Was your supply of land at a specified address (the property) a taxable supply pursuant to section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 ('GST Act')?
No, your supply of the property was not a taxable supply and is not subject to GST. This ruling applies for the following period 1 January 2023 - 30 December 2023 The scheme commences on 6 May 2021
You are not registered for GST. Your occupation is XX. On a specified date, you entered into a contract to purchase the Property for $X. You have provided a copy of the sale contract. Settlement occurred on a specified date. The Property comprised of vacant land and was acquired as part of a house and land package. Your intent was to construct a house on the Property to use as your family's primary residence. Since purchase, the Property was left vacant. You received council approval for construction on a specified date. You did not use or construct anything on the Property during your period of ownership. Due to personal circumstances, you made the decision to sell the property. On a specified date, you entered into a contract for the sale of the Property for $X. You have provided a copy of the sale contract. You have not previously sold any property and do not own any other property.
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 section9-40
Summary For the sale of real property to be a taxable supply the supply must satisfy all the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 ('GST Act'). In your case, the requirements in paragraphs 9-5(a) and 9-5(c) and of the GST Act were satisfied as the sale of the Property was made for consideration and the sale was connected with the indirect tax zone, as it was located in Australia. The requirement in paragraph 9-5(b) was not satisfied because the supply was not made in the course of furtherance of an enterprise that you carried on. The sale was a mere realisation of a private asset and thus, was not made in the course or furtherance of an enterprise that you carried on. Furthermore, the requirement in paragraph 9-5(d) was not met as you were not registered nor required to be registered for GST. Consequently, GST is not payable on the sale of the Property as you did not make a taxable supply under section 9-5 of the GST Act when you sold the Property. Detailed reasoning GST is payable on any taxable supply that you make.
The sale of real property is a taxable supply if the supply satisfies all the requirements of section 9-5 of the GST Act which states: 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. However, the supply is not a * taxable supply to the extent that it is GST-free or input taxed. Based on the information that you provided, you met the requirements of paragraphs 9-5(a) and 9-5(c) of the GST Act as: • the sale of the Property was for consideration; and • the supply was connected with the indirect tax zone as the property was located in Australia. The primary issue to be resolved is whether the supply of the Property was made in the course or furtherance of an enterprise you carried on (paragraph 9-5(b)). If so, a further issue to be considered is whether you were required to be registered for GST. Enterprise Subsection 9-20(1) provides, amongst other things, that 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. Miscellaneous Taxation Ruling MT 2006/1 The New Tax System: the meaning of entity carrying on an enterprise for the purpose of entitlement to an Australian Business Number (MT 2006/1) provides the ATO view on the meaning of enterprise for the purposes of entitlement to an Australian Business Number. 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 ? Also provides that the discussion in MT 2006/1 equally applies to the term 'enterprise' as used in the GST Act and can be relied on for GST purposes.
MT 2006/1 provides that ordinarily, the term business would encompass trade engaged in, on a regular or continuous basis, while an adventure or concern in the nature of trade may be an isolated or one-off commercial activity that does not amount to a business but which has the characteristics of a business deal. However, the mere realisation of investment or private assets does not amount to trade. Additionally, the fact that the asset is sold at a profit does not, of itself, result in the activity being commercial in nature. Paragraphs 258 to 260 of MT 2006/1 provide that certain type of assets, such as rental properties, business plant and machinery, the family home, family cars and other assets are considered as investment assets. These assets are purchased with the intention of being held for a reasonable period of time, as income-producing assets or for the pleasure or enjoyment of the person. The mere disposal of these investment and private assets does not amount to trade. Assets can change their character from investment to trade, however these assets cannot be held at the same time for both purposes.
Based on the information provided, you purchased the Property with the intention of building residential premises to use as your principal residence. Your circumstances changed and you decided to sell the Property without proceeding to construction. Considering all the facts and circumstances of your case, the sale of the Property was a mere realisation of a private asset. Further, the sale was not in the form of a business or an adventure or concern in the nature of trade. Therefore, your supply of the Property did not constitute a supply made in the course or furtherance of an enterprise that you carried on, as such, the requirement in paragraph 9-5(b) of the GST Act was not satisfied. As you did not satisfy all the requirements of section 9-5 of the GST Act, your sale of the property was not a taxable supply. Hence, GST is not payable on the sale.