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Edited version of your written advice
Authorisation Number: 1012980044124
Date of advice: 3 March 2016
Ruling
Subject: GST and sale of vacant land
Question
Will you be liable to pay goods and services tax (GST) when you sell the land located in Australia?
Advice
Yes, you will be liable to pay GST when you sell the land located in Australia, as the sale of the land will be a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).
Relevant fact
You currently carry on a leasing enterprise and are registered for GST.
You have purchased a commercial property located in Australia as a going concern. The property is on two lots, lot 1 and 2.
Lot 1 has a building on it and you are currently leasing this property.
Lot 2 has a dilapidated house in which materials and rubbish were dumped into until you purchased it. Since you purchased lot 2, this land and house has not been used.
You were going to knock down the house on lot 2 and rebuild and decided not to because of the many council restrictions related to the zoning and the high cost of rebuilding.
You are considering selling lot 2 as a vacant land. This is because the house on lot 2 is not fit for human habitation and cannot provide basic living facilities and shelter since the house does not have a kitchen, bathroom, flooring and full walls. You have not received any demolition order and the previous owners had the house like this for years.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 9-5
Detailed Reasoning
What is the supply?
According to paragraph 47 in Goods and Services Tax ruling GSTR 2012/5, vacant land is not capable of being occupied as a residence or for residential accommodation as it does not provide shelter and basic living facilities. Vacant land is not residential premises.
You will sell lot 2 that has a dilapidated house on it. The house is not fit for human habitation and cannot provide basic living facilities and shelter since the house does not have a kitchen, bathroom, flooring and full walls
In this instance you will be selling vacant land and not residential premises.
GST status of supply of vacant land
Note: Where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act.
GST is payable on a taxable supply. An entity makes a taxable supply under section 9-5 of the GST Act if:
a) the entity makes the supply for consideration; and
b) the supply is made in the course or furtherance of an enterprise that the entity carries on; and
c) the supply is connected with Australia; and
d) the entity is registered or required to be registered for GST.
However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.
All of the above requirements must be satisfied for your supply of vacant land to be a taxable supply under section 9-5 of the GST Act.
From the information received, you will satisfy paragraphs 9-5(a) and 9-5(d) of the GST Act when you supply the vacant land as:
a) you will make the supply for consideration; and
b) the supply will be made in the course of the leasing enterprise that you carry on since Lot 2 was purchased with lot 1 as a going concern;
c) the supply is connected with Australia as the land is in Australia; and
d) you are registered for GST.
There is no provision in the GST Act that makes the supply of vacant land GST-free or input taxed.
Accordingly, your supply of the vacant land will be a taxable supply under section 9-5 of the GST Act and you will be liable for GST on the sale.
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