Edited version of private advice

Authorisation Number: 1052396636870

Date of advice: 19 May 2025

Ruling

Subject: GST - sale of vacant land

Questions 1

1.              Would your proposed sale of the vacant land at ...(Vacant Land) subdivided from your leased residential property at ..... (the Property) amount to an 'enterprise' in the form of 'an adventure or concern in the nature of trade', and therefore you are required to be registered for GST?

2.              Would the proposed sales of the Vacant Land be a mere realisation of a capital asset?

Answers 1

1.              No. The sale does not amount to an enterprise in the form of 'an adventure or concern in the nature of trade', as such you are not required to register for GST due to the proposed sale of the Vacant Land.

2.              Yes, the disposal of the Vacant Land is a mere realisation of a capital asset.

Although you are carrying on a leasing enterprise of residential properties, you are not required to be registered for GST. The sale of the Vacant Land will not be included in your GST registration turnover threshold calculation because it is excluded as the sale of a capital asset.

Relevant facts and circumstances

You are not and have never been registered for GST.

You acquired two residential properties in Australia in the year XXXX and derive residential rent from these properties for many years.

You acquired the first property situated at ...(the Property) for $Y. The Property has a land size of approximately AAA square meters.

You acquired the second property located at ....(second property) for $Z. It is BBB square meters in land size.

You lived in the Property for some years then moved overseas and then leased the Property since then.

The Property is rented for $C pw.

The second property is rented at $D pw. The rental properties are both managed via a real estate agent.

You used the Property as your main residence as soon as practicable after purchase and had been living in the property until ...... You then moved overseas and from .... till now, and the Property has been rented out. No major improvements have been made to the Property, other than repairs and maintenance as requested by tenants or on recommendations by the management agent.

Reasons for subdividing the Property into two lots:

The original intention was to retain the Property by renting it out indefinitely so that you would have a home to stay in when you return to Australia one day. However, you are now both retired and decided to continue staying overseas. On the one hand, you do not have salaries after retirement, and you are planning to sell the Property to realise the asset to provide for your retirement nest eggs. On the other hand, the Property consists of a dated small house on a large piece of land, the weekly rent received can hardly cover the land tax and other expenses such as repairs and maintenance, etc.

On advice by your real estate sales agent, you considered that by subdividing the land into two smaller parcels, you can dispose of the Property more easily.

The subdivision expenses are funded by you (as owners of the property) from your personal savings.

On 2XXX, you were granted for your DA application to subdivide the Property into 2 lots: the front lot with the existing dwelling, and the rear lot of vacant land and driveway is.... .

In 2XXX.....the subdivision commenced and is expected to complete in 2XXX. The front lot which contains the existing residential building will continue to be available for rent, and only the rear lot of vacant land (Vacant Land) will be sold. The Property has always been zoned residential (before and after the subdivision).

You made preliminary enquiries with ....Council, planner, surveyor, engineer and builder about what would be required to subdivide the property. 2 quotes were obtained to select a builder.

You provide a copy of Notice of Determination of A Development Application in respect of the Property as approved by ... dated ...

You also provide a subdivision works certificate (construction certificate) issued by .... dated ...

The total costs of subdivision will be $..... No input tax credits have been claimed for any subdivision costs.

You intend to sell the Vacant Land by engaging a real estate agent.

This is the first subdivision project undertaken by you. There has been no subdivision activities or land development projects previously undertaken by you or by any entities related to you.

You or entities related to you, do not plan to undertake any subdivision activities in the future. This is the very first and last subdivision activity undertaken by you.

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 subsection 9-20(1)

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 1999subsection 188-10(1)

A New Tax System (Goods and Services Tax) Act 1999 subsection 188-15(1)

A New Tax System (Goods and Services Tax) Act 1999 subsection 188-20(1)

A New Tax System (Goods and Services Tax) Act 1999 paragraph 188-25(a)

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