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Ruling

Subject: GST and the sale of land

Question

Is the sale of land, located in Australia, with some improvements, subject to GST?

Answer

No, the sale of land is not subject to GST.

Relevant facts and circumstances

You purchased a vacant lot of land, located in Australia, in 19XX.

Since purchasing the land, you have had boundary fencing erected. Also, two concrete slabs have been constructed, being for the house and the garage. The slabs were constructed with associated drainage and plumbing works. You have also had a tree removed from the property.

You have not subdivided the property.

A property valuation valued the land.

You intended to live in the completed premises. You hold an owner-builder permit for the property, these permits are only granted to persons who intend to live in the completed property.

You own other residential properties, which you rent out. You have not previously sold these or any other properties.

You consider the value of the property to be the property valuation amount plus the value of your improvements to the property.

You are not involved in any subdivision or development activities.

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(b) and

A New Tax System (Goods and Services Tax) Act 1999 Section 9-20.

Reasons for decision

Subsection 7-1(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that GST is payable on taxable supplies and taxable importations. Section 9-5 of the GST Act states:

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.

For the sale of your land to be a taxable supply, all the requirements in section 9-5 of the GST Act must be met.

In your case, you are selling the land for consideration, the sale of the land is connected with Australia and you are registered for GST. Therefore, it needs to be considered whether the sale of your land is in the course or furtherance of an enterprise that you carry on and if it is, whether the sale of the land is GST-free or input taxed.

The term enterprise is defined in section 9-20 of the GST Act which includes:

(1) An enterprise is an activity, or series of activities, done:

(a) in the form of a *business; or

(b) in the form of an adventure or concern in the nature of trade; or

(c) - (h) …

In your case, you acquired the land to build your private residence. This is the first time you have acquired vacant land. The land was not acquired for any commercial purpose. Due to changed circumstances, the land is to be sold. There have been minimal improvements and no subdivision done on the land. As such, the acquisition and subsequent sale of the land is not an enterprise. Accordingly, paragraph 9-5(b) of the GST Act will not be met.

As paragraph 9-5(b) of the GST Act will not be met, the sale of the land is not a taxable supply. Therefore, the sale of the land is not subject to GST.