Edited version of private ruling

Authorisation Number: 1011675778134

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Ruling

Subject: GST and subdivision and sale of land

Question

Are the sales of the proposed subdivided lots taxable supplies?

Answer

The sales of the proposed subdivided lots that are vacant land are taxable supplies.

The sales of the proposed subdivided lots that contain residential premises are input taxed provided the residential premises are not substantially renovated prior to their sale.

Relevant facts and circumstances

You purchased a property (property A) many years prior to 1 July 2000. You have lived on this property since then except for a few months when you lived in the house on property B.

After 1 July 2000, you subdivided part of property A into a number of lots and sold all the allotments.

You were audited by the ATO. The audit outcome was that the sales of the subdivided lots were not subject to GST.

After you commenced the process of subdividing part of property A, the owners of the adjoining property, property B, advertised their property for sale and marketed the site as being suitable for construction of a high-density development.

You considered that if the proposal went ahead, it would have negative impact on your lifestyle. You indicated to the owners of property B that you were prepared to buy the property. Your intention was to subdivide property B into large residential lots rather than allowing someone else to undertake a more high-density development.

You had calculated that if you paid a specified sum for the acquisition you could cover the costs of the purchase and related expenses if you subdivided part of the property and retained the home on the property.

You purchased property B for the specified sum (the purchase price). A house is located on property B.

You established a line of credit with a financial institution and borrowed more than the purchase price to fund the acquisition of property B.

The interest on the funds borrowed was claimed against rental income in your personal tax returns for the relevant years. This was for the period when the house on property B was first rented until the loan was repaid.

You moved into the home on property B for a few months, immediately after its purchase, but moved back to property A because you realised that the other residence needed substantial renovations and that you would not have the funds to do this until you had completed the proposed sale of the surplus land.

You spent some money on renovating property B immediately after its purchase. The property had been neglected for some time. The works carried out on the property did not amount to substantial renovations.

Because you acquired property B with the intention that you would subdivide it, you understood that you might have to account for GST on the sales of the allotments when the subdivision was completed and therefore you applied for an Australian business number (ABN) and GST registration. You have been lodging nil activity statements for each tax period since then.

A consulting firm submitted the Development Application for property A and property B to the relevant council on your behalf.

The Development Application was approved a few months ago. You are awaiting the approval of your application for Operational Works to commence the subdivision.

There will be no change in the zoning as a result of the development. The subdivision will result in a specified number of lots being created.

According to the subdivision plan, a new road will be constructed between property A and property B to provide access to the proposed lots created on these properties that do not have direct access to the main road.

Proposed lot X contains your current residence on property A. Proposed lot Y contains the house at property B. You intend to sell all the proposed subdivided lots. However, if reasonable prices are not achievable on lots X and Y you may retain the houses as rental properties. You do not intend to demolish these houses. Part of the rationale for undertaking the subdivision was to preserve these houses.

The house on property B has been rented for some time. The house on property A has never been used to produce income.

You have no special skills or knowledge in conducting subdivision, other than that acquired when you subdivided and sold part of property A. You will not be personally involved in the subdivision and development work. You engaged a firm of town planners and surveyors to survey your properties and establish how many lots they could be subdivided into. You have engaged consultants and contractors to provide the necessary expertise to undertake the development and satisfy the requirements (such as roads, electricity, telephone and drainage).

The subdivision costs are estimated as follows:

Consultant fees to date $...

Council fees $...

Telecommunication pit relocation $...

Engineering and construction (estimate) $...

Landscaping (estimate) $...

Interest on borrowed funds (estimate) $...

Park contribution currently undetermined

If you finally decide to embark on the development proposal, you will develop a structured plan for the development and sale of the proposed lots with the assistance of external consultants as you did for the previous subdivision of part of property A.

The subdivision will be funded through the line of credit, which remains available.

You have not commenced marketing the proposed lots. You expect to sell the proposed subdivided lots through a real estate agent.

Each proposed lot will be sold for over $75,000.

You have not brought property B into account as a business asset. You have not claimed any tax deductions in respect of the acquisition of this property nor in respect of any consulting or other expenses incurred since the property was acquired.

The only other property that you currently own is a holiday house which you purchased in many years ago prior to 1 July 2000. This property was previously rented for holidays.

You have not previously subdivided or developed any other properties apart from the earlier subdivision of part of property A.

You are unsure of whether the subdivision activity would be profitable. You do not expect to make any material profit based on the purchase price that you have paid. The rough cost estimates that you prepared for the meeting with your neighbours prior to acquisition of property B provides that you were contemplating the following ideas.

If you just tried to sell your home you would struggle to get a certain amount.

If you subdivided property A and property B into a specified number of lots, you would make a specified amount from selling all the lots except the house on property B. After allowing for the purchase price of property B, renovation of the house on property B and the holding costs, the exercise would be revenue neutral.

If you just subdivided and moved, you would make a specified sum but had to buy a new house.

You are registered for GST. You are not carrying on any other enterprise.

Your contentions:

You are not carrying an enterprise. Your activities are not 'significant' compared to other cases such as Statham & Anor v. Federal Commissioner of Taxation 89 ATC 4070; 20 ATR 228 (Statham) and Casimaty v. FC of T 97 ATC 5135; (1997) 151 ALR 242; 37 ATR 358 (Casimaty) where the Courts found that the sales of the subdivided lots were not a business.

Even if you were carrying on a business or an adventure or concern in the nature of trade, you will not be carrying on an enterprise because you did not have a reasonable expectation of profit or gain. You could have made a profit by undertaking a high-density development, but have only undertaken a project with an intention to prevent high-density development and protect the amenity of the area.

Even if you are carrying on an enterprise, your turnover will not meet the registration turnover threshold, as the sales of the subdivided lots will be the sales of capital assets.

Although you are registered for GST, you are not required to be registered for GST.

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 Paragraph 9-5(a).

A New Tax System (Goods and Services Tax) Act 1999 Paragraph 9-5(b).

A New Tax System (Goods and Services Tax) Act 1999 Paragraph 9-5(c).

A New Tax System (Goods and Services Tax) Act 1999 Paragraph 9-5(d).

A New Tax System (Goods and Services Tax) Act 1999 Subsection 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 11-5.

A New Tax System (Goods and Services Tax) Act 1999 Section 11-15.

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

A New Tax System (Goods and Services Tax) Act 1999 Paragraph 23-5(a).

A New Tax System (Goods and Services Tax) Act 1999 Paragraph 23-5(b).

A New Tax System (Goods and Services Tax) Act 1999 Section 40-35.

A New Tax System (Goods and Services Tax) Act 1999 Section 40-65.

A New Tax System (Goods and Services Tax) Act 1999 Subsection 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 Section 188-25.

Question

Are the sales of the proposed subdivided lots taxable supplies?

Summary

The sales of the proposed subdivided lots are in the course of your land development enterprise as your activities amount to more than a mere realisation of a capital asset.

The sales of the proposed subdivided lots that are vacant land are taxable supplies. The sales of the proposed subdivided lots that contain the residential premises are input taxed provided the residential premises are not substantially renovated prior to their sale.

Detailed reasoning

Section 9-40 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that you must pay the GST payable on any taxable supply that you make.

A supply is a taxable supply if it meets all the requirements of section 9-5 of the GST Act. This section states:

You make a taxable supply if:

· you make the supply for *consideration; and

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

· the supply is *connected with Australia; and

· 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.

(* denotes a term defined in section 195-1 of the GST Act)

In your case, the requirements of paragraphs 9-5(a) and 9-5(c) of the GST Act are satisfied as the sales of the proposed subdivided lots will be for consideration and the sales will be connected with Australia as the subdivided lots are situated in Australia.

Therefore, what needs to be determined is:

· whether the sales of the proposed subdivided lots will be in the course or furtherance of an enterprise that you carry on

· whether you are required to be registered for GST, and

· whether the sales are input taxed or GST-free.

Whether the sales of the proposed subdivided lots are in the course or furtherance of an enterprise that you carry on

The term enterprise is defined in subsection 9-20(1) of the GST Act to include, amongst other things, an activity or series 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 considers the meaning of the word 'enterprise' for the purposes of entities' entitlement to an ABN. Goods and Services Tax Determination GSTD 2006/6 confirms that the principles in MT 2006/1 apply equally to the term enterprise for GST purposes.

Paragraph 153 of MT 2006/1 provides that an entity can undertake a wide range of activities with varying degrees of interrelationship. The meaning of the term activity or series of activities for an entity can range from a single undertaking including a single act to groups of related activities or to the entire operations of the entity.

MT 2006/1 provides that ordinarily, the term business would encompass trade engaged in, on a regular or continuous basis. However, an enterprise can incorporate a single undertaking such as the acquisition, development and sale of real property.

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 and 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.

You intend to subdivide property A and property B into a specified number of lots for the purposes of sale. You advised that you previously subdivided part of property A and sold all the subdivided allotments. You stated that apart from that subdivision you have not subdivided or developed any other properties before.

Based on the information provided, we consider that you are not carrying on a property development business as you are not engaged in developing properties on a regular or continuous basis. However, it remains to be considered whether your property development activities amount to an isolated transaction that is an enterprise in the form of an adventure or concern in the nature of trade.

Paragraphs 262 to 302 of MT 2006/1 deal with isolated transactions and sales of real property. The ruling provides that often the question of whether an entity is carrying on an enterprise arises where there is a one-off activity or isolated real property transaction. The issue to be decided in such cases is whether the one-off activity is of a revenue nature (an enterprise) or a mere realisation of a capital asset.

Paragraph 265 of MT 2006/1 provides guidance for determining whether the activities involving the sale of real estate are a business or an adventure or concern in the nature of trade as opposed to a mere realisation of a capital asset. This paragraph states:

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 the 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.

MT 2006/1 also provides that in determining whether activities relating to an isolated transaction are an enterprise or are the mere realisation of a capital asset, it is necessary to examine the facts and circumstances of the particular case. In addition to the factors outlined above, there may be other relevant factors that need to be considered in reaching an overall conclusion. No single factor will be determinative rather it will be a combination of factors that will lead to a conclusion as to the character of the activities.

You contend that your activities are a mere realisation of a capital asset as they are not 'significant' compared to cases such as Statham and Casimaty.

In Casimaty the taxpayer acquired a farming property on which he erected a homestead and conducted a primary production business. Because of growing debt and ill health, the taxpayer had to subdivide and sell off a large part of the property. In all, there were a total of eight separate subdivisions. The proceeds from the subdivisions and sales were held not to be assessable as there was no change of purpose for which the land was held. The taxpayer acquired and continued to hold the property for use as a residence and the conduct of the business of primary production. A related consideration was the fact that the land was developed and subdivided on a piecemeal basis in response to the exigencies of increasing debt and deteriorating health. No coherent plan was conceived at the outset for the subdivision of the whole property, even in stages, to maximise the return from the aggregate for the individual lots. Accordingly, the subdivisions were considered to have occurred as part of the mere realisation of a capital asset.

In Statham the appellants were the trustees of the deceased who had acquired a farm to raise his family there and engage in farming. There was never any intention of selling for a profit. The deceased's health deteriorated and he had various employment transfers and it was decided to subdivide and sell the land. It was held that the way in which the subdivision and sale of the land progressed was simple and had few of the hallmarks of a business enterprise for a number of reasons including:

· the owners were at first content to sell the land as one parcel, but were unable to do so

· no moneys were borrowed by them, although a guarantee was provided to the relevant council by way of bank guarantee

· only very limited clearing and earthworks were involved

· the owners relied upon the council to carry out road works, kerbing, electricity and sewerage works which were required to be done

· apart from the council's activities, the owners did not engage any contractors, although they did obtain some professional advice

· the owners did not erect buildings on the land

· they had no business organisation, no manager, no office, no secretary, and no letterhead.

We consider that the facts of your case can be distinguished from those in Statham and Casimaty as outlined below.

MT 2006/1 provides that 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 the pleasure or enjoyment of the person, are more likely not to be purchased for trading purposes. However, the nature of an asset can change from being a private or capital asset to that of trade and vice versa. Where a property that was not acquired for resale at a profit later becomes the subject of subdivision, it is necessary to consider if the activities have a commercial flavour and whether the nature of the asset changes to one of trade.

You advised that you have lived on property A since its acquisition. Whilst property A has been your principal place of residence, after taking into account the circumstances of your case, we consider that your activities change the character of property A from a capital asset into a trading asset and go beyond a mere realisation of a capital asset.

You acquired property B for the purpose of subdivision and sale. You added property A to property B and obtained a development approval to subdivide the whole land. You intend to sell all the proposed subdivided lots including lots X and Y which contain the houses. In the meantime, you have been carrying on a leasing enterprise from property B.

Combining the properties enables you to subdivide the whole land in a more advantageous way and maximise the profit from the sale of the proposed lots. For example, this has allowed you to construct a road between property A and property B to provide access to the proposed subdivided lots that did not have direct access to the main road.

There is also a change in the purpose for which property A is held as you intend to sell all the proposed subdivided lots and if lot X is not sold you will retain it for rental purposes.

Furthermore, you have a coherent plan for the subdivision of the whole land to maximise the return from each individual lot. You are developing the land in an organised and professional manner relying on consultants and contractors to provide the necessary expertise and facilitate the successful completion of the development. You are building access roads and installing the necessary services. You are investing/risking a large sum of money to finance the project. You will borrow funds to finance the subdivision. You have undertaken subdivision activities before.

You stated that your intention in undertaking these activities was not to make a profit or gain but to prevent high-density development and protect the amenity of the area.

As stated in MT 2006/1, motive is not relevant if an objective assessment of the activities of the entity indicates that the activities are in the nature of the trade. That is, when determining whether or not a transaction occurred in the course of carrying on an enterprise, less weight is given to statements of purpose or intention by the entity. More consideration is given to objective facts, having regard to all the circumstances of a particular case which illustrate that purpose.

Based on the facts of your case, we consider that the dominant purpose of acquiring property B was to add this property to your land, subdivide the whole area in a more advantageous way for the purpose of sale. The fact that your development activities are modest compared to other significant development activities which could have been carried out on the land is not a relevant consideration. The facts indicate that you are undertaking these activities with a reasonable expectation of making a profit and gain. The rough cost estimates that you did prior to acquiring property B which was based on a smaller number of lots also indicates that there was a reasonable expectation of making a gain from subdividing and selling the whole subdivided allotments.

For the above reasons, we consider that your activities amount to an adventure or concern in the nature of trade as they go beyond a mere realisation of a capital asset. Therefore, you are carrying on a land development enterprise.

Accordingly, the sales of the subdivided lots are in the course or furtherance of your land development enterprise. Consequently, the requirement of paragraph 9-5(b) of the GST Act is met.

Whether you are required to be registered for GST

An entity is required to be registered for GST if it satisfies the requirements of section 23-5 of the GST Act. This section states:

You are required to be registered under this Act if:

· you are *carrying on an *enterprise; and

· your *GST turnover meets the *registration turnover threshold.

Carrying on an enterprise

As explained above, you are carrying on a land development enterprise. Therefore, you satisfy paragraph 23-5(a) of the GST Act.

Whether your GST turnover meets the registration turnover threshold

Under subsection 188-10(1) of the GST Act, you have a GST turnover that meets the registration turnover threshold if:

· your current GST turnover is $75,000 or more, and the Commissioner is not satisfied that your projected GST turnover is below $75,000, or

· your projected GST turnover is $75,000 or more.

Subsection 188-15(1) of the GST Act provides 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.

Subsection 188-20(1) of the GST Act provides that your projected 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 that month and the next 11 months.

However, the following supplies are excluded from the calculation of both current and projected GST turnovers:

· supplies that are input taxed

· supplies that are not for consideration (and are not taxable supplies under section 72-5 of the GST Act)

· supplies that are not made in connection with an enterprise that you carry on

· supplies that are not connected with Australia

· supplies that are connected with Australia because of paragraph 9-25(5)(c) of the GST Act

· supplies (other than those mentioned in the immediately preceding two dot points) of a right or option to use commercial accommodation in Australia where the supplies are not made in Australia and are made through an enterprise that the supplier does not carry on in Australia, and

· supplies made from one member of a GST group to another member of that GST group.

Additionally, section 188-25 of the GST Act provides that when calculating your projected GST turnover, you do not include any supplies made or likely to be made by you:

· by way of transfer of ownership of a capital asset, or

· solely as a result of ceasing an enterprise or substantially and permanently reducing the size or scale of your enterprise.

Trade v capital asset

You submitted that even if you are carrying on an enterprise, your turnover will not meet the registration turnover threshold, as the sales of the subdivided lots will be the sales of capital assets. We do not agree with your submission for the following reasons.

The meaning of capital assets is discussed in paragraphs 31 to 36 of Goods and Services Tax Ruling GSTR 2001/7.

GSTR 2001/7 provides that 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.

A revenue asset on the other hand, is an asset whose realisation is inherent in, or incidental to, the carrying on of a business. That is, 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 nature even if such a disposal is an occasional or one-off transaction.

In your case, the sales of the subdivided lots are inherent in carrying on your land development enterprise. As stated earlier, your activities change the character of property A from a capital asset into a trading asset and although you have been carrying on a leasing enterprise from property B, you acquired property B for the purposes of subdivision and sale.

Therefore, the sales of the subdivided lots are not transfers of capital assets as the subdivided lots are your trading assets. Furthermore, the supplies are not made solely as a consequence of ceasing to carry on an enterprise or substantially or permanently reducing the size or scale of your enterprise. Accordingly, the sales of the subdivided lots are not disregarded under section 188-25 of the GST Act when calculating your projected GST turnover.

Input taxed supplies - sale or lease of proposed lots X and Y

As stated above input taxed supplies are excluded when working out the current and projected GST turnovers.

Section 40-65 of the GST Act states:

A sale of *real property is input taxed, but only to the extent that the property is *residential premises to be used predominantly for residential accommodation (regardless of the term of occupation).

However, the sale is not input taxed to the extent that the *residential premises are:

· commercial residential premises; or

· new residential premises other than those used for residential accommodation (regardless of the term of occupation) before 2 December 1998.

You advised that the proposed lots X and Y contain the houses. Based on the information provided, you have not done any substantial renovations to these two houses. Accordingly, if you sell lots X and Y without substantially renovating the houses located on these lots, the sales would be input taxed supplies pursuant to section 40-65 of the GST Act. Therefore, the values of these supplies will not be included when working out your current or projected GST turnovers.

However, if you substantially renovate these houses prior to sale then the sales may be a supply of new residential premises. Where the sales are sales of new residential premises the values of these supplies will be included in working out your current and projected GST turnovers. For information on what constitutes substantial renovations please refer to Goods and Services Tax Ruling GSTR 2003/3.

You also stated that if you do not achieve a reasonable price on lots X and Y you may retain the houses for rental purposes.

Section 40-35 of the GST Act deals with supply of premises by way of lease. This section states:

A supply of premises that is by way of lease, hire or licence (including a renewal or extension of a lease, hire or licence) is input taxed if:

· the supply is of *residential premises (other than a supply of *commercial residential premises or a supply of accommodation in commercial residential premises provided to an individual by the entity that owns or controls the commercial residential premises); or

· the supply is of *commercial accommodation and Division 87 (which is about long-term accommodation in commercial premises) would apply to the supply but for a choice made by the supplier under section 87-25.

…

However:

· the supply is input taxed only to the extent that the premises are to be used predominantly for residential accommodation (regardless of the term of occupation); and

· the supply is not input taxed under this section if the lease, hire or licence, or the renewal or extension of a lease, hire or licence, is a *long-term lease.

As the supply of residential premises by way of lease is input taxed, the values of the leases of lots X and Y are not included in working out your current and projected GST turnovers.

Sales of the proposed vacant allotments

The sales of the proposed vacant allotments do not fall under any of the categories listed above that are excluded when calculating your current or projected GST turnovers. Therefore, the values of the supplies of the proposed vacant lots are included when working out your current and projected GST turnovers.

Based on the information provided, your current GST turnover at this point in time is less than $75,000.

Each proposed vacant lot will be sold for an amount that is over $75,000. Accordingly, where at a time during a particular month you expect to sell a subdivided lot either during that month or the following 11 months, your projected GST turnover would meet the registration turnover threshold of $75,000. At that point in time, you will become required to be registered for GST and the requirement of paragraph 23-5(b) of the GST Act will be satisfied.

As both requirements of section 23-5 of the GST Act will be satisfied at that point in time, you will become required to be registered for GST. Consequently, the requirement of paragraph 9-5(d) of the GST Act will be met.

In summary, the sales of the proposed vacant lots meet the requirements of paragraphs 9-5(a),

9-5(b), 9-5(c) and 9-5(d) of the GST Act. Furthermore, the sales of the proposed vacant lots are neither input taxed nor GST-free under any provision of the GST Act or a provision of any other Act. Therefore, the sales are taxable supplies. You are liable to pay 1/11^th of the sale price of each proposed vacant lot as GST.

As stated above, unless the houses located on the proposed lots X and Y are substantially renovated, the sales or lease of these two lots are input taxed supplies. Therefore, you are not liable to pay GST on the sale or lease of these lots as these supplies will not meet all the requirements of section 9-5 of the GST Act.

However, if the houses are substantially renovated to the extent that they are considered to be new residential premises, then the sales would be taxable supplies.

Margin Scheme

Where a sale of a real property is a taxable supply, the sale may be made under the margin scheme pursuant to Division 75 of the GST Act if certain requirements are met.

For further information on margin scheme, please refer to the following publications:

GST and the margin scheme (NAT 15145)

Goods and Services Tax Ruling GSTR 2000/21 Goods and services tax: the margin scheme for supplies of real property held prior to 1 July 2000

Goods and Services Tax Ruling GSTR 2006/7 Goods and services tax: how the margin scheme applies to a supply of real property made on or after 1 December 2005 that was acquired or held before 1 July 2000

Entitlement to input tax credits

Section 11-20 of the GST Act provides that you are entitled to the input tax credit for any creditable acquisition that you make.

Section 11-5 of the GST Act sets out when an entity makes a creditable acquisition. It states:

You make a creditable acquisition if:

· you acquired anything solely or partly for a *creditable purpose; and

· the supply of the thing to you is a *taxable supply; and

· you provide, or are liable to provide, *consideration for the supply; and

· you are *registered, or *required to be registered.

Section 11-15 of the GST Act provides that you acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise, however, you do not acquire the thing for a creditable purpose to the extent that:

· the acquisition relates to making supplies that would be input taxed, or

· the acquisition is of a private or domestic nature.

In your case as the sales of the proposed vacant lots are taxable supplies, the acquisitions that you make in relation to the subdivision and sales of these proposed vacant lots are creditable acquisitions as required by paragraph 11-5(a) of the GST Act. You are entitled to input tax credits for the acquisitions relating to the subdivision and sales of the proposed vacant lots provided the acquisitions meet all the other requirements of section 11-5 of the GST Act.

However, as the sale or lease of the proposed lots X and Y are input taxed, you are not entitled to any input tax credit to the extent that an acquisition relates to subdivision, sale or lease of these lots.