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Edited version of your private ruling
Authorisation Number: 1012564234373
Ruling
Subject: GST and the sale vacant land
Question 1
Are the sales of the properties subject to GST under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999?
Answer
Yes, the sales of the properties are taxable supplies and subject to GST.
Relevant facts and circumstances
The entity purchased a number of properties located near each other.
The entity purchased the properties with the intention of constructing residential premises for use by associates of the entity. However, circumstances changed and the entity sold the properties as vacant land.
The entity has been registered for GST since before the properties were purchased.
During an interview with ATO officers, the entity advised that the activities of the entity include:
· Buying residential properties for the purpose of investment, ie receiving rental and at a later stage to be sold for profit.
· Buying vacant land for the purpose of development and resale or to be resold as vacant land at a later stage at profit.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 9-5
Reasons for decision
The sale of real property is subject to GST if the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) are met:
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.
(Items marked with an *asterisk are defined in the Dictionary at section 195-1 of the GST Act)
The sales of the vacant properties by the entity are for consideration (payment), connected with Australia (because the properties are located in Australia), are not GST-free or input taxed and the entity is registered for GST. Therefore, the sales are subject to GST if they are made in the course of furtherance of an enterprise that the entity carries on.
The entity has stated that part of the entity's business is to buy vacant land for development or resale at a profit. Therefore, sales of the vacant properties are made in the course of that business.
The fact that the entity intended to construct residential premises and supply these properties to associates of the entity does not change the nature of the properties for the entity. Had the developments occurred and the properties been supplied to the associates of the entity, these supplies would have still be made in the course of the business operated by the entity. These hypothetical supplies would have been taxable supplies if the entity had transferred the properties to the associates of the entity (or input taxed if they had been leased or rented to the associates of the entity).
As all of the requirements of section 9-5 of the GST Act are met, the supplies of the vacant properties are each taxable supplies subject to GST.
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