Edited version of the private ruling

Authorisation Number: 1011697269014

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Ruling

Subject: GST and sale of undeveloped land

Question

Is the sale your property a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Decision

No, the sale of your property is not a taxable supply under section 9-5 of the GST Act.

Relevant facts and circumstances

A few years ago, you purchased a vacant block of land. The intention of purchasing the property was to build two houses on the property; one for your family and one for your parents.

Due to employment purposes, you had to go overseas. You never got around to building the two houses.

You have always been employees and have never claimed any income tax deductions on the purchase or the maintenance of the property.

You are not registered for GST. You do not carry on any enterprise.

You did not build any structures on the land. You did not make any improvements to the land other than maintaining the fence.

The land has never produced any income.

The land will be sold as one block without being subdivided.

Reasons for the decision

Goods and services tax (GST) is payable on any taxable supply. Section 9-5 of the GST Act provides that, 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.

Satisfaction of section 9-5 of the GST Act

You will make the supply of the property for consideration. The supply is connected with Australia, as the property is located in Australia. The supply of vacant land is not a GST-free or input taxed supply under any provision of the GST Act.

However, you are not registered for GST. Therefore, it is necessary to ascertain whether you will make the supply in the course or furtherance of an enterprise carried on by you and as a result will be required to be registered for GST.

Carrying on an enterprise

Subsection 9-20(1) of the GST Act defines an enterprise as 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; or

on a regular or continuous basis, in the form of a lease, licence or other grant of an interest in property; or

……..

You advise that you did not carry out any activities to improve the property other than maintaining the fence. You will not subdivide the property and carry out any other activities in the form of an enterprise prior to selling the property. The property will be sold as one block of land.

The intention of purchasing the property was to build two houses to live, which due to personal circumstances did not materialise. You did not carry out any development activities on the property. On a regular or continuous basis, you did not lease the property or grant an interest in the property. The circumstances under which the sale will occur will be private and domestic in nature.

Accordingly, you will not make the supply in the course or furtherance of an enterprise that you carry on. As a result, you are not required to be registered for GST.

In supplying the property, you will not satisfy some of the requirements of section 9-5 of the GST Act. Therefore, the sale of the property will not be a taxable supply. Accordingly, you will not incur any GST liability when you sell the property.