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Edited version of private advice
Authorisation Number: 1052242571153
Date of advice: 6 June 2024
Ruling
Subject: GST and income tax - sale of property
Issue 1 - Goods and services tax
Question 1
Is the sale of X (the Property) a taxable supply under Division 9 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
No. GST is payable on any taxable supplies that you make. One of the requirements of a taxable supply includes that you are registered or required to be registered for GST. In this case, you are neither registered nor required to be registered for GST.
The sale of the Property will not be a taxable supply pursuant to section 9-5 of the GST Act.
Issue 2 - Income tax
Question 1
Is any portion of the sale proceeds of the Property assessable to you as ordinary income?
Answer
In this case, the sale proceeds represent a mere realisation of a capital asset, and any capital gain or capital loss is subject to the capital gains tax (CGT) provisions in Part 3-1 of the Income Tax Assessment Act 1997 (ITAA 1997).
This ruling applies for the following period:
Year ended 30 June 20XX
The scheme commenced on:
1 July 20XX
Relevant facts and circumstances
X (you) have an Australian business number (ABN) but you are not registered for GST.
On DDMMYYYY you entered a contract to purchase vacant land at X (the Property) for $X to build a holiday home and to earn rental income.
You have never undertaken any land or property development activities.
You do not have an ownership interest in any other investment properties.
On DDMMYYYY, the land purchase settled, and you obtained finance from a bank for an investment loan.
On DDMMYYYY you submitted the council planning application. On DDMMYYYY, the council planning permit was approved. The vacant land was neither rezoned nor subdivided.
On DDMMYYYY you obtained a foundation investigation report.
On DDMMYYYY your plans were endorsed by the Council.
On DDMMYYYY you signed the building contract for the construction contract price of $X.
On DDMMYYYY the building permit issued.
Construction of the house on the Property commenced on DDMMYYYY.
Construction was completed during MMYYYY, and you received the occupancy certificate on DDMMYYYY.
Between DDMMYYYY and DDMMYYYY, you furnished the dwelling, so it was ready for holiday rentals and family holidays.
On DDMMYYYY, you signed a contract for the management of the Property, and it was made available for short-term letting. Between DDMMYYYY and DDMMYYYY, you received $X in rental income.
You secured a fixed interest rate of X% per annum on your investment loan. However, from DDMMYYYY your interest rate increased to X% per annum.
You experienced distress due to the financial burden presented by the increase in interest rate.
The Property was listed for sale on DDMMYYYY for between $X and $X.
On DDMMYYYY, you signed a contract of sale for $X. Settlement occurred on DDMMYYYY.
You did not obtain a valuation of the vacant land prior to or post construction.
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
Income Tax Assessment Act 1997 section 6-5
Income Tax Assessment Act 1997 Part 3-1