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Edited version of your written advice
Authorisation Number: 1051322566795
Date of advice: 21 December 2017
Ruling
Subject: GST
Questions
1. Are you conducting an enterprise considering the subdivision of your residential property?
2. Will GST be payable on your sale of the subdivided Lots?
Answers
1. No.
2. No.
Relevant facts and circumstances
● You and another entity own the identified property (the property) as joint tenants.
● The property has a house on it and this has been your residence since you bought it decades ago.
● You have not carried on any enterprise activities on the land during your occupation of the property.
● The property was only for residential private use, being a lifestyle property close to city amenities.
● The property has become too large for you to maintain but you still want to live there.
● You plan to subdivide the property into a number of Lots.
● You will continue to live in the existing house.
● You will not demolish the existing house and will not construct any dwellings or other buildings on the land.
● You intend to keep two of the Lots:
○ the Lot which contains the house where you live in (House Lot) and
○ the adjoining Lot to the House Lot.
● You intend to sell the remainder Lots as vacant land, budgeting to have some remainder cash to cover taxation and future living.
● In order to be able to subdivide the property, you must comply with the relevant Council regulations.
● You are retired and receiving the age pension.
● You do not have the expertise to comply with the Council requirements to develop the land. You will be using the services of professionals.
● You have engaged a third party to manage the subdivision of the land into Lots, including obtaining all necessary approvals.
● The third party, in its capacity as your agent, will organise the complete development, finance and sales of the Lots. The third party is authorised to recoup its costs and monies owing to it from the proceeds of the sales of the Lots.
● You will be guided by the third party as to the most effective way to develop the land and cover the costs and to provide the two Lots mentioned above back to you.
● You will only be undertaking what is required to comply with the minimum requirements for Council approval for subdivision.
● You are not registered for the goods and services tax (GST) either individually or as a partnership.
● You have not developed land previously.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 7-1,
A New Tax System (Goods and Services Tax) Act 1999 section 9-5,
A New Tax System (Goods and Services Tax) Act 1999 section 9-20, and
A New Tax System (Goods and Services Tax) Act 1999 section 23-5.
Reasons for decision
Section 7-1 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that GST is payable on taxable supplies.
Under section 9-5 of the GST Act, you make a taxable supply if:
● you make the supply for consideration;
● the supply is made in the course or furtherance of an enterprise that you carry on;
● the supply is connected with the indirect tax zone (such as, Australia);
● you are registered or required to be registered for GST; and
● the supply is neither GST-free nor input taxed.
On the facts of this case, there are no provisions in the GST Act to make the sale of your property GST-free or input taxed.
You are currently not registered for GST. Therefore, in deciding whether the sale of the subdivided Lots that are part of your property is a taxable supply, we need to determine whether the supply is made in the course or furtherance of an enterprise that you carry on and whether at the time of sale, you will be required to be registered for GST.
Are you carrying on an enterprise and are you required to be registered for GST?
Under section 23-5 of the GST Act, you are required to be registered if you are carrying on an enterprise and your GST turnover meets the registration turnover threshold.
On the facts provided, based on the principles in MT 2006/1 and GSTD 2006/6, we consider that your activities in relation to the subdivision and sale of the subdivided Lots do not amount to carrying on an ‘enterprise’ as defined in section 9-20 of the GST Act.
As you are not carrying on an enterprise, you will not be required to be registered for GST.
As you are not registered and will not be required to be registered for GST at the time of sale, the sale will not meet all of the requirements for a taxable supply under section 9-5 of the GST Act. Consequently, GST will not be payable on the sale of part of your property, constituted by the subdivided Lots.
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