Edited version of private advice

Authorisation Number: 1052134164833

Date of advice: 28 June 2023

Ruling

Subject: GST - sale of subdivided lots of land

Question

Will Entity A be liable to pay GST (if any), under section 9-40 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) on the sale of the Subdivided Lots situated at X Address?

Answer

Yes, Entity A is liable to pay GST under section 9-40 of the GST Act when Entity A sell the Subdivided Lots situated at X Address.

Relevant facts and circumstances

You, Entity A, are both a regulated and a complying self-managed superannuation fund within the meaning of the Superannuation Industry (Supervision) Act 1993. The trustee for this fund is Entity B. Individual A and Individual B are the current members of this fund and also are the directors of the trustee entity (the Members).

You are not, and have never been registered for GST.

You acquired the property situated at X Address (the Property) from Individual A on DDMMYYYY.

The land where the Property is situated has the following property identifiers:

•         Plan of subdivision number: #

•         Lot: #

•         DP: #

The Property is # hectares in size and was used by Individual A for primary production purposes through a partnership agreement with Individual B for approximately # years.

The income received from the primary production business was approximately $# to $# per annum.

The Property was purchased on a bare trust arrangement with Entity C dated DDMMYYYY.

The purchase of the Property was funded by a $# in specie contribution from the Members with the additional $# borrowed by a limited recourse loan pursuant to the bare trust relationship between you and Entity C.

You purchased the Property with the intention of continuing the bee keeping business and to construct a dwelling on the Property later on for Individual A and Individual B retirement and having the Members live on the Property.

There is no site office or any building on the Property.

Prior to the purchase of the Property, you maintained a commercial property situated at Y Address (Y Property) which was used to generate rental income.

The rental income generated from Y Property was approximately $# per annum. However, the income was insufficient to pay the associated land tax, council rates, interest payments on the loan and other expenses with the upkeep of the property.

The Y Property was subsequently sold as Individual A could no longer maintain the property due to his declining health and old age. The proceeds from the sale were used to pay off the outstanding loans on the Y Property and thus liquidating your borrowing arrangements.

Upon the sale of Y Property, you did not seek to purchase another commercial property due to Individual A's health and age.

Individual A's age and declining health had also prevented the construction of a dwelling on the Property. As such, no dwelling was built on the Property and you looked to sell the property so that Individual A could make other plans for his retirement.

You became aware that Council rezoned the area in early YYYY which the Property is located to Zone RU2 Rural Landscape which permitted the applicant to subdivide the Property into rural residential lots.

Prior to the transfer of the Property from Individual A to you, during Individual A's previous # year ownership of the Property, Council did not allow property owners in the area to subdivide the land into rural residential lots.

In MMYYYY, you submitted a development application to the Council seeking developmental approval to subdivide the Property into # community title rural residential lots and # community association lot (the Plan).

The application for the Plan was approved by Council on DDMMYYY to subdivide the Property into # residential lots and # community lot (the Subdivided Lots).

The community lot will be owned in common by all the lot owners under the subdivision.

The community lot will not be used for common amenities of the lot owners (e.g. pools or driveways), but will be used to preserve the natural environment of the land, pursuant to council requirements.

It is a requirement of the Council when submitting a development application that an individual must engage a private planner to assist the individual in the application process.

As part of the application, you are required to provide the proposed lots with access to water, electricity, fire trails and sewage.

You relied entirely on the expertise of the private planner in seeking approval for the Plan.

You are seeking only to complete those works necessary on the Property to satisfy the conditions of the Plan.

You are required to submit a modification to the approved plan on DDMMYYYY to remove additional trees located on the Property to create the fire trail and asset protection zone (the Amended Plan). The Amended Plan was required due to a change in Council's policies and was not done at your request.

Throughout the development process, you did not seek a property valuation.

To date, you have spent approximately $# on the Plan and the Amended Plan. The amount spent has only been used to satisfy the minimum requirements needed to subdivide the Property.

All Council conditions for the subdivision have been met.

The costs to be spent on the remaining development of the Property is approximately $#. These costs include providing access to water, electricity, fire trails and sewage.

No building nor dwelling has been constructed on any of the Subdivided Lots.

You have begun the process of selling the Subdivided Lots and have engaged Entity D. You have left all the negotiation, pricing and marketing of the lots entirely in the hands of Entity D. You have had no contact with any potential buyers of the Property. Entity C will be listed as the vendor for the sale of the Subdivided Lots.

You have no business organisation in relation to the subdivision and sale of the lots. You are solely run by the Members, as directors of the Trustee. You have no employees or contractors to assist you, other than the aforementioned private planner and Entity D.

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 9-40

A New Tax System (Goods and Services Tax) Act 1999 section 23-5

A New Tax System (Goods and Services Tax) Act 1999 Division 188

Superannuation Industry (Supervision) Act 1993 section 62

Reasons for decision

Section 9-40 states that you are liable for GST on any taxable supplies that you make.

Section 9-5 provides that you make a taxable supply if:

(a)  you make the supply for *consideration; and

(b)  the supply is made in the course or furtherance of an *enterprise that you *carry on; and

(c)   the supply is *connected with the indirect tax zone; and

(d)  you are *registered or *required to be registered.

However, the supply is not a taxable supply to the extent that it is *GST-free or *input taxed.

On the facts of this case, there are no provisions in the GST Act to make the sale of the Subdivided Lots of vacant land GST-free or input-taxed.

Paragraph 9-5(a) requires that you must make the supply for consideration. As Entity C holds the legal title to the Subdivided Lots under the bare trust arrangement with you through your trustee, it needs to be determined which entity is making the supply when the Subdivided Lots are sold. Goods and Services Tax Ruling GSTR 2008/3 Goods and services tax: dealings in real property by bare trusts (GSTR 2008/3) provides the Commissioner's view on which entity in a bare trust arrangement makes a supply of real property for GST purposes.

The following have been extracted for your information:

29. A bare trust arrangement does not itself create the relationship of agency between the trustee and beneficiary. An entity does not, merely by acting in its capacity as bare trustee, contract as agent for the beneficiary of the trust but as principal. Accordingly, transactions involving a bare trust, without more, need to be analysed in a way that does not rely on a finding of agency.

30. In applying the GST law to a dealing in real property held on a bare trust, the question arises as to which entity makes the relevant taxable supply or creditable acquisition as the case may be - the trustee or the beneficiary.

...

37. The activities of a bare trustee are essentially passive in nature. A trustee of the type of trust considered in this Ruling has either no active duties to perform or only minor active duties. A bare trust as that term is used in this Ruling does not carry on an enterprise for GST purposes by virtue of its dealings in the trust property.

38. On the other hand, a beneficiary of a bare trust may carry on an enterprise involving an asset held on trust for the beneficiary by the bare trustee. For instance, in the example at paragraph 11 of this Ruling, despite legal title to the property being held by T, the property is used by B in carrying on its enterprise.

39. If the asset is sold, the transaction will involve a transfer of the legal title to the property to a third party by the trustee at the direction of the beneficiary.

40. The definition of 'taxable supply' concerns itself with supplies made in the course of an enterprise. It is the entity which conducts that enterprise that makes the relevant supply. In other words, if T transfer legal title to the property to a third party at the direction of B, it is B that causes the supply to be made in the course of its enterprise and is liable for GST, if the other requirements for a taxable supply in section 9-5 are met.

In this instance, Entity C is listed as the entity that is holding onto the Subdivided Lots for the beneficiary, which is Entity B. This means that Entity C does not have any other active duties to perform aside from holding the Property in the trust arrangement and thus, Entity C will not be carrying on an enterprise for GST purposes by virtue of its dealings in the Property. The sales of the Subdivided Lots are carried out at your direction in your capacity of beneficiary under the bare trust arrangement with Entity C. Therefore, you will be the entity that is making the supply when the Subdivided Lots are sold.

The sale of the Subdivided Lots will satisfy the requirements of paragraphs 9-5(a) and 9-5(c). This is because the sale will be a supply made for consideration (the sale price of the Lots) and the Property is situated in Australia.

It now needs to be determined whether the sale of the Subdivided Lots is made in the course or furtherance of an enterprise that you carry on under paragraph 9-5(b). Moreover, you are not currently registered for GST. Therefore, we also need to determine whether you will be required to be registered for GST under paragraph 9-5(d) at the time of settlement of the sale of the subdivided lots.

Is the sale of the Subdivided Lots in the course or furtherance of an enterprise that you carry on?

The term enterprise is defined for GST purposes in subsection 9-20(1) and includes, among other things, an activity or series of activities done:

(a) in the form of a business; or

(b) in the form of and adventure or concern in the nature of trade; or

...

(da) by a trustee of a complying superannuation fund, or if there is no trustee of the fund, by the person who manages the fund.

As you are a complying superannuation fund, you are carrying on an enterprise through your trustee for the purposes of the GST Act as per paragraph 9-20(1)(da). It now needs to be determined whether the sale of the Subdivided Lots is made in the course or furtherance of this enterprise.

The scope of paragraph 9-20(1)(da) is extensive in the sense that the activities done by a trustee of a complying superannuation fund are what forms the enterprise that they carry on. Therefore, any activities done by a trustee of a complying superannuation fund will necessarily be in the course or furtherance of that enterprise. Furthermore, a trustee of a complying superannuation fund is required under section 62 of the Superannuation Industry (Supervision) Act 1993 (SIS Act) to ensure that the fund is maintained solely for, among other things, 'the provision of benefits for each member of the fund on or after the member's retirement from any business, trade, profession, vocation, calling, occupation or employment in which the member was engaged...'.

Therefore, any activity done by you through your trustee must be consistent with section 62 of the SIS Act, and consequently must be in the course or furtherance of your enterprise. The fact that you originally intended to acquire the Property to allow the bee keeping business to continue and to construct a dwelling for the fund's Members to live in does not change that outcome. Consequently, your activities in subdividing the Property and selling the Subdivided Lots will be made in the course or furtherance of your enterprise as a complying superannuation fund, and paragraph 9-5(b) will be satisfied.

GST registration requirements

We now have to consider whether you are required to register for GST.

Section 23-5 provides that you are required to be registered for GST if you carry on an enterprise and your GST turnover meets the registration turnover threshold (currently $75,000).

Under subsection 188-10(1), an entity has a GST turnover that meets a turnover threshold if:

(a)  your current GST turnover is at or above the turnover threshold, and the Commissioner is not satisfied that your projected GST turnover is below the turnover threshold; or

(b)  your projected turnover is at or above the turnover threshold.

Subsection 188-15(1) states that your current GST turnover at a time during a particular month is the sum of the values of all the supplies that you have made, or are likely to make, during the 12 months ending at the end of that month, other than:

(a)  supplies that are input taxed; or

(b)  supplies that are not for consideration (and are not taxable supplies under section 72-5); or

(c)   supplies that are not made in connection with an enterprise that you carry on.

Subsection 188-20(1) states that your projected turnover at a time during a particular month is the sum of the values of all the supplies that you have made, or are likely to make, during that month and the next 11 months, other than:

(a)  supplies that are input taxed; or

(b)  supplies that are not for consideration (and are not taxable supplies under section 75-5); or

(c)   supplies that are not made in conjunction with an enterprise that you carry on.

Goods and Services Tax Ruling GSTR 2001/7 Goods and services tax: meaning of GST turnover, including the effect of section 188-25 on projected GST turnover (GSTR 2001/7) explains the meaning of 'capital assets' in the context of section 188-25 in paragraphs 31 to 36:

Meaning of 'capital assets'

31. The GST Act does not define the term 'capital assets'. Generally, the term 'capital assets' refers to those assets that make up 'the profit yielding subject' of an enterprise. They are often referred to as 'structural assets' and may be described as 'the business entity, structure or organisation set up or established for the earning of profits'.

32. 'Capital assets' can include tangible assets such as your factory, shop or office, your land on which they stand, fixtures and fittings, plant, furniture, machinery and motor vehicles that are retained by you to produce income. 'Capital assets' can also include intangible assets, such as your goodwill.

33. Capital assets are 'radically different from asses which are turned over and bought and sold in the course of trading operations'. An asset which is acquired and used for resale in the course of carrying on an enterprise (for example, trading stock) is not a 'capital asset' for the purposes of paragraph 188-25(a).

34. 'Capital assets' are to be distinguished from 'revenue assets'. A 'revenue asset' is 'an asset whose realisation is inherent in, or incidental to, the carrying on of a business'.

35. If the means by which you derive income is through the disposal of an asset, the asset will be of a revenue nature rather than a capital asset even if such a disposal is an occasional or one-off transaction. Isolated transactions are discussed further at paragraphs 46 and 47 of this Ruling.

36. Over the period that an asset is held by an entity, its character may change from capital to revenue or from revenue to capital. For the purposes of section 188-25 the character of an asset must be determined at the time of expected supply.

Paragraphs 258 to 260 of MT 2006/1 provide further guidance on the distinction between trading/revenue assets and investment/capital assets:

258. United Kingdom cases categorise assets as either trading assets or investment assets. Assets purchased with the intention of holding them for a reasonable period of time, to be held as income producing assets or to be held for pleasure or enjoyment of the person, are more likely not to be purchased for trading purposes.

259. Examples of investment assets are rental properties, business plant and machinery, the family home, family cars and other private assets. The mere disposal of investment assets does not amount to trade.

260. Assets can change their character but cannot have a dual character at the same time.

In addition, paragraphs 46-47 of GSTR 2001/7 explains the concept of isolated transactions in the context of GST turnover:

Isolated transactions

46. An enterprise may consist of an isolated transaction or a dealing with a single asset. For example, an enterprise may consist solely of the acquisition and refurbishment of a suburban shop for resale at a profit. Where an entity engages in acquiring a single asset for resale at a profit, the activity will be an enterprise under paragraph 9-20(1)(b), because it is an activity in the form of an adventure in the nature of trade. As discussed in paragraph 35 of this Ruling, the disposal of that single asset is not the transfer of a capital asset. Consequently, that supply is not excluded from your projected GST turnover.

47. The disposal of that single asset, or the completion of that isolated transaction, is also not a transfer solely as a consequence of ceasing to carry on an enterprise. In such circumstances the enterprise ceases as a consequence of the disposal of the single asset, rather than the single asset being disposed of in consequence of the ceasing to carry on the enterprise.

Miscellaneous Taxation Ruling MT 2006/1 The New Tax System: the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian Business Number (MT 2006/1) sets out the ATO's position on when an entity is carrying on an enterprise for the purposes of entitlement to an ABN. One situation where an entity is considered to be carrying on an enterprise is where they engage in an adventure or concern in the nature of trade. While an enterprise has already been established in your case for the reasons set out above, the guiding principles in MT 2006/1 for determining whether an enterprise in the form of an adventure or concern in the nature of trade exists have relevance to the question of whether the disposal of an asset is revenue or capital in nature for GST registration purposes. This is because an adventure or concern in the nature of trade generally involves the disposal of revenue assets, rather than capital assets.

Paragraph 264 of MT 2006/1 discusses two seminal cases establishing whether there is an adventure or concern in the nature of trade: Statham & Anor v Federal Commissioner of Taxation 89 ATC 4070 (Statham) and Casimaty v FC of T 97 ATC 5135 (Casimaty). Paragraph 265 of MT 2006/1 extracts the key elements of both cases and provides a list of factors that can be used to assist in determining whether isolated property transactions are an adventure or concern in the nature of trade or a mere realisation of a capital asset:

265. From the Statham and Casimaty cases a list of factors can be ascertained that provide assistance in determining whether activities are a business or an adventure or concern in the nature of trade (a profit-making undertaking or scheme being the Australian equivalent, see paragraphs 233 to 242 of this Ruling). If several of these factors are present it may be an indication that a business or an adventure or concern in the nature of trade is being carried on. These factors are as follows:

•         there is a change of purpose for which the land is held;

•         additional land is acquired to be added to the original parcel of land;

•         the parcel of land is brought into account as a business asset;

•         there is a coherent plan for the subdivision of land;

•         there is a business organisation - for example, a manager, office and letterhead;

•         borrowed funds financed the acquisition or subdivision;

•         interest on money borrowed to defray subdivisional costs was claimed as a business expense;

•         there is a level of development of the land beyond that necessary to secure council approval for the subdivision; and

•         buildings have been erected on the land.

No single factor will be determinative of whether the activity or activities will constitute either a business or an adventure or concern in the nature of trade.

In determining whether activities relating to isolated transactions are an enterprise or are the mere realisation of a capital asset, it is necessary to examine the facts and circumstances of each particular case.

In your ruling application, you have submitted that in the course of applying the above factors taken from Statham and Casimaty, that the sale of the Subdivided Lots would be the disposal of capital assets for the following reasons:

a)    the purpose for which the land was held was one of primary production and building a dwelling for the Members. The property was then realised to provide for the Members' retirement once Individual A's health deteriorated

b)    no additional land was acquired or purchased

c)    the land was not brought into account as a business asset

d)    there was a coherent plan for the subdivision of the Property, however you have relied on the expertise of the private planner in all instances

e)    you do not have a business organisation

f)     you borrowed limited funds only through limited recourse borrowing arrangements

g)    monies borrowed by you were subject to interest on monies borrowed under the bare trust arrangement

h)    there has been no development beyond what is absolutely necessary to secure Council approval, including the Amended Plan

i)      no buildings have been erected on the Property.

We disagree with your application of the above factors from Statham and Casimaty and the resulting conclusion you have drawn for the following reasons:

1)    as a complying superannuation fund, your trustee is required to undertake activities that result in the provision of benefits to members of your fund upon their retirement. This will involve activities that seek to maximise the financial benefit of your Members during their retirement, in accordance with your trustee's statutory obligations under the SIS Act;

2)    while you submit that the Property was not brought into account as a business asset and there was no business organisation in relation to the sale, the fact remains that it is an asset held by a complying superannuation fund, which must deal with fund assets in an organised way in compliance with statutory obligations for the purposes of providing financial benefits to the fund's members;

3)    your decision to subdivide the Property into lots fundamentally changed the nature of the Property since the time you acquired it. The Property was able to be sold as-is without subdividing it for market value, but subdividing it into the Subdivided Lots meant that you are able to enhance the return on the sale of the Property;

4)    while you have not undertaken any development beyond what is necessary to secure Council approval, based on the facts, the total expenses you are likely to incur on the subdivision will exceed $# million ($# already expended and an additional $# anticipated). We consider these costs are significant when compared to the total acquisition cost of the Property ($# in total funded by the in specie contribution from the Members and the limited recourse borrowing arrangement with Entity C);

5)    your engagement of a private planner to assist with the subdivision application, along with engaging Entity E to market and sell the Subdivided Lots does not diminish your intention to enhance the profit on the sale of the Property. Where a taxpayer lacks the necessary skills or knowledge to carry out a subdivision and marketing themselves, is to be expected that they would engage a suitably qualified third party to supplement this. The private planner and Entity D must still act in accordance with the instructions that you would have given them upon engagement, even if you have permitted them to make certain decisions during their engagement without your input. This means they are supporting you in carrying out your intentions to enhance the profit of the sale of the Property.

The Administrative Appeals Tribunal (AAT) case Collins & Anor ATF The Collins Retirement Fund v FC of T 2022 ATC 10-627 (Collins) is relevant to your situation. In Collins, the applicant was the trustee of a complying superannuation fund and held two parcels of land it acquired from its members. The members of that fund had previously used the parcels as a nursery and later leased them to a tenant. The applicant subdivided the lots into 11 community title rural residential lots and one community association lot, and sold 10 of the lots. The applicant argued that although they were carrying on an enterprise pursuant to paragraph 9-20(1)(da), they were not required to be registered for GST as the proceeds from the sale of the subdivided lots were excluded from turnover as the lots were capital in nature. The AAT disagreed with the applicant and concluded that the sale of the lots constituted the disposal of revenue assets, and should be included in the applicant's GST turnover, resulting in them being required to be registered.

The AAT in Collins, at paragraphs 20 to 26, discussed that the character of an asset needs to be determined at the time of supply, not the time of acquisition:

20. In the income context, in determining whether the proceeds of sale of an asset are on the revenue or capital account, attention is focused upon whether the seller had an intention, at the time of acquisition of the asset, that the asset would be sought at a profit. The Commissioner submitted that for s188-25(a) purposes, the character of an asset must be determined at the time of the supply, describing this as a key point of distinction from the income tax framework.

21. As the Commissioner pointed out, the expression 'capital asset' does not appear elsewhere in the GST Act. Further, the context of the characterisation of the supply of an asset as a transfer of ownership of a capital asset in s188-25(a) - in determining an entity's projected turnover - is quite different to the role played by the revenue/capital distinction in determining the accessibility of receipts or deductibility of outgoings or losses.

22. For instance, whether an amount is received in the course of a commercial or business-like transaction may be significant to or even determinative of whether the receipt is assessable to income tax. In contrast, the application of s 188-25(a) will only arise for consideration where the supply under consideration is or would be made in the course of an enterprise the taxpayer carries on.

23. Further, as the Commissioner pointed out, the GST Act deals separately with supplies and acquisitions. Section 188-25(a) is only relevant to supplies.

24. These considerations point to whether the taxpayer has a profit-making intention or object at the time the relevant asset is acquired being of less significance that it is for the purposes of the capital vs revenue dichotomy in the income tax context. Accordingly, the Commissioner submitted that whether the taxpayer had a profit-making intention at the time of the acquisition of an asset is not determinative for s 188-25(a) purposes. The focus must be on the time a supply of the asset is made or is likely to be made.

[...]

26. I respectfully adopt the proposition that for s 188-25(a) the character of an asset must be determined at the time the supply is made (or, I would add, likely to be made).

In your case, we consider these principles from Collins are applicable and that the character of the Subdivided Lots needs to be determined at the time of their sale, and not whatever intentions may have been held for the former, unsubdivided Property.

You have submitted in paragraphs 41 to 44 of your ruling application that Collins should be distinguished and that the decision of the McCorkell v FC of T 98 ATC 2199(McCorkell) should be followed because you have adopted a passive role and, similar to your submissions in relation to Statham and Casimaty relied on expertise and professional advice and had no direct contractual relationship with any contractors and experts retained, no direct contact with potential purchasers, and continued to use the Property for primary production purposes up until it was subdivided.

The decision in McCorkell concerned a taxpayer that lived on a farming property of approximately 15 hectares since birth and undertook an orchard business on the property. The taxpayer contemplated retirement and selling the land as he had no family to continue the orchard. He arranged for part of a 4 hectare block to be subdivided into 40 housing lots, with an additional 17 lots created out of the remainder of the block. The subdivision was carried out in two stages to avoid significant borrowing. The taxpayer engaged a surveyor, an engineer and real estate agents to assist with the subdivision and sale of the 4 hectare block. The taxpayer had minimal involvement with the experts he engaged and no contact with prospective buyers. 37 lots were sold and it was held that the sale of the 37 lots amounted to disposal of capital assets.

We disagree with your application of McCorkell described above to the current facts. The taxpayer in McCorkell lived on the property and worked the land for the entire time he held the property. The subdivision and sale of the 4 hectares into residential lots was found to be a realising of the capital value of part of the property that he used for a dual private residential and farming purpose. The taxpayer still resided on the remaining part of his property that was not sold. In your case, when the Property was transferred to you, you were required to hold the Property as an asset to provide financial benefits to the Members upon their retirement. The decision to subdivide the Property into Lots and sell the Property in allotments provided additional profits beyond what could be obtained through selling the Property unsubdivided at market value. Your intention for the use of the Property at the time of the subdivision and sale of the Subdivided Lots was for profit.

The AAT in Collins also distinguished McCorkell for the following reasons in paragraphs 57 to 59 of the decision:

57. Similarly, in McCorkell, the taxpayer had lived on a farming property since birth, inherited it upon his father's death and worked it for many years. Again, there could be no suggestion that he acquired it with the intention of subdivision and sale. The Tribunal found that the taxpayer did no more than was necessary to obtain approval of the authorities and enhance the presentation of the individual lots for sale. Aside from the sale proceeds being deposited to a separate bank account, more formal business records were not maintained. The Tribunal accepted evidence that the subdivision was a fairly straightforward one. Again, this is quite different to the current matter in which a very substantial amount was expended on the development and, I infer from the precision with which the applicant was able to identify that amount, effective business records maintained.

58. The Tribunal in McCorkell was heavily influenced by the judgement of the Full Federal Court in Statham, the third case referenced by the applicant. Again, this case is quite different to the current matter. The Court accepted a submission that the subdivision was simple and had few of the hallmarks of a business enterprise. Only limited clearing and earthworks were involved, the owners relying on the local council to carry out roadworks and other infrastructure.

59. All in all, examination of these cases underlines, with respect, the wisdom of the observation in the judgement of Gibbs CJ in the Whitfords Beach case that it can be 'unprofitable to examine the particular circumstances of the various cases in which the question [of whether a subdivision and sale is a mere realisation of a capital asset] has been discussed.' Federal Commissioner of Taxation v Whitfords Beach Pty Ltd (1982) 150 CLR 355, 368.

Consistent with this reasoning, and in contrast with McCorkell, in your case you are required to deal with fund assets in an organised way in compliance with statutory obligations, for the purposes of providing financial benefits to the fund's members. We consider the amount expended on the subdivision, when compared to the amount paid by you to acquire the Property, is significant.

The AAT in Collins also addressed the issue of engaging experts to assist in a property subdivision. This is discussed in paragraph 63 of the decision, which is extracted below:

63. That the applicant, with no professional experience in land development, should engage others to carry out works and market the subdivided lots is scarcely surprising. The engagement of contractors to provide advice and carry out engineering and construction works and real estate agents to market land, is I would have thought, a hallmark of modern subdivision projects. While that may mean Mr Collins was relatively passive in respect of these activities, I do not accept that this weighs heavily in the applicant's favour in the context of a development of this nature which involved the undertaking of extensive skilled work.

Consistent with this aspect of the Collins decision, we consider the purpose for which you engaged the private planner and Entity D is consistent with utilising experts to assist you in achieving the intended outcome of enhancing the return on the sale of the Property through the subdivision into lots. The fact that you may have been passive in your interactions with the private planner and Entity E does not take away the intention for which you engaged them.

Consequently, in light of the above analysis, the Subdivided Lots has the character of a revenue asset and therefore, the sale of the Subdivided Lots will be included in your GST turnover. Given the sales are likely to exceed the turnover threshold of $75,000, you will be required to register for GST and paragraph 9-5(d) is satisfied.

Conclusion

You satisfy all the elements of section 9-5 in relation to the sale of the Subdivided Lots. Therefore the sale of the Subdivided Lots will be a taxable supply. GST is payable under section 9-40.

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