Data Matching – Property Sales & GST
On 21 January, the ATO reminded us that it receives data about the sale of properties from State and Territory revenue offices and “matches” it to information in statements filed by taxpayers.
According to the statement, taxpayers carrying on commercial activities can expect to receive a letter if property was sold and GST was not included in their BAS.
Affected taxpayers hoping to avoid a penalty will need to review their records and make any necessary revisions to their BAS by the specified date.
Of course, not all property sales are subject to GST.
Generally, there is no GST on the sale of existing residential property so long as the property is not “commercial residential premises” (for example, a hotel). There is GST, however, on the sale of new residential property.
If the property being sold is vacant, GST will be payable if the sale was made in connection with a commercial activity being carried on. The buyer may also be under an obligation to withhold an amount from the purchase price and pay it to the ATO.
On the other hand, a private sale of vacant land which is not part of a larger property development would not be subject to GST.
GST is not imposed on supplies of “going concerns” provided:
(1) there is payment (i.e. it’s a sale, not a gift);
(2) the buyer is registered or required to be registered for GST;
(3) the parties agree in writing that the sale is of a “going concern”;
(4) the business is carried on up to the date of sale; and
(5) everything needed to continue the business is supplied as part of the sale.
Sales of farm blocks might fit into this category if the whole farming business is being sold. If not, there is no GST on the sale of a farming property where a farming business has been carried on on the land for at least 5 years before the sale and the buyer intends to also carry on a farming business on the land after acquiring it.
If you have any questions about the above or you receive a letter from the ATO and need assistance in responding to it, please contact our office.