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Edited version of private advice
Authorisation Number: 1051819843361
Date of advice: 31 March 2021
Ruling
Subject: GST and subdivision of land
Question 1
Are you considered to be in business and therefore required to be registered with an Australian Business Number?
Answer
No. The subdivision of the property and the sale of the new subdivided parcel of lands is the mere realisation of a capital asset: The mere realisation of a capital asset does not amount to trade. In addition, the mere realisation of a capital asset is not a business or an adventure or concern in the nature of trade despite the size of the assets.
Question 2
Are you required to register and charge the buyer GST on their new subdivided parcel of lands?
Answer
No. The subdivision and sale of the new subdivided parcel of lands will not amount to activities that are in the form or an adventure or concern in the nature of trade. The sale of the new subdivided parcel of lands is therefore not made in the course or furtherance of an enterprise and therefore will not meet the requirements of a taxable supply.
Question 3
Will any part of the proceeds from the subdivision be taxed as ordinary income?
Answer
No. The sale of the lots is considered to be a mere realisation of a capital asset. No part of the proceeds from the sale of the subdivided lots will be included in your ordinary income.
This ruling applies for the following periods:
30 June 20XX
30 June 20XX
30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
You acquired a property. (The property).
The ownership of the property is held as follows; person 'A' a percent and person 'B' a percent.
The size of the land is greater than 2 hectares.
The property was purchased in 19xx.
The purchase price was $x
The property has a house and a shed and is used as your main residence.
You have a local Council Value which values the property prior to subdivision $XX.
Current Market Value without changes as indicated by a recent real estate agent is between $XXX -$YYY.
The property has never been offered on the market for sale. After submitting preliminary plans to the local council to subdivide into X blocks of a size, the local council approached you with an offer to purchase Y blocks to develop a park, an offer of $XX was made and refused due to the low value of the offer.
The Current market value is considered to be approximately $XXX - $YYY per block, which is between $X and $Y.
No blocks will be retained by you. No buildings are being built.
The main dwelling and shed will be demolished upon subdivision.
In relation to the subdivision a number of steps are required to be undertaken and you will incur costs as a result. To date, very few of these steps have been undertaken.
A loan is to be approved with other investment properties held as security. The loan is to be used to fund the subdivision project.
The Project is to commence in shortly.
The Project will be completed between within 12 to 18 months from commencement.
You have not acquired any additional land.
You have not undertaken any property development in the past and do not plan to do so in the future.
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 Section 9-20
A New Tax System (Goods and Services Tax) Act 1999 Section 23-5
A New Tax System (Goods and Services Tax) Act 1999 Section 188-10
Income Tax Assessment Act 1997 section 6-5
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