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Edited version of your written advice
Authorisation Number: 1012981524992
Date of advice: 18 March 2016
Ruling
Subject: GST and sale of real property
Question
Will you make a supply that is 'in the course or furtherance of an enterprise' and will you be making a taxable supply when you sell the subdivided blocks of land?
Answer
No.
You will not making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when you sell the subdivided blocks of land because the sale of the subdivided blocks of land will be the mere realisation of a private asset and hence, will not be made in the course or furtherance of an enterprise that you carry on.
Relevant facts and circumstances
You are the owner of the land (the property). The land area of the property is X acres.
You purchased the property many years ago with the intention of it becoming your family home.
You obtained a bank loan to finance the purchase of the property.
You constructed a house on the property and you have continued to reside in the house to the present time.
The property was used for business purposes for a number of years.
You have not operated a business on the property for a number of years and are not registered for GST.
For specific reasons you have decided to sell the property and move to a new location closer to family members.
A draft Development Agreement is currently being prepared with a developer in relation to the subdivision of the property and sale of the subdivided blocks of land (the subdivision project).
• The entire subdivision project will be managed by the developer.
• The developer will fund the subdivision and sale of the subdivided blocks of land.
• The developer will be engaged to undertake the bare minimum as required by Council, with the view to expediting the time frame of getting the lots on the market and to reduce your costs.
• The developer will receive a Development fee paid from the proceeds of the sale of the subdivided blocks of land.
• The subdivided blocks of land will be advertised, marketed and sold by a real estate agent identified by the developer.
You will not have any direct involvement in the subdivision project or sale process.
You have never undertaken any property development.
You do not have a business plan.
You will not retain any of the subdivided blocks of land.
It is estimated that each subdivided block of land will be sold for a certain sum, dependant on some variables, such as the size of each subdivided block of land.
You have received a private ruling which provides that:
• the profit from the sale of subdivided blocks of land will not be treated as ordinary income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) as a result of you carrying on a business of property development, and
• the profit from the sale of subdivided blocks of land will not be treated as ordinary income under section 6-5 ITAA 1997 as a result of an 'isolated transaction' carried out for profit and commercial in character.
The Reasons for decision which accompanied the Notice of private ruling stated that:
• it is the Commissioner's view that your activities are not those of an entity carrying on a business of developing and selling land, and
• it is the Commissioner's view that the subdivision of the property and the sale of the subdivided blocks of land will be a mere realisation of a capital asset.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 9-5.
A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-5(a).
A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-5(b).
A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-5(c).
A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-5(d).
A New Tax System (Goods and Services Tax) Act 1999 section 9-20.
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