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Edited version of private ruling
Authorisation Number: 1011611530463
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Ruling
Subject: GST & Sale of Vacant Land
Question
Is GST payable on the sale of a vacant block of land more particularly described as lot X?
Answer
Yes, GST is payable on the sale of a vacant block of land which is more particularly described as lot X.
Relevant facts
The seller is the owner of the land described as Lots X, Y and Z contained in the Certificates of Title (the land).
The seller became the registered owner of the land prior to 1 July 2000.
The seller has entered into an agreement to sell the land for an arms length price to Entity A in Australia (the buyer).
Established residential homes are located on Lots Y and Z.
Lot X is the vacant block of land.
All Lots are currently zoned 'residential' in the town plan.
The seller does not carry on an enterprise on the land however it does carry on an enterprise on the adjacent land.
The seller accesses the adjacent land by using a driveway which runs over the land. There have been no other improvements made to the land and the land has not been used for any other purpose by the seller.
This land is not farm land and has not been used for farming or primary production purposes.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 (GST Act), section 9-5
Reasons for decision
Under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), an entity is liable for goods and services tax (GST) for any taxable supply it makes. Therefore, the sale of vacant land will only be subject to GST if the supply of the land satisfies the definition of taxable supply under section 9-5 of the GST Act.
Section 9-5 of the GST Act says 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 Australia, 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.
In your case, the supply of vacant land will be:
(a) for consideration as the seller will receive payment on the sale; and
(b) the supply is made in the course or furtherance of an enterprise the seller carries on; and
(c) the supply will be connected with Australia as the land is located in Australia, and;
(d) the seller is registered for GST.
GST and the disposal of capital assets (NAT 7682) states the following:
What is a capital asset?
A capital asset is generally an asset which is retained by an enterprise for the purpose of earning revenue. A capital asset is not intended for sale in the ordinary course of business.
Capital assets include things like motor vehicles, manufacturing machinery, office equipment or land and buildings.
When do I account for GST on disposal of a capital asset?
Generally, if you are registered or required to be registered for GST, the disposal of a capital asset in Australia, in the course of carrying on your business, is a taxable supply and you are required to account for GST on that sale. This applies even if the asset was purchased before 1 July 2000 or the asset is sold to an individual who is not in business (a private sale). If you receive any payment (or other form of consideration) when you dispose of a capital asset, you must report an amount at G1 (total sales) on your activity statement for the relevant tax period.
In this case the seller became the registered owner of the land prior to 1 July 2000 and has entered into an agreement to sell a capital asset for an arms length price.
Therefore, where all the requirements of section 9-5 of the GST Act are satisfied and the supply is neither GST-free nor input taxed, the sale of the vacant block of land will be taxable.