Edited version of private advice

Authorisation Number: 1052413998419

Date of advice: 27 June 2025

Ruling

Subject: GST - sale of commercial property

Question

Are you, the Trustee for a self-managed superannuation fund, liable to pay GST under section 9-40 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) on the proposed sale of your commercial property?

Answer

No.

This ruling applies for the following periods:

1 July 20YY to 30 June 20YY

The scheme commenced on:

1 July 20YY

Relevant facts and circumstances

You are the trustee of a complying self-managed superannuation fund (SMSF) within the meaning of the Superannuation Industry (Supervision) Act 1993.

You are not currently registered for GST.

You acquired a commercial property which you leased to a tenant for an amount that was less than $XX,000 per financial year.

The commercial property was completely destroyed in a fire and you accessed your insurance to reinstate the commercial property. The commercial property was reinstated in XXXX year. After the fire, the tenant had to move out and did not return to the commercial property when it was reinstated. You have not received any rent from a tenant since the fire.

You claimed and received rental compensation payments from your insurance which amounted to less than $XX,000 per financial year.

You appointed a new real estate agent to look for a tenant for the commercial property, but due to the rental market in the area being weak, you have not been able to secure a tenant. The real estate agent has however, found a prospective buyer for the commercial property.

You have only held one commercial property for the last eleven years.

Your intention in regard to the acquisition of the commercial property was always for long-term investment purposes and not to buy and sell at a profit.

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 188-10

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

Reasons for decision

Section 9-40 of the GST Act states that you are liable for GST on any taxable supply that you make.

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

(a)          is made for consideration; and

(b)          is made in the course or furtherance of an enterprise being carried on by the entity; and

(c)          in connected with the indirect tax zone; and

(d)          is made by the entity 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.

On the facts of this case there are no provisions in the GST Act to make the proposed sale of the commercial property GST-free or input taxed.

The proposed sale of the commercial property would satisfy the requirements of paragraph 9-5(a) of the GST Act and paragraph 9-5(c) of the GST Act. This is because the sale will be made for consideration and the commercial property is situated in Australia.

It now needs to be determined whether the proposed sale will be made in the course or furtherance of an enterprise that you carry on under paragraph 9-5(b) of the GST Act. Further, as you are not registered for GST we also need to determine whether you are required to register for GST under paragraph 9-5(d) of the GST Act.

Carrying on an enterprise

The term enterprise is defined for GST purposes in subsection 9-20(1) of the GST Act and includes, among other things, an activity or series of activities done:

(a)          in the form of a business; or

(b)          in the form of and adventure or concern in the nature of trade; or

(c)          on a regular or continuous basis, in the form of a lease, licence or other grant of an interest in property; or

...

(da)          by a trustee of a complying superannuation fund, or if there is no trustee of the fund, by the person who manages the fund.

The phrase 'carrying on' an enterprise is defined in section 195-1 of the GST Act to include doing anything in the course of the commencement or termination of the enterprise.

As you are a complying superannuation fund, you are carrying on an enterprise for the purposes of the GST Act as per paragraph 9-20(1)(da) of the GST Act. The scope of paragraph 9-20(1)(da) of the GST Act is extensive in the sense that the activities done by the trustees of a complying superannuation fund are what forms the enterprise that they carry on. Therefore, any activities done by a trustee of a complying superannuation fund will necessarily be in the course or furtherance of that enterprise.

Furthermore, 'enterprise' as defined in paragraph 9-20(1)(c) of the GST Act also includes 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 leasing of the commercial property would constitute an 'enterprise' under the definition in section 9-20 of the GST Act and its subsequent proposed sale would be activities undertaken in the course of termination of that leasing enterprise.

Therefore, we consider that you are carrying on an enterprise for the purposes of the GST Act. The leasing of the commercial property and proposed sale is done in the course of furtherance of your enterprise and hence paragraph 9-5(b) of the GST Act will be satisfied.

GST registration

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

(a)          you are carrying on an enterprise; and

(b)          your *GST turnover meets the *registration turnover threshold (in your case the threshold is $XX,000).

An * denotes a term defined in section 195 of the GST Act

As discussed above, your activities fall within the scope of 'carrying on an enterprise', thus satisfy paragraph 23-5(a) of the GST Act. The next issue to consider is whether your GST turnover meets the registration turnover threshold of $XX,000 or more.

Subsection 188-10(1) of the GST Act provides that you have a GST turnover that meets the registration turnover threshold if:

(a)          your current GST turnover is at or above $XX,000 and the Commissioner is not satisfied that your projected GST turnover is less than $XX,000; or

(b)          your projected GST turnover is at or above $XX,000.

Your 'current GST turnover' is defined in section 188-15 of the GST Act as the sum of the values of all of your supplies made in a particular month and the preceding 11 months.

Your 'projected GST turnover' is defined in section 188-20 of the GST Act as the sum of the values of all of your supplies made in a particular month and the following 11 months.

Paragraphs 188-15(1)(a) of the GST Act and 188-20(1)(a) of the GST Act provide that input taxed supplies are not taken into account when calculating your current and projected turnovers respectively.

Further, section 188-25 of the GST Act provides that in calculating your projected GST turnover, you disregard any supply made, or likely to be made, by you by way of transfer of ownership of a capital asset of yours.

The meaning of 'capital assets' is discussed at paragraphs 31 to 36 of 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) as follows:

Meaning of 'capital assets'

31. The GST Act does not define the term 'capital assets'. Generally, the term 'capital assets' refers to those assets that make up 'the profit yielding subject' of an enterprise. They are often referred to as 'structural assets' and may be described as 'the business entity, structure or organisation set up or established for the earning of profits'.

32. 'Capital assets' can include tangible assets such as your factory, shop or office, your land on which they stand, fixtures and fittings, plant, furniture, machinery and motor vehicles that are retained by you to produce income. 'Capital assets' can also include intangible assets, such as your goodwill.

33. Capital assets are 'radically different from assets which are turned over and bought and sold in the course of trading operations'. An asset which is acquired and used for resale in the course of carrying on an enterprise (for example, trading stock) is not a 'capital asset' for the purposes of paragraph 188-25(a).

34. 'Capital assets' are to be distinguished from 'revenue assets'. A 'revenue asset' is 'an asset whose realisation is inherent in, or incidental to, the carrying on of a business'.

35. If the means by which you derive income is through the disposal of an asset, the asset will be of a revenue nature rather than a capital asset even if such a disposal is an occasional or one-off transaction. Isolated transactions are discussed further at paragraphs 46 and 47 of this Ruling.

36. Over the period that an asset is held by an entity, its character may change from capital to revenue or from revenue to capital. For the purposes of section 188-25 the character of an asset must be determined at the time of expected supply.

Further, Paragraphs 258 and 259 of 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) contain guidance on the distinction between trading/revenue assets and investment/capital assets.

While MT 2006/1 discusses these principles in the context of entitlement to an ABN, these principles have equal application to determining whether the sale of something is a revenue or capital asset for GST registration purposes. Paragraphs 258 and 259 of MT 2006/1 provide the following:

•                     Assets can be categorised as trading/revenue assets or capital/investment assets. Assets purchased with the intention of holding them for a reasonable period of time, to be held as income producing assets or to be held for the pleasure or enjoyment of the person, are more likely not to be purchased for trading purposes.

•                     Examples of capital/investment assets are rental properties, business plant and machinery, the family home, family cars and other private assets. The mere disposal of capital/investment assets does not amount to trade.

Taking into account the facts of this case, we consider the sale of the commercial property would constitute the transfer of a capital asset for the purposes of section 188-25 of the GST Act and is therefore disregarded when calculating your projected GST turnover. The commercial property was not intended to be acquired for the primary purpose of resale. Furthermore, you have derived your rental income from the use of the commercial property as opposed to the trading of properties.

Given the above, your GST turnover does not meet the registration turnover threshold, and you are not required to be registered for GST. On this basis paragraph 9-5(d) of the GST Act will not be satisfied.

Conclusion

The sale of the commercial property will be made in the course or furtherance of an enterprise you carry on, will be made for consideration and is located in Australia. However, you are neither registered nor required to be registered for GST.

Consequently, you will not be making a 'taxable supply' when you sell the commercial property and will not be liable to pay GST under section 9-40 of the GST Act on the proposed sale of the commercial property.