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Edited version of your written advice
Authorisation Number: 1013130596809
Date of advice: 24 November 2016
Ruling
Subject: GST and the sale of vacant land
Question 1
Is the intended sale of your vacant block of land located in NSW (land), subject to Goods and Services Tax (GST)?
Answer
No. The intended sale of your vacant block of land will not be subject to GST.
This ruling applies for the following periods:
01/07/20XX to 30/06/20YY
Relevant facts and circumstances
● You purchased the block of land in 20ZZ using bank finance.
● Your intention was to continue to work to obtain the additional finance to construct new residential premises to be used as your primary residence.
● You were unable to continue with the construction of the property due to the change in circumstances with your work causing the bank to deny your application for further approval to commence the construction.
● To enable you to secure paid employment you have commenced a training course.
● You were required to obtain an ABN for the purpose of operating a care service following your training.
● There were no improvements to the land and you have never held any other real property.
● To minimise your expenses you moved to a rented a room to enable you to meet your loan repayments for the land.
● In 20XX, you entered into a contract to sell the vacant land to a purchaser, the terms of the contract include obtaining a favourable goods and services tax private binding ruling.
Relevant legislative provisions
Section 23-5 and section 9-5 in the A New Tax System (Goods and Services Tax) Act 1999
Reasons for decision
GST is payable on taxable supplies. The sale of your vacant land is a supply and will be subject to GST if it is a taxable supply.
The sale of your vacant land will be subject to GST if it is a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). Section 9-5 of the GST Act provides that you make a taxable supply if:
(a) you make a supply for consideration
(b) the supply is made in the course or furtherance of an enterprise that you carry on
(c) the supply is connected with Australia and
(d) you are 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.
There are no sections of the GST Act to treat this sale of a vacant land as GST-free or input taxed.
You intend to sell the land for consideration, the sale is connected with Australia and you are not registered for GST. Therefore, it is necessary to consider whether the land will be sold in the course or furtherance of an enterprise that you carry on and whether you are required to be registered for GST.
Whether the sale is made in the course or furtherance of an enterprise
Section 9-20 of the GST Act provides that the definition of enterprise includes an activity or series of activities done in the form of a business, or in the form of an adventure or concern in the nature of trade. However, it does not include activities of a private or domestic nature.
Although the sale of your vacant land is only a one-off transaction, it can fall within the definition of enterprise if it is carried on in the form of an adventure or concern in the nature of trade.
In this case, your change in financing circumstances prompted the sale of vacant land which was held for private and domestic use. The sale was not in the form of an adventure or concern in the nature of trade. Therefore the sale of your vacant land does not constitute an enterprise for GST purposes and it is merely the realisation of a private asset.
Whether you are required to be registered
Section 23-5 of the GST Act advises that you are required to be registered if you are both carrying on an enterprise, and your GST turnover meets the registration turnover threshold.
As the sale of your vacant land does not constitute an enterprise, you will not be required to be registered under section 23-5 of the GST Act.
As all of the requirements under section 9-5 are not satisfied, the sale of your vacant land will not be a taxable supply. Therefore it will not be subject to GST.
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