Are you making a taxable supply pursuant to section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when you sell the Property?
No.
You were registered for the GST from Date A to Date C. You were previously registered for GST as you conducted: • building house construction services • leasing of farmland from Period D to Period E • leasing of land for agistment from Period D to present day. You cancelled your GST registration from Date C as you are no longer required to be registered for the GST as your annual turnover from taxable supplies is less than $75,000 per annum. You acquired the Property under a contract dated Period D and settlement was 30 days thereafter. A special condition of the contract was that the Property was acquired GST-free under the farmland concession. The Property with a total land area of X hectares is currently used as follows: • 70% of grazing land leased for agistment purposes • residence deriving input taxed rental income (the shed is used in conjunction with the house for storage of cars and tools • farmhouse or caretaker's cottage deriving input taxed rental income. Since acquiring the property, it has been used for mixed purposes outlined as follows:
• Prior to your acquisition of the property, approximately 50% of agricultural land of the property were leased by the Seller to a farmer. • Following completion of your purchase contract of the Property, a new lease was entered into between you and lessee for the lease of a number of hectares of agricultural farmland and the farmhouse or caretaker's cottage for an annual rent of a certain sum plus GST. The agreement to lease the farmland and farmhouse expired in Period E and was not renewed nor has similar activity been undertaken since. • In Period D, the property was deriving agistment income from approximately 50% of the Property. • Since Period E, the property has been deriving agistment income from approximately 70% of the land. • The combined taxable supplies from farm lease and agistment income in the last 5 years is less than $75,000. • On acquisition of the Property, there was an established farmhouse or caretaker's cottage. This was leased and continues to be leased to present day. The current annual rent is less than $75,000 per annum as an input taxed supply.
• Residential premises were constructed on the property and on completion immediately became the residence of individuals associated with you. You also constructed an adjoining shed for storage of vehicles and tools. Rent was and is being paid by your associates as an input taxed supply. You entered into a conditional contract for the disposal of the Property on Date B with settlement expected to occur in approximately twelve months. The sale price is over $75,000. The draft Sale contract contains the following information: • There is an X mark on the statement that no GST is payable or the purchase price includes GST (if any). • In relation to the clause on 'GST Withholding Obligations', there is an X mark on the statement that the buyer is not required to make a payment under section 14-250 of the Withholding Law in relation to the supply of the Property. • In relation to the clause on 'Tenancies' which whether the Property is sold subject to a Residential Tenancy Agreement, there is an X mark on 'No'.
• Special Condition X of the draft contract allows the Buyer to undertake activities associated with a proposed subdivision or development application before settlement (including site access, investigations, testing, surveys and signage). • Clause Y provides that certain personal items and fixtures are not sold with the Property. • The associates have the option to rent back the house for a certain period after settlement.
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 23-5 A New Tax System (Goods and Services Tax) Act 1999 section 188-5 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 A New Tax System (Goods and Services Tax) Act 1999 section 195-1
The sale of real property is a taxable supply if all the requirements of section 9-5 of the GST Act are satisfied. Section 9-5 of the GST Act 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 Australia; 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. (*denotes a term defined in the GST Act.) Based on the information that you provided, the sale of the Property satisfies the requirements of paragraphs 9-5(a) and 9-5(c) of the GST Act because: • the proposed sale of the Property is for consideration and • the supply is connected with Australia as the Property is located in Australia. It remains to be determined whether the sale is made in the course or furtherance of an enterprise that you carry on (paragraph 9-5(b) of the GST) and whether you are required to be registered (paragraph 9-5(d) of the GST Act).
Whether the sale is made in the course or furtherance of an enterprise that you carry on The term enterprise is defined in subsection 9-20(1) of the GST Act to include, amongst other things, an activity or series of activities done in the form of a lease, licence or other grant of an interest in property. Section 195-1 provides that 'carrying on' an enterprise includes doing anything in the course of the commencement or termination of the enterprise. The Property is leased to third parties and to related entities. Hence, the sale of the Property is a sale made in the course or furtherance of a leasing enterprise that you carry on. Accordingly, the requirement of paragraph 9-5(b) of the GST Act is satisfied. Whether you are required to be registered You are currently not registered for GST. Under section 23-5 of the GST Act, you are required to be registered if • you are carrying on an enterprise; and • your GST turnover meets the registration turnover threshold. You have a GST turnover that meets the registration turnover threshold if your current GST turnover is at or above $75,000 and your projected GST turnover is not below $75,000.
In calculating your GST turnover under Division 188 of the GST Act, certain supplies are excluded. Paragraphs 188-15(1)(a) and 188-20(1)(a) of the GST Act provide that input taxed supplies are disregarded when calculating your current and projected GST turnovers respectively. In addition, paragraph 188-25(a) of the GST Act provides that in calculating your projected GST turnover, you disregard any supply made, or likely to be made, by way of transfer of ownership of a capital asset of yours. Part of the income you derive from leasing the Property is for input taxed supply of residential premises. Hence, to this extent, it is excluded in the calculation of your current and projected GST turnovers. Based on the information provided, your current GST turnover is below $75,000. The Property is used in carrying on your leasing enterprise. Hence, the sale of the Property is a disposal of a capital asset and is excluded in the calculation of your projected GST turnover. Hence, your projected GST turnover is below $75,000. Accordingly, as your GST turnover does not meet the registration turnover threshold, you are not required to be registered for GST under section 23-5 of the GST Act.
As you are currently not registered for GST and you are not required to be registered for GST when you sell the Property, the requirements of paragraph 9-5(d) of the GST Act are not satisfied. Therefore, as not all the requirements of section 9-5 of the GST Act are satisfied, you are not making a taxable supply when you sell the Property.