Edited version of private ruling

Authorisation Number: 1011655882180

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Ruling

Subject: GST and sale of real property

Question

Is GST payable on the sale of the vacant land?

Advice/Answers

No, GST is not payable on the sale of the vacant land.

Facts

You are the beneficiary of a deceased estate.

As the beneficiary of the deceased estate you inherited properties, one of which is the vacant land.

You are in the process of selling the vacant land.

Since the vacant land was transferred to you, you have not undertaken any improvements. You do not intend to undertake any improvements before the sale. You will sell the vacant land in the same state as it was transferred to you.

You provided an unexecuted copy of the contract for the sale of the vacant land. It shows the purchase price as over $75,000. The sale is marked as not a taxable supply because the sale is 'by a vendor who is neither registered nor required to be registered for GST'.

You are not carrying on any enterprise and you are not registered for GST.

Reasons for decision

GST is payable on the sale of real property if you are making a taxable supply.

Under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), you make a taxable supply if:

(a) you make the supply for consideration

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

(c) the supply is connected with Australia, and

(d) you are registered, or required to be registered for GST purposes.

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

In your case, the sale of the vacant land will satisfy the requirements of paragraphs 9-5(a) and 9-5(c) of the GST Act. That is, you will make the supply for consideration and the supply is connected with Australia as the vacant land is located in Australia. You also advised that you are not registered for GST.

Therefore, we need to determine whether you are making the sale in the course of an enterprise that you carry on, whether you are required to be registered for GST and whether the sale is GST-free or input taxed.

Whether the sale of the property is made in the course or furtherance of an enterprise that you carry on

Section 9-20 of the GST Act provides that enterprise includes, among other things, an activity or serries of activities done:

· in the form of a business, or

· in the form of an adventure or concern in the nature of trade.

Miscellaneous Taxation Ruling MT 2006/1 provides the view of the Tax Office on the meaning of enterprise for the purposes of entitlement to an Australian Business Number. Goods and Services Tax Determination GSTD 2006/6 provides that the discussion in MT 2006/1 equally applies to the term enterprise as used in the GST Act and can be relied on for GST purposes.

Paragraph 234 of MT 2006/1 provides that ordinarily, the term business would encompass trade engaged in, on a regular or continuous basis. In relation to the words 'in the form of an adventure or concern in the nature of trade', paragraph 244 of MT 2006/1 states:

244. An adventure or concern in the nature of trade includes a commercial activity that does not amount to a business but which has the characteristics of a business deal. Such transactions are of a revenue nature. However, the sale of the family home, car or other private assets are not, in the absence of other factors, adventures or concerns in the nature of trade. The fact that the asset is sold at a profit does not, of itself, result in the activity being commercial in nature.

In your case the sale of the vacant land is not made in the form of a business.

You inherited the vacant land from your late spouse. Since the transfer of the vacant land you have not undertaken any improvements on the land. You are now in the process of the selling the vacant land in the same state as it was transferred to you.

On the information provided, the sale of the vacant land does not amount to an adventure or concern in the nature of trade as it is the mere realisation of a private or investment asset. Hence, it is not considered to be made in the course or furtherance of an enterprise. As such, the requirement in paragraph 9-5(b) of the GST Act is not be satisfied.

Furthermore, the requirements of paragraph 9-5(d) of the GST Act is not satisfied for the following reason:

Section 23-5 of the GST Act provides that you are required to be registered if:

(a) you are carrying on an enterprise and

(b) your GST turnover meets the registration turnover threshold of $75,000 (or $150,000 if you are a non-profit organisation).

As you are not carrying on an enterprise, you are not required to be registered for GST. In addition, you are not registered for GST. Hence, the requirements of paragraph 9-5(d) of the GST Act are not satisfied.

Therefore, as all the requirements of section 9-5 of the GST Act are not met, the sale of the vacant land is not a taxable supply. Hence, GST is not payable on the sale.