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1 Is Person A a CGT small business entity for the income years ending 30 June 20XX and 30 June 20XX as defined in section 152-10(1AA) of the Income Tax Assessment Act 1997 (ITAA 1997)?

1 Yes. Question 2 Is Person B an affiliate of Person A as defined under section 152-147 of the ITAA 1997? Answer 2 Yes. Question 3 Does the Property satisfy the active asset test under section 152-35 of the ITAA 1997? Answer 3 Yes. Question 4 Will the sale of the Property happen in connection with the retirement of Person A and Person B under paragraph 152-105(d)(i) of the ITAA 1997? Answer 4 Yes. Question 5 If the answer to question 4 is no, are Person A and Person B considered 'permanently incapacitated' at the time of disposal of the Property under subparagraph 152-105(d)(ii) of the ITAA 1997? Answer 5 Not applicable. Issue 2 Question 6 Will the supply of the Property be a taxable supply pursuant to section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) if the purchaser has intentions to continue with the farming activities? Answer 6 No. Question 7 Will the supply of the Property be a taxable supply pursuant to section 9-5 of the GST Act if the purchaser does not intend to continue with the farming activities? Answer 7 No. This ruling applies for the following period : 30 June 20XX The scheme commenced on: 1 July 20XX

In the facts below, the expressions 'you' and 'your' refer to Person A and Person B as a collective and are used interchangeably throughout. Background Person A and Person B are each other's spouses. Person A has worked as a labourer since a specified year. Person A is currently employed on a full-time basis by Company A as a director. You provided us with details on when the position commenced. Person B has worked as an administrative clerk and homemaker. Previous Property experience You have never undertaken property development activities, either individually or jointly. You each hold a specified percentage of shareholding in Company A. Company A is a construction company providing concrete services to their clients. In a specified year, Company A commenced construction of townhouses. You provided us with details on the address of the townhouses and the competition date. All townhouses remain owned by Company A as investment properties with tenants. Purchase of property for primary production You entered into a contract to purchase the Property as joint tenants. You provided us with details on the address, purchase date and purchase amount.

The Property was zoned 'farming zone' at the time of purchase. The purchase of the Property was GST-free pursuant to section 38-480 relating to farmland supplied for farming. You provided us with details on when the Property purchase settled. The Property is located on approximately XX acres and at the time of purchase did not contain any residential dwellings, nor have any residential dwellings been constructed since the purchase of the Property. Your intentions at the time of the Property purchase were to develop a commercial Livestock A farming business to generate additional income to supplement your wages as employees. You each have since made independent decisions with regard to the Property. Initial work to prepare the land for farm operation The property was not fit for commercial Livestock A farming at the time of possession due to extensive debris, damaged and weed-infested paddocks, and deteriorated fencing. These conditions rendered the land unsuitable for grazing and required significant remediation.

Therefore, you carried out substantial work for a few years with help from your sons (Person C and Person D) to prepare the Property to commence the commercial Livestock A farming business. The activities undertaken to prepare for carrying on commercial Livestock A farming activities are land clearing, weed removal, soil cultivation, fencing repairs, and firebreak installation. You have completed the administrative steps, such as obtaining an ABN, registering the property with relevant authorities, and listing it on the National Grower Register. Farm operation Since a specified date, Person A has operated a primary production business on the Property as a sole trader. You provided us with details on the primary production activities that were conducted on the land. In a specified year, the Property was set on fire due to a firebug. The fire damage extended from where the Property is situated on a road to other properties owned by others in the nearby location.

In a specified income year, Person A made the decision to discontinue Livestock A operations and commence Crop A and Livestock B farming activities. This was due to concerns regarding the long-term profitability of Livestock A farming. Following extensive research and consultation, Person A opted to shift focus from Livestock A farming activities to Crop A cultivation and Livestock B farming activities. Person A had an intention to make a profit at all times since the start of the farming operation. This is evidenced by Person A's decision to change from non-profitable Livestock A farming activities to profitable Livestock B and Crop A farming activities. The Crop A and Livestock B farming activities were more successful than the previous Livestock A farming activities. When Person A ceased the Livestock A operation on the Property, Person A exchanged the remaining Livestock A for Livestock B and grain. Person A initially purchased a certain number of higher breed Livestock B to mix with the existing Livestock B for breeding. The Livestock B are segregated/ fenced off to prevent them from eating Crop A. They are shifted from area to area on the Property avoiding the area of Crop A.

Based on the previous few years production, Person A grew approximately XX tons of Crop A per year. There are approximately XX Livestock B currently on the Property. There is no Crop A for sale this year, the Crop A has been retained for Livestock B feed, with approximately X tone kept in storage to use for planting next year's crops. You provided us details on Person A's customers in relation to the primary production business. The sale of Livestock B was by Person A through word of mouth, there was no formal advertising done. You have provided the history of the primary production activities from the beginning income year until the current income year. There is no written agreement between you for the use of the Property for farming. Person B was not reimbursed for the use of the Property for primary production activities. You verbally agreed Person A will be responsible for the expenses/outgoing for the Property.

Since a specified date, Person A have dedicated an average of XX hours per week to the Property on farming activities. The time Person A spent on business activities fluctuated throughout the year due to seasonal factors, sowing periods, cropping schedules, and birthing cycles. Your sons (Person C and Person D) have assisted with the farming activities at the Property at various times. Person A expects to continue to spend this amount of time at the Property undertaking farming activities until the Property is sold. Person A anticipates a net profit in both the latest and upcoming income years. Person A's aggregate turnover is below $2 million and expected to remain below $2 million throughout these latest and upcoming income years. The Property has been used exclusively for farming since its purchase. Registrations You are not registered for GST. You have not applied for or received a partnership ABN. Person A's ABN has been registered from a specified date. Person B has never registered for an ABN. You are not registered for GST as individuals.

Person A did not register for GST for the farming activities as the gross income from the primary production business has never reached the $75,000 GST registration turnover threshold. Rezoning of the property There has been rapid changing around the areas near the Property resulting in the rezoning of the Property to 'urban growth zone' in a specified year. Since the rezoning of the Property in that specified year, no development works, or related activities have been carried out on the Property. According to the State Government Department of Transport and Planning, land zoned as Urban growth zone allows for: •                Existing farming and rural activities to continue, and new farming uses to establish, other than new saleyards and intensive animal industries, and •                A permit is required to subdivide land, and a minimum lot size of 40 hectares applies. A section 173 agreement is required to be entered into with one of the requirements to constrain further subdivision of the land. However, the section 173 agreement does not restrict development necessary to implement a precinct structure plan at a later date. Selling of the Property for retirement

In a specified year, your sons advertised the Property for sale to gauge the approximate market value of the Property with no intention to sell the Property. The Property was ultimately withdrawn from advertisement on a specified date with no offers received. The Property has not been advertised for sale since that time and is currently not advertised for sale. No development work will be undertaking prior to the Property being marketed for sale. Person A will continue the farming operations on the Property until it is sold. You plan to sell the Property in the upcoming income year. You have received interest from potential buyers. The proposed sale price from interested purchasers would be sufficient to fund your retirement. You will both be over 55 years or older at the time of the CGT event. Following the sale of the Property, you will cease working and retire.

Income Tax Assessment Act 1936 section 318 Income Tax Assessment Act 1997 section 152-A Income Tax Assessment Act 1997 subsection 152-10(1) Income Tax Assessment Act 1997 subsection 152-10(1AA) Income Tax Assessment Act 1997 section 152-35 Income Tax Assessment Act 1997 section 152-40 Income Tax Assessment Act 1997 subsection 152-40(1) Income Tax Assessment Act 1997 section 152-47 Income Tax Assessment Act 1997 subsection 152-47(1) Income Tax Assessment Act 1997 subparagraph 152-47(1)(b)(i) Income Tax Assessment Act 1997 subsection 152-47(2) Income Tax Assessment Act 1997 section 152-105 Income Tax Assessment Act 1997 paragraph 152-105(d)(i) Income Tax Assessment Act 1997 section 328-110 Income Tax Assessment Act 1997 subsection 328-130(1) Income Tax Assessment Act 1997 subsection 995(1) A

Issue 1 - Income Tax In this section unless otherwise stated, all legislative references are to the Income Tax Assessment Act 1997 . Question 1 Is Person A a CGT small business entity for the income year ending 30 June 20XX and 30 June 20XX as defined in section 152-10(1AA) of the Income Tax Assessment Act 1997 (ITAA 1997)? Summary Yes. Person A satisfies the conditions under subsection 152-10(1AA) for the income years ending l 30 June 20XX and 30 June 20XX and therefore is a CGT small business entity. Person A is carrying on a business and their aggregated turnover is less than $2 million. Detailed reasoning As per subsection 152-10(1AA), an entity is a CGT small business entity for an income year if the entity: •                is a small business entity for the income year and •                would be a small business entity for the income year if your turnover is less than $2 million. Subsection 328-110 provides that an entity will qualify as a small business entity for an income year if: •                you carry on a business in the current year; and •                your aggregate turnover is less than $2 million.

Based on the facts provided, Person A satisfied the conditions to quality as a small business entity under subsection 152-10(1AA) as they are carrying on a business and their aggregate turnover is less than $2 million. Question 2 Is Person B an affiliate of Person A as defined under section 152-147 of the ITAA 1997? Summary Yes. Person B is considered an affiliate of Person A under 152-47. Person B holds an interest in the Property that is used in carrying on a primary production business conducted by Person A. Detailed reasoning 'Affiliate' is defined in subsection 328-130(1) as follows: An individual or a company is an affiliate of yours if the individual or company acts, or could reasonably be expected to act, in accordance with your directions or wishes, or in concert with you, in relation to the affairs of the business of the individual or company. Person B has no or minimal involvement in your primary production business, and you do not act under Person B's directions or wishes in respect of the primary production business. Therefore, Person B would not be treated as your affiliate as defined in section 328-130.

Under section 152-47 a spouse or child can be taken to be affiliates in certain situations. Section 152-47(1) applies if: (a)   one entity (the asset owner) owns a CGT asset, whether the asset is tangible or intangible; and (b)   either: (i)      the asset is used, or held ready for use, in the course of carrying on a business in an income year by another entity (the business entity); or (ii)      the asset is inherently connected with a business that is carried on in an income year by another entity (the business entity); and (iii)      the business entity is not (apart from this section) an affiliate of, or connected with, the asset owner. Subsection 152-47(2) states: For the purposes of this Subdivision, in determining whether the business entity is an affiliate of, or is connected with, the asset owner, take the following to be affiliates of an individual: (a)  a spouse of the individual: (b)  a child of the individual, being a child who is under 18 years. Based on the facts, Person B is an affiliate of Person A's under 152-47 because: •                Person B owns an interest in the Property

•                The Property was used in carrying on a primary production business by you •                Person B is not otherwise an affiliate of or connected to you •                Person B is your spouse. Question 3 Does the Property satisfy the active asset test under section 152-35 of the ITAA 1997? Summary Yes. The property satisfies the active asset test under section 152-35 as you have owned the Property for more than 15 years and it was used to conduct a business for more than 7½ years. Detailed reasoning Section 152-35 of ITAA: (1)   A CGT asset satisfies the active asset test if: (a)  you have owned the asset for 15 years or less and the asset was an active asset of yours for a total of at least half of the period specified in subsection (2); or (b)  you have owned the asset for more than 15 years and the asset was an active asset of yours for a total of at least 7 ½ years during the period specified in subsection (2). (2)   The period: (a)  begins when you acquired the asset; and (b)  ends at the earlier of: (i)      the CGT event; and

(ii)      if the relevant business ceased to be carried on in the 12 months before that time or any longer period that the Commissioner allows - the cessation of the business. Section 152-40 states: A CGT asset is an active asset at a time if, at that time: (a)  you own the asset (whether the asset is tangible or intangible) and it is used, or held ready for use, in the course of carrying on a business that is carried on (whether alone or in partnership) by: (i)      you; or (ii)      your affiliate; or (iii)      another entity that is connected with you; or (b)  if the asset is an intangible asset - you own it and it is inherently connected with a business that is carried on (whether alone or in partnership) by you, your affiliate, or another entity that is connected with you. The property satisfies the active asset under section 152-35 as follows: •                You have owned the Property for more than 15 years •                Person A conducted a business on the Property for more than 7½ years during the total ownership period. •                Person B is regarded as Person A's affiliate. Question 4

Will the sale of the Property happen in connection with the retirement of Person A and Person B under subparagraph 152-105(d)(i) of the ITAA 1997? Summary Yes. The sale of the Property will happen in connection with the retirement of Person A and Person B under subparagraph 152-105(d)(i). Person A and Person B satisfy the basic conditions in Subdivision 152-A, they have owned the Property for over 15 years, Person A and Person B are both over the 55 years of age and they will both retire at the time of the sale of the Property. Detailed reasoning Section 152-105 states: If you are an individual, you can disregard any capital gain arising from a CGT event if all of the following conditions are satisfied: (a)  the basic conditions in Subdivision 152-A are satisfied for the gain; (b)  you continuously owned the CGT asset for the 15-year period ending just before the CGT event; (c)   if the CGT asset is a share in a company or an interest in a trust - the company or trust had a significant individual for a total of at least 15 years (even if the 15 years was not continuous and it was not always the same significant individual) during which you owned the CGT asset; (d)  either:

(i)      you are 55 or over at the time of the CGT event and the event happens in connection with your retirement; or (ii)      you are permanently incapacitated at the time of the CGT event. The basic conditions for relief under the CGT small business conditions are outlined in Subdivision 152-A. Subsection 152-10(1) provides that a capital gain you make may be reduced or disregarded if the following basic conditions are satisfied: (a)   a CGT event happens in relation to a CGT asset of yours in an income year; (b)  the event would (apart from this Division) have resulted in a gain; (c)   at least one of the following applies: (i)      you are a CGT small business entity for the income year; (ii)      you satisfy the maximum net asset value test (iii)      you are a partner in a partnership that is a CGT small business entity for the income year and the CGT asset is an interest in an asset of the partnership; (iv)      you do not carry on a business, but your CGT asset is used in a business carried on by a small business entity that is your affiliate, or any entity connected with you; (d)  the CGT asset satisfies the active asset test.

Person A and Person B satisfied the conditions under paragraph 152-105(d)(i) as: •                The basic conditions in Subdivision 152-A are satisfied as: •                a CGT event will occur when the Property is disposed of which will result in a gain •                Person A is a CGT small business entity at the time of the CGT event •                Person B is an affiliate of Person A's •                The Property is an active asset •                Person A and Person B have owned the Property for longer than 15 years. •                Person A and Person B are over 55 years. •                Person A and Person B will retire at the time the Property is sold. Question 5 If the answer to question 4 is no, are Person A and Person B considered 'permanently incapacitated' at the time of disposal of the Property under subparagraph 152-105(d)(ii) of the ITAA 1997? Summary Not applicable Issue 2 - GST In this section •                unless otherwise stated, all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)

•                all legislative terms of the GST Act marked with an asterisk are defined in section 195-1 of the GST Act. •                all reference materials, published by the Australian Taxation Office (ATO), that are referred to are available on the ATO website ato.gov.au Question 6 Will the supply of the property situated at a specified address be a taxable supply pursuant to section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) if the purchaser has intentions to continue with the farming activities? Summary No, the proposed sale of the Property will not be a taxable supply whereby the purchaser intends to continue farming activities on the property. Detailed reasoning Taxable Supply Section 9-40 provides that an entity is liable for GST on any taxable supplies that it makes. Section 9-5 provides that 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 to the indirect tax zone (Australia); and (d)   you are registered or required to be registered for GST.

However, the supply will not be a taxable supply to the extent the supply is GST-free or input taxed. In this case, the requirements of subsections 9-5(a) and 9-5(d) will be satisfied since: •                the supply of the Property will be for consideration, and •                the proposed sale of the Property is connected with the indirect tax zone as the Property is located in Australia. In the event where a vendor makes a supply that does not satisfy the requirements of section 9-5, the supply would not be a taxable supply. This is because section 9-5 provides that a supply is not a taxable supply to the extent that it is GST-free or input taxed. There are no provisions in the GST Act under which your supply of the property in question would be input taxed under Division 40. In relation to the Property, we need to consider if: •                Person A and Person B are making a supply in their own right or as a partnership •                Person A and Person B are carrying on an enterprise, and •                Person A and Person B are required to be registered for GST, and •                the supply will be GST-free. Related Entities

Division 72 ensures that a supply to, or an acquisition from, an associate without consideration is brought within the GST system, and that supplies to your associates for inadequate consideration are properly valued for GST purposes. Even though the supply of Person B's interest in the Property to Person A was for no consideration, the characteristics of the supplies does not change under Division 72. Section 72-5(1) states that: (1)   The fact that a supply to your associate without consideration does not stop the supply being a taxable supply if: (a)   your associate is not registered or required to be registered; or (b)   your associate acquires the thing supplied otherwise than solely for a creditable purpose. An 'associate' is defined in section 195-1 as having the meaning given by section 318 of the Income Tax Assessment Act 1936 (ITAA 1936). Of relevance in this case is 'associates' of a natural person. Section 318(1) of the ITAA 1936 categorises the types of entity capable of being an associate of a natural person which states: (1)   For the purposes of this Part, the following are associates of an entity (in this subsection called the primary entity)

that is a natural person (otherwise than in the capacity of trustee): (a)   a relative of the primary entity; (b)   a partner of the primary entity or a partnership in which the primary entity is a partner; (c)   if a partner of the primary entity is a natural person otherwise than in the capacity of trustee--the spouse or a child of that partner; Section 72-10 deals with the value of taxable supplies made without consideration. It states that if a supply to your associate without consideration is a taxable supply; its value is the GST exclusive market value of the supply. Similarly, section 72-70 deals with the value of taxable supplies where consideration is inadequate. It states that if a supply to your associate for consideration that is less than the GST inclusive market value is a taxable supply; its value is the GST exclusive market value of the supply. In this case, Person A and Person B are associates as defined in Section 318(1) of the ITAA 1936. It remains to be determined whether Person A and Person B are in a partnership. Partnership

Section 195-1 defines partnership with reference to the definition in section 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997). There are two types of partnerships for GST purposes under paragraph 995-1(1)(a) being: •                a 'common law partnership' that exists if there is an association of persons carrying on a business as partners, or •                a 'tax law partnership' that exists if an association of persons are in receipt of ordinary income or statutory income jointly.

In this case, you purchased the Property to use for the farming business, however this farming business was conducted by Person A as a sole trader. Person B allowed Person A to use their share of the Property to conduct the farming business without any remuneration, on the informal agreement that Person A would be solely responsible for the cost associated with the Property. The Property was not used for leasing purposes which could have given raise to income jointly in the form of rent. In addition, you are not in receipt of income jointly in relation to the farming business that Person A conducted on the Property. Therefore, we do not consider that you are carrying on a business as partners in relation to the Property. As a result, the Property will not be supplied as a partnership but separately in your individual capacity. Enterprise The term 'enterprise' is defined in section 9-20. Subsection 9-20(1) states: An enterprise is an activity, or series of activities, done: (a)  in the form of a * business; or (b)  in the form of an 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 ... The phrase 'carrying on' an enterprise is defined in section 195-1 to include doing anything in the course of the commencement or termination of the enterprise. This definition ensures that activities done in the course of the commencement or termination of the enterprise are included in determining whether the activities of the entity amount to an enterprise. 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) contains the Commissioner's view on what constitutes an enterprise for the purpose of eligibility for an Australian business number. Paragraph 1 of Goods and Services Tax Determination GSTD 2006/6 Goods and services tax: does 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 guidelines in MT 2006/1 are considered to apply equally to the term 'enterprise' as used in the GST Act and can be relied upon for GST purposes. In the form of a business Paragraphs 177 to 179 of MT 2006/1 discuss the main indicators of carrying on a business, and state: Indicators of a business 177. To determine whether an activity, or series of activities, amounts to a business, the activity needs to be considered against the indicators of a business established by case law. 178. TR 97/11 discusses the main indicators of carrying on a business. Based on that discussion some indicators are: •                a significant commercial activity; •                a purpose and intention of the taxpayer to engage in commercial activity; •                an intention to make a profit from the activity; •                the activity is or will be profitable; •                the recurrent or regular nature of the activity; •                the activity is carried on in a similar manner to that of other businesses in the same or similar trade; •                activity is systematic, organised and carried on in a businesslike manner and records are kept;

•                the activities are of a reasonable size and scale; •                a business plan exists; •                commercial sales of product; and •                the entity has relevant knowledge or skill. 179. There is no single test to determine whether a business is being carried on. Paragraph 12 of TR 97/11 states that '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'. TR 97/11 can be referred to for a fuller discussion on whether a particular On balance having considered the facts of this case, we can determine that the indicators set out in paragraph 178 of MT 2006/1 are present to a sufficient degree to warrant the conclusion that Person A is carrying on an enterprise in the form of a business pursuant to paragraph 9-20(1)(a). We consider that the activities Person A have undertaken in the farming business display the indicators of a business which are, amongst other things, transactions entered into on a continuous and repetitive basis. On a regular or continuous basis, in the form of a lease, licence or other grant of an interest in property

Paragraphs 303 to 322 of MT 2006/1 discuss activities done on a regular or continuous basis, in the form of a lease, licence or other grant of an interest in property. The grant of a licence over a property will fall within the scope of an 'enterprise' for GST purposes. Furthermore, the activities associated with the commencement or termination of a licence over a property will also fall within the scope of an enterprise for GST purposes. An enterprise terminates when the activities related to that enterprise cease. Paragraph 140 to 148 of MT2006/1 provides guidance on the termination of an enterprise. Ordinarily, the termination of an enterprise occurs when all assets are disposed of or converted to another purpose or use and all obligations are satisfied. A change in purpose could occur where an asset is no longer used by the entity in the enterprise and is instead used for other purposes. However, paragraph 307 and 318 to 320 of MT 2006/1 include the following guidelines

307. A gratuitous lease, licence or other grant of an interest in property made by an individual (other than a trustee of a charitable trust or of a fund covered by item 2 of the table in section 30-15 of the ITAA 1997 or of a fund that would be covered by that item if it had an ABN) or a partnership where all or most of the partners are individuals will not, by itself, amount to an enterprise. It should have a commercial basis underlying it. This is because there needs to be a reasonable expectation of profit or gain for an enterprise carried on by an individual (other than a trustee of a charitable trust) or a partnership (where all or most of the members are individuals), see paragraph 9-20(2)(c) of the GST Act. However, where there is a reasonable expectation of profit or gain by the individual or partnership a gratuitous lease, licence or other grant of an interest in property may amount to an enterprise, (see Example 39 at paragraphs 318 to 320 of this Ruling). ... Example 39 - use of property on a continuous basis which is an enterprise

318. Verity owns a farming property. She is unable to farm the property herself. She allows the land to be farmed by a partnership comprising members of her family apart from herself. The understanding between the parties is that the partnership can farm the property for a period of ten years and that Verity will retain any capital improvements made to the farm. 319. The partnership puts up fences, applies fertiliser and installs irrigation, erects hail netting and plants fruit trees. The partnership also pays the rates, the electricity for the farm and the insurance on the farm buildings. Verity is entitled to a share of the fruit crop each year. 320. Verity is entitled to an ABN. She has granted a licence on a continuous basis to the partnership to farm the land. Verity has a reasonable expectation of profit or gain .

Although there was no formal agreement in place, it was agreed that Person A would cover all the expenses associated with the Property in exchange for the use of Person B's share. The total expenses reported for the Property for each income years is under $75,000. On balance having considered the facts of the case, we consider Person B's agreement to allow Person A to use their share of the Property to conduct the farming business on a regular and continuous basis does not amount to an enterprise for GST purposes pursuant to paragraph 9-20(1)(c). We now need to consider whether you are required to be registered for GST as currently you are not registered for GST. Registration Section 23-5 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 (currently $75,000). Note: It is the entity that carries on the enterprise that is required to be registered (and not the enterprise). As discussed previously, Person A's activities associated with the use of the Property fall within the scope of 'carrying on an enterprise' thus satisfying paragraph 23-5(a) above.

The next issue to consider is whether Person A's GST turnover meets the registration turnover threshold of $75,000 or more. Subsection 188-10(1) provides that you have a GST turnover that meets the registration turnover threshold if: (a)   your *current GST turnover is at or above $75,000 and the Commissioner is not satisfied that your *projected GST turnover is less than $75,000; or (b)   your projected GST turnover is at or above $75,000. The 'current GST turnover' is defined in section 188-15 as the sum of the values of all of your supplies made in a particular month and the preceding 11 months. The 'projected GST turnover' is defined in section 188-20 as the sum of the values of all of your supplies made in a particular month and the following 11 months. Section 188-25 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: In working out your *projected GST turnover, disregard: (a)  any supply made, or likely to be made, by you by way of transfer of ownership of a capital asset of yours; and

(b)  any supply made, or likely to be made, by you solely as a consequence of: (i) ceasing to carry on an * enterprise; or (ii)  substantially and permanently reducing the size or scale of an enterprise. 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 discusses this issue. The meaning of 'capital assets' is discussed at paragraphs 31 to 36 of GSTR 2001/7: 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. In relation to isolated transaction paragraphs 46 to 47 of GSTR 2001/7 provides: Isolated Transactions

46. An enterprise may consist of an isolated transaction or a dealing with a single asset. For example, an enterprise may consist solely of the acquisition and refurbishment of a suburban shop for resale at a profit. Where an entity engages in acquiring a single asset for resale at a profit, the activity will be an enterprise under paragraph 9-20(1)(b), because it is an activity in the form of an adventure in the nature of trade. [20] As discussed in paragraph 35 of this Ruling, the disposal of that single asset is not the transfer of a capital asset. Consequently, that supply is not excluded from your projected GST turnover. 47. The disposal of that single asset, or the completion of that isolated transaction, is also not a transfer solely as a consequence of ceasing to carry on an enterprise. In such circumstances the enterprise ceases as a consequence of the disposal of the single asset, rather than the single asset being disposed of in consequence of the ceasing to carry on the enterprise.

Considering the facts of this case, we consider the supply of the Property would constitute the transfer of a capital asset for the purposes of section 188-25, and in the ordinary course of events would therefore be disregarded when calculating Person A's projected GST turnover. Person A's total GST turnover comprised mainly of the farming activities of under $75,000 for each income year. Person A is therefore not required to be registered for GST because their GST turnover will not meet the GST registration turnover threshold of $75,000. Based on provided facts for this case, the proposed sale of the Property will not be a supply made in the course of furtherance of an enterprise that you carry on under section 9-20 of the GST Act. Further, a sale that is not made in connection with an enterprise is not included in calculating the GST turnover for registrations purposes; therefore, the sale will not increase your GST turnover for you to be required to register for GST. Your proposed sale of the Property will not be a taxable supply under section 9-5 of the GST Act as paragraphs 9-5(b) and 9-5(d) will not be satisfied.

However, the proposed sale of the Property may be characterised as GST-free supply of farmland pursuant to section 38-480 whereby the potential purchasers intends to continue on with the farming activities and all the requirements of section 9-5 are satisfied. Question 7 Will the supply of the property situated at a specified address be a taxable supply pursuant to section 9-5 of the GST Act if the purchaser does not intend to continue with the farming activities? Summary No, whereby the purchaser does not intend to continue farming activities on the Property, your proposed sale of the Property will not be a taxable supply under section 9-5 as you are not carrying on an enterprise and are not required to be registered for GST. Detailed reasoning Taxable Supply Section 9-5 provides that you make a taxable supply. There are no provisions of the GST Act under which your supply of the property in question would be input taxed. The supply of the Property would not be GST free, whereby the purchaser intends that a farming business would not be carried, the requirements under 38-480(b) will not be satisfied.

In this case, the requirements of subsections 9-5(a) and 9-5(d) will be satisfied since: •                the supply of the Property will be for consideration, and •                the proposed sale of the Property is connected with the indirect tax zone as the Property is located in Australia. As determined above in Question1: •                the Property will not be supplied as a partnership, but separately in your individual capacity •                Person B is not carrying on an enterprise for GST purposes •                Person A is carrying on an enterprise for GST purposes, however, is not required to be registered for GST. Based on the provided facts of the case, your proposed sale of the Property would not be a taxable supply under section 9-5 of the GST Act as paragraphs 9-5(b) and 9-5(d) will not be satisfied. Conclusion Consequently, if the purchaser does not intend to continue with the farming activities when you supply the Property, GST will not be payable if you do not satisfy the requirements of a taxable supply pursuant to section 9-5.