XX, The Executor pays two-thirds and The trust pays one-third.

In accordance with GSTR 2004/6, a tax law partnership will exist in the following circumstances:

•    Association of Persons: There must be an association of persons, which in accordance with paragraph 20 of GSTR 2004/6, requires that there be some link, connection or existence of a mutual or common purpose between persons.

•    Receipt of Income: The association of persons must be in receipt of income jointly. At paragraph 26 of GSTR 2004/6, the Commissioner states that this includes not only the actual receipt of income but also the steps leading to the right or entitlement to that income.

The Executor and Individual A permit The Trust to carry on a primary production business on Lot XX, This is done on an informal and oral agreement. There is no fee payable by The Trust to The Executor and Individual A. Based on the facts provided we do not consider that the Executor and Individual A carry on a business in common with a view to profit and are not receiving income jointly. Accordingly, we do not consider that The Executor and Individual A are carrying on a partnership for GST purposes.

The Contract of Sale is on the Revised Terms.

We do not consider that where the Sales Contract is on the Revised Terms it changes the reasoning that has been provided above.

Question 2 The Executor - and The Trust

Detailed reasoning

For these questions, it is relevant to firstly consider whether The Executor and The trust are a partnership for GST purposes and if so, whether the partnership is the entity carrying on an enterprise.

The relevant legislative provisions on the definition of a partnership and the Commissioner's view of when a partnership exists are provided under question one above.

The Executor and The Trust are the co-owners of Lot MM, Lot YY, Lot KK, and Lot PP with their ownership interests in each of these four lots being two thirds and one third respectively.

Other than a part of Lot YY, The Executor permits The Trust to operate a primary production business on the land via an informal and oral arrangement. There is no written agreement and no fee payable by The Trust to The Executor. Outgoings of the Land are paid by The Executor and The Trust on two thirds and one third basis respectively.

The part of Lot YY not used by The Trust for its farming business has an existing house on the land. The house is a basic residence currently leased by The Executor and The Trust to a third-party lessee under an informal oral lease arrangement.

Based on the above facts, we consider the following:

Lot YY

In relation to the lease of the residential premises on Lot YY, The Executor and The Trust are receiving rental income jointly. Accordingly, the definition of a tax law partnership under section 195-1 is satisfied and The Executor and The Trust are a partnership entity for GST purposes.

GSTR 2004/6 explains that the fact that a tax law partnership exists does not necessarily mean that in every case it is the partnership that carries on an enterprise. In some cases, an objective evaluation of all the facts and circumstances may lead to a conclusion that an enterprise is carried on by each co-owner and not by a tax law partnership or vice versa. The ruling provides guidelines on the circumstances in which a tax law partnership does or does not carry on an enterprise.

GSTR 2004/6 further explains that while the factors discussed in the ruling are relevant, they are not exhaustive and that neither the existence nor the absence of any one factor is conclusive one way or the other. It is the overall weight of evidence that is important, and the individual weighting of each factor will depend on the circumstances of each case.

In this case, in examining the factors relating to the situation of the partnership of The Executor and The Trust we note the history of how The Executor and The Trust came to co-own the relevant land lots and other factors.

In analysing all the relevant factors including the above, we conclude that overall, the leasing enterprise of the residential premises on Lot YY is carried on by The Executor and The Trust in their capacity as co-owners in their own right and not by their partnership entity.

Lot MM, Lot KK, and Lot PP

The licence or permission for The Trust to use Lot MM, Lot KK and Lot PP was granted via an informal and oral arrangement. There is no written agreement and no fee payable by The Trust to the owners. Outgoings of these lots are paid by The Executor and The Trust on a two-thirds and one-third basis, respectively. Under the circumstances, we consider The Executor and The Trust are neither carrying on a business with a view of profit nor receiving any income jointly. Accordingly, the definition of a partnership under section 195-1 is not satisfied, and The Executor and The Trust are not a partnership entity for GST purposes.

The Contract of Sale is on the Revised Terms.

We do not consider that where the Sales Contract is on the Revised Terms it changes the reasoning that has been provided above.

Question 3 - Executor

Detailed reasoning

Paragraph 9-20(1)(c) provides that an enterprise is an activity or series of activities, done on a regular or continuous basis, in the form of a lease, licence or other grant of an interest in property.

The facts of this case include:

•     The Executor permits (grants licence to) The Trust to operate a primary production business on Lot MM, Lot YY, Lot XX, Lot KK, and Lot PP by way of an informal and oral arrangement.

•     The Executor and The Trust are leasing the dwelling on a part of Lot YY to an unrelated third party.

The Executor is carrying on the enterprises of licencing the use of its land to The Trust and leasing the residential premises to a third party as these activities satisfy the requirements of paragraph 9-20(1)(c).

Is The Executor required to be registered for GST under section 23-5?

Section 23-5 states that an entity is required to be registered for GST under the GST Act if:

(a)  the entity is carrying on an enterprise, and

(b)  the entity's GST turnover meets the GST registration turnover threshold (in this case the threshold is $75,000)

As established under question 3(a), The Executor is carrying on the licencing and leasing enterprises. Accordingly, paragraph 23-5(a) is met. It is therefore relevant to consider paragraph 23-5(b) in relation to its GST registration turnover threshold.

Section 188-10 is relevant for working out whether an entity's GST turnover meets, or does not exceed, a turnover threshold. Under subsection 188-10(1) an entity's GST turnover meets a particular turnover threshold when:

(a)     the entity's current GST turnover is at or above the turnover threshold, and the Commissioner is not satisfied that the entity's projected GST turnover is below the turnover threshold; or

(b)     the entity's projected GST turnover is at or above the turnover threshold.

Section 188-15 defines 'current GST turnover' and that subject to certain exclusions the current GST turnover at any time during a particular month is the sum of the values of all the supplies that an entity made, or are likely to make, during the current month and the preceding 11 months.

Section 188-20 defines 'projected GST turnover' and subject to certain exclusions the projected GST turnover at a time during a particular month is the sum of the values of all the supplies that an entity made, or are likely to make, during that month and the next 11 months.

For both the current and projected GST turnover, the exclusions include supplies that are input taxed. Accordingly, it is relevant to consider the supplies made by The Executor.

The provision of subsection 40-35(1) includes that a supply of premises by way of lease is input taxed if the supply is of residential premises, where the premises are to be used predominantly for residential accommodation.

Based on the facts, we consider the lease of the residential premises is an input taxed supply under section 40-35 and the rental will be excluded from the calculation of the current GST turnover.

It is relevant to also consider the projected GST turnover of The Executor.

Guidelines on GST turnover are also available on Goods and Services Tax Ruling GSTR 2001/7 Goods and services tax: meaning of GST turnover, including the effect of section 188-25 on projected GST turnover. GSTR 2001/7 includes the following guidelines:

Supplies to be disregarded under section 188-25

29. Section 188-25 modifies the effect of section 188-20 by excluding certain supplies made when working out your projected GST turnover. Section 188-25 requires you to disregard the following when calculating your projected GST turnover:

•        any supply made, or likely to be made, by you by way of transfer of ownership of a capital asset of yours; and

•        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.

30. Your projected GST turnover does not include supplies that fall within the description in either paragraph 188-25(a) or paragraph 188-25(b) listed above. Your supply does not have to satisfy the descriptions in both paragraph (a) and paragraph (b). When you make a supply that is capable of satisfying the description in both paragraphs, the supply is excluded only once...

In a legislative context, the first dot point of paragraph 29 above refers to paragraph 188-25(a) and the second point refers to paragraph 188-25(b).

Paragraphs 31 to 36 of GSTR 2001/7 further explain on the meaning of what is a 'capital asset' as the term is referred to in the first dot point of paragraph 29 above.

The facts of this case include:

•       The Land has, throughout its ownership history, been used wholly and exclusively for the purpose of running a primary production business, excluding that part of Lot YY which contains the house.

•       The house has been periodically leased out by the The Executor and The Trust for several years and is currently leased to a third-party lessee.

•       The Owners will not, undertake any development on the Land and will not subdivide the Land before any sale.The Owners do not have any, intention to undertake any property development in respect of the Land.

Based on the above facts we consider the sale of the Land will be the sale of a capital asset and not a trading asset. Accordingly, the sale proceeds of the land will not be included in working out the projected GST turnover. Accordingly, in relation to The Executor's interest in the Land, the sale proceeds will be excluded from its projected GST turnover calculations. This would mean, The Executor's GST registration turnover threshold would not be met, and The Executor would not be required to be registered for GST in relation to the sale of its interest in the Land.

This is provided that prior to the sale The Executor does not carry on any other enterprise or enterprises with a GST turnover that meets the GST registration turnover threshold of $75,000.

Is the supply by The Executor of its interest in Lot MM, Lot YY, Lot XX, Lot KK, and Lot PP by way of sale a taxable supply under section 9-5 and subject to GST?

Section 9-40 provides that an entity must pay the GST payable on any *taxable supply that the entity makes, and section 9-5 states that an entity makes a *taxable supplyif:

(a) the entity makes the *supply for *consideration; and

(b) the *supply is made in the course or furtherance of an *enterprise that the entity carries on; and

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

(d) the entity 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.

Please note a defined term is marked with an asterisk.

As determined in question 3(b), The Executor is not required to be registered for GST in relation to the sale of its interest in the Land. Accordingly, the requirement in paragraph 9-5(d) will not be satisfied and the supply by The Executor of its interest in Lot MM, Lot YY, Lot XX, Lot KK, and Lot PP by way of sale would not be a taxable supply under section 9-5 and GST would not be payable on the sale.

This is provided The Executor does not voluntarily register for GST or carry on any other enterprise or enterprises with a GST turnover that meets the GST registration turnover threshold, in this case being $75,000, on or before the sale.

Additionally, The Executor is making an input taxed supply in relation to a part of Lot YY - section 40-65 satisfied

Section 40-65 provides that:

(1) A sale of *real property is *input taxed, but only to the extent that the property is *residential premises to be used predominantly for residential accommodation (regardless of the term of occupation).

(2) However, the sale is not *input taxed to the extent that the *residential premises are:

(a) *commercial residential premises; or

(b) *new residential premises other than those used for residential accommodation (regardless of the term of occupation) before 2 December 1998.

The meaning of 'residential premises' includes land or a building that is occupied as a residence or for residential accommodation; or is intended to be occupied, and is capable of being occupied, as a residence or for residential accommodation (regardless of the term of the occupation or intended occupation).

The facts of this case include that a part of Lot YY contains a basic residence which is currently leased to a third-party lessee. We consider the house satisfies the definition of residential premises, and a supply by The Executor of its interest in Lot YY by way of sale will be an input taxed supply under section 40-65 to the extent of the part in relation to the residential premises and GST will not be payable on the sale.

Accordingly, in addition to the decision that The Executor is not required to be registered for GST, the supply by The Executor of Lot YY by way of sale will be an input taxed supply to the extent of that part with the residential premises.

The Contract of Sale is on the Revised Terms.

We do not consider that where the Sales Contract is on the Revised Terms it changes the reasoning that has been provided above.

Question 4 - Individual A

Detailed reasoning

Is Individual A carrying on an enterprise under section 9-20?

The reasoning to this question in relation to Individual A will be similar to the reasoning under question 3 in respect of The Executive . Likewise, Individual A is carrying on the enterprise of licencing the use of the land to The Trust. The land refers to Individual A's ownership interest in Lot XX.

Is Individual A required to be registered for GST under section 23-5?

The reasoning to this question in relation to Individual A will be similar to the reasoning under question 3 above in respect of The Executor Likewise, Individual A is not required to be registered for GST in relation to the sale of its ownership interest in Lot XX as its projected GST turnover (sale proceeds) will not meet the GST registration turnover threshold.

This is provided Individual A does not voluntarily register for GST or carry on any other enterprise or enterprises with a GST turnover that meets the GST registration turnover threshold, in this case being $75,000, on or before the sale.

Is the supply by Individual A of its interest in Lot XX by way of sale a taxable supply under section 9-5 and subject to GST?

The reasoning to this question in relation to Individual A will be similar to the reasoning under question 3 in respect of The Executor. Likewise, when Individual A makes a supply of its interest in Lot XX by way of sale it will not be a taxable supply under section 9-5 and GST would not be payable on the sale.

The Contract of Sale is on the Revised Terms.

We do not consider that where the Sales Contract is on the Revised Terms it changes the reasoning that has been provided above.

Question 5 - The Trust

Detailed reasoning

The relevant legislative provisions in relation to making a taxable supply sections 9-40 and 9-5 are provided earlier in this ruling under question 3.

The facts of this case:

•  A supply by way of 'sale' will be for consideration (sale price)

•  The Trust is carrying on a farming enterprise

•  The Land is in Australia

•  The Trust is registered for GST

Based on the above facts, we consider the requirements specified in paragraphs 9-5(a), (b), (c) and (d) are all satisfied and the supply by The Trust of its co-ownership interests in Lot MM, Lot YY, Lot KK, and Lot PP by way of sale will be a taxable supply under section 9-5 and GST will be payable on the sale. However, the supply will not be a taxable supply to the extent the supply is a GST free or an input taxed supply.

Input taxed supply

The Trust will be making an input taxed supply under section 40-65 to the extent of the part of Lot YY with the existing premises. The reasoning on this decision is similar with that given under question 3 in relation to The Executor's supply.

The Contract of Sale is on the Revised Terms.

We do not consider that where the Sales Contract is on the Revised Terms it changes the reasoning that has been provided above.