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1 Did you in your capacity as statutory trustee, make a taxable supply of the Property pursuant to section 9-5 of the A New Tax System Goods and Services Tax Act 1999 (GST Act)?

1 Yes. Question 2 If your supply of the Property is a taxable supply pursuant to section 9-5, is GST 10% of the value of the taxable supply? Answer 2 Yes. Issue 2 Income tax Question 1 Are the sale proceeds from the sale of the Property assessable to the Trustee under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) as a result of an isolated transaction carried out for profit and commercial in character? Answer 1 No. Question 2 Does the Trustee have a capital gain on the sale of the Property under section 100-45 of the ITAA 1997? Answer 2 No. Question 3 Does the Trustee have an income tax liability arising from the sale of the Property under sections 98, 99 or 99A of the Income Tax Assessment Act 1936 (ITAA 1936)? Answer 3 No. This ruling applies for the following period : DD MM YYYY - DD MM YYYY The scheme commenced on: DD MM YYYY

You are registered for GST from a specified date. On a specified date the Supreme Court made an order that pursuant to section 66G of the Conveyancing Act 1919 (NSW), a named party (Trustee) be appointed trustee for the sale of the Property. A copy of the Court Order was provided as part of this ruling request. Prior to the orders, the Property was owned by two individuals. The Property is zoned general industrial, and a warehouse is situated on the property. You undertook the following duties in your role as trustee: •                 obtained quotes from independent valuers and independent real estate agents for an estimate of their costs for their services •                 engaged a valuer and a real estate agent •                 engaged an insurance broker to insure the property •                 attended the property to inspect its state •                 obtained advice from the following professional services: o       Legal advice o       Accounting services o       Conveyancing services o       Real estate agent. •                 engaged removalists to prepare the property for sale •                 obtained Building Technical Due Diligence report

•                 provided updates to the legal representatives of the beneficiaries; and •                 sought judicial advice with respect to the settlement agreement entered into prior to the trustee being appointed - the parties to the legal proceedings had opposing views on the settlement agreement after the trustee's appointment. Sale of the Property You, through your Trustee, subsequently entered into a contract for the sale (Sale Contract) of the Property with (purchaser) for a specified amount. The Sale Contract provides that the supply was a taxable supply. Settlement was completed on a specified date. The settlement statement states that GST of a specified amount was paid at settlement. You have provided a copy of the tax invoice that was issued to the Purchaser. The Property was sold with vacant possession.

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 9-70 A New Tax System (Goods and Services Tax) Act 1999 section 9-75 A New Tax System (Goods and Services Tax) Act 1999 section 195-1 Income Tax Assessment Act 1936 section 98 Income Tax Assessment Act 1936 section 99 Income Tax Assessment Act 1936 section 99A Income Tax Assessment Act 1997 section 6-5 Income Tax Assessment Act 1997 section 104-10 Income Tax Assessment Act 1997 section 100-45 Income Tax Assessment Act 1997 section 110-25 Income Tax Assessment Act 1997 section 116-20

This is to explain how we reached our decision. This is not part of the private ruling. Issue 1 Question 1 Did The Trustee (you) in your capacity as statutory trustee, make a taxable supply of (the Property) pursuant to section 9-5 of the A New Tax System Goods and Services Tax Act 1999 (GST Act)? Detailed reasoning You make a taxable supply if you meet the requirements of section 9-5 of the GST Act, which states: Section 9-5 provides you make a taxable supply if: (a)              you make the supply for consideration; and (b)              the supply is made in the course or furtherance of an enterprise that you carry on; and (c)              the supply is connected with the indirect tax zone; and (d)              you are registered, or required to be registered for GST. However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. Division 38 and 40 provide for certain supplies to be GST-free and input taxed respectively. There are no provisions within these divisions under which the supply of the Property (a vacant warehouse) would be GST-free or input taxed.

In this case the supply of the Property by the Trustee satisfies the requirements of subsections 9-5(a), 9-5(c) and 9-5(d) of the GST Act. It remains to be determined whether the supply of the Property was made in the course or furtherance of an enterprise carried on by the Trustee. The term 'enterprise' is defined in section 9-20 of the GST Act and includes an activity, or series of activities, done in the form of a business or in the form of an adventure or concern in the nature of trade. The phrase 'carrying on an enterprise' includes doing anything in the course of the commencement or termination of the enterprise (section 195-1). 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) considers the meaning of the terms 'entity' and 'enterprise' for the purposes of the GST Act. Paragraphs 159 and 234 of MT 2006/1 state: 159. Whether or not an activity, or series of activities, amounts to an enterprise is a question of fact and degree having regard to all of the circumstances of the case.

234. Ordinarily, the term 'business' would encompass trade engaged in, on a regular or continuous basis. However, an adventure or concern in the nature of trade may be an isolated or one-off transaction that does not amount to a business but which has the characteristics of a business deal. For an entity to be carrying on an enterprise, it is necessary to identify one activity or a series of activities that amount to an enterprise. The concept of 'an adventure or concern in the nature of trade' has arisen in the context of Australian and United Kingdom revenue law and is not defined for the purposes of the GST Act. Trade commonly means operations of a commercial character where goods or services are provided to customers for reward. An adventure or concern in the nature of trade includes a commercial activity that does not amount to a business. Isolated transactions fall into this category. Paragraphs 262 to 269 of MT 2006/1 discuss isolated transactions and sales of real property. In particular paragraph 266 states:

266. In determining whether activities relating to isolated transactions are an enterprise or are the mere realisation of a capital asset, it is necessary to examine the facts and circumstances of each particular case. This may require a consideration of the factors outlined above, however there may also be other relevant factors that need to be weighed up as part of the process of reaching an overall conclusion. No single factor will be determinative rather it will be a combination of factors that will lead to a conclusion as to the character of the activities. The issue of whether a party, or parties, appointed pursuant to section 66G of the Conveyancing Act 1919 (NSW)as statutory trustees for the sale of property are carrying on an enterprise was considered by White J in Toyama Pty Ltd v Landmark Building Developments Pty Ltd [2006] NSWSC 83 ( Toyama ). In Toyama, White J at [68] noted that the 'enterprise which the trustees carried on was the series of activities required to be undertaken pursuant to their appointment as trustees for sale. The sale of the property, being the very thing they were appointed to do, was in furtherance of that enterprise'.

White J at [69] added that 'the activity, or series of activities, which they carried on, was done in the form of business. The words "in the form of" have the effect of extending the meaning of enterprise beyond entities carrying on a business, to encompass activities that have the appearance or characteristics of business activities'. White J at [72] stated: 72. When the enterprise carried on by the trustees is regarded as a whole, it can be seen that it involves a series of acts done by the trustees. These included the engaging of consultants, the marketing of the property, the obtaining of judicial advice and the sale of the property. In this case, the Trustee held the Property for sale as prescribed by section 66G of the Conveyancing Act 1999 (NSW). Consistent with the view in MT 2006/1 and the comments of White J in Toyama

we consider that in conducting their duties and obligations pursuant to the Court Order, the Trustee was carrying on an enterprise for GST purposes. The series of activities undertaken by the Trustee as listed above, were commercial in character and were carried out 'in the form' of a business by the Trustee for GST purposes. It follows that the sale of the Property was also made in the course or furtherance of this enterprise as it is the reason for which the Trustee was appointed. Therefore, the supply of the Property was a taxable supply pursuant to section 9-5 of the GST Act. Question 2 If your supply of the Property is a taxable supply pursuant to section 9-5, is GST 10% of the value of the taxable supply? Detailed reasoning Section 9-70 of the GST Act provides that the amount of GST on a taxable supply is 10% of the value of the taxable supply. Subsection 9-75(1) provides that the value of a taxable supply is the price x 10/11 where price is the sum of: a)               so far as the consideration for the supply is consideration expressed as an amount of money - the amount (without any discount for the amount of GST (if any) payable on the supply); and

b)               so far as the consideration is not consideration expressed as an amount of money - the GST inclusive market value of that consideration. As your supply of the Property was a taxable supply, the amount of GST payable is 10% of the value of the taxable supply. Issue 2 Question 1 Are the sale proceeds from the sale of the Property assessable to the Trustee under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) as a result of an isolated transaction carried out for profit and commercial in character? Summary Proceeds from the sale of the Property are not assessable to the Trustee as ordinary income under section 6-5 of the ITAA 1997. Detailed reasoning Section 6-5 of the ITAA 1997 provides that your assessable income includes income according to ordinary concepts. The Commissioner's view on whether a profit from an isolated transaction is income according to ordinary concepts is discussed in Taxation Ruling TR 92/3 Income tax: whether profits on isolated transactions are income. Paragraph 6 of TR 92/3 provides that a profit from an isolated transaction is generally income when both of the following elements are present:

•                 the intention or purpose of the taxpayer in entering into the transaction was to make a profit or gain; and •                 the transaction was entered into, and the profit was made, in the course of carrying on a business or in carrying out a business operation or commercial transaction. Paragraph 13 of TR 92/3 highlights various factors in considering whether a business operation or commercial transaction exists. The relevant factors include: a)               the nature of the entity undertaking the operation or transaction, b)               the nature and scale of other activities undertaken, c)               the amount of money involved in the operation or transaction and the magnitude of the profit sought or obtained, d)               the nature, scale and complexity of the operation or transaction, e)               the manner in which the operation or transaction was entered into or carried out, f)                the nature of any connection between the relevant taxpayer and any other party to the operation or transaction, g)               if the transaction involved the acquisition and disposal of property, the nature of that property, and

h)               the timing of the transaction or the various steps in the transaction. The Trustee was appointed by the Court to sell the Property and distribute the net proceeds to the beneficiaries. It is considered that the Trustee's activities in carrying out the Court order do not have the indicia of a business operation or commercial transaction as discussed at paragraph 13 of Taxation Ruling TR 92/3; nor is there the requisite intention of the Trustee to make a profit or gain. Therefore, the proceeds from the sale of the Property are not considered ordinary income of the Trustee under section 6-5 of the ITAA 1997. Question 2 Does the Trustee have a capital gain on the sale of the Property under section 100-45 of the ITAA 1997? Summary The total proceeds from the sale of the Property will not exceed the Trustee's cost base, therefore the Trustee does not make a capital gain from CGT event A1. Detailed reasoning

CGT event A1 happened when the Trustee entered into a contract to dispose of the Property (section 104-10 of the ITAA 1997). A capital gain will therefore be made by the Trustee in the income year ending 30 June 2024, if the capital proceeds from the CGT event are more than the asset's cost base (section 100-45 of the ITAA 1997). Pursuant to subsection 116-20(1) of the ITAA 1997, the capital proceeds for the CGT event are the total of the money the Trustee received (or is entitled to receive) in respect of the event happening and the market value of any other property the Trustee received (or is entitled to receive) in respect of the event happening. The GST payable on the sale of the Property is not included in the capital proceeds (subsection 116-20(5) of the ITAA 1997). Under subsection 110-25(2) of the ITAA 1997, the first element of the cost base of the Property is the money paid by the Trustee (or required to be paid) and the market value of any other property given (or required to be given) by the Trustee in respect of acquiring the Property.

It is accepted that the Trustee's obligation under the Court Order to pay the net proceeds to the beneficiaries will also be their cost of acquisition for the purposes of the first element of the cost base under subsection 110-25(2) of the ITAA 1997. This net proceed amount is considered the money the Trustee is required to pay for the acquisition of the Property. The second element of the cost base is the incidental costs incurred in respect to the Property (subsection 110-25(3) of the ITAA 1997). Incidental costs that can be included in the cost base of a CGT asset are set out in section 110-35 of the ITAA 1997. It includes items such as agent fees, settlement costs, sales advertising/marketing costs, legal costs, valuation costs and transfer costs. The third element of the cost base includes the costs of owning the Property including maintenance costs, insurance, rates and land tax (subsection 110-25(4) of the ITAA 1997). It is accepted that all costs incurred in holding and selling the Property including the Trustee's remuneration will form part of the second and third elements of the Trustee's cost base of the Property.

The Trustee's total cost base for the Property in this case, being the first element (net proceeds) and the second and third elements (holding and selling costs), will equal the capital proceeds from the sale of the Property. Accordingly, the Trustee will not make a capital gain under section 100-45 of the ITAA 1997 from the sale of the Property as the capital proceeds from the CGT event will not exceed the Trustee's cost base of the Property. Question 3 Does the Trustee have an income tax liability arising from the sale of the Property under sections 98, 99 or 99A of the Income Tax Assessment Act 1936 (ITAA 1936)? Summary As there is no net income arising from the sale of the Property by the Statutory Trust, sections 99, 99 and 99A of the ITAA 1936 do not apply and the Trustee will not have an income tax liability. Detailed reasoning The liability to taxation provisions in Division 6 of Part III of the ITAA 1936, specifically sections 98, 99 and 99A only apply where there is net income of the trust estate.

The Property sale in this case does not give rise to a capital gain for the Trustee. The Trustee also does not derive any income from holding the Property during the relevant period. The Trustee therefore does not derive any net income for the statutory trust. As there is no net income of the statutory trust sections 98, 99 and 99A of the ITAA 1936 do not apply.