QA Time: Question: My client has a family trust which owns three residential investment properties, a block of land and does some share trading. They now have a contract on the block of land and would like to know if this is “realisation of a capital asset” or an enterprise and GST would be applicable to the sale. They purchased the residential block of land in the 2010 financial year and had thoughts of building a house and selling. They have now decided to sell the block of land instead. The only work carried out on the block is realignment of the boundaries with the property next door (which they own under their own names and rent out). The family trust is GST registered, although this is from when they held a business under the family trust which was sold back in 2008/2009. They kept the GST registration but have been lodging nil BAS. Answer: To be a taxable supply, the supply must inter alia be made in the course or furtherance of an enterprise that the supplier carries on. Your question suggests that this residential block of land has nothing to do with the enterprise formerly carried on by the trust, so it seems curious that the trust has maintained its GST registration. Assuming that the property has nothing to do with the trust’s existing registration, then the sale of this property is unlikely to be seen as anything other than the realisation of a capital asset. Proceeds from the sale of capital assets are not included in an entity’s GST turnover, which means that proceeds from the sale of the vacant land is unlikely to be taken into account in determining the trust’s requirement to register in relation to a land development enterprise. That being the case, the sale of the vacant land should be treated as an out-of-scope supply and hence, not subject to GST. Do you fall in this category and need some advice, feel free to contact us: D’Omkara Accountants Pty Ltd Suite 11 - 211 Warrigal Road HUGHESDALE VIC 3166 (03) 9579-4450
Posted on: Tue, 09 Sep 2014 22:57:26 +0000