Edited version of your private ruling

Authorisation Number: 1012594134551

Ruling

Subject: Sale of vacant land

Question

Is your sale of vacant land subject to Goods and Services Tax (GST)?

Answer

No. Your sale of vacant land is not subject to GST.

Relevant facts and circumstances

You purchased vacant land ("the Property") from a developer.

You had purchased the Property with the intent of building residential premises on it and moving there to live at a later date. However, over the years circumstances and interests have changed and this did not eventuate and is now no longer likely to eventuate.

You have now decided to sell the Property.

You have never claimed any income tax deductions in respect of the Property.

You are not registered for GST as individuals although you have a partnership with an Australian Business Number ("ABN") and which is registered for GST. The partnership was formed in relation to the purchase and subsequent leasing of another property.

The purchase of the Property is a personal acquisition and has no connection with the partnership.

Relevant legislative provisions

A New Tax System (Goods and Services Act) Act 1999

- Section 7-1

- Section 9-5

- Section9-10

- Section 9-20

- Section 9-30

- Section 40-65

- Section 195

Reasons for decision

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

Supply is defined in subsection 9-10(1) of the GST Act to mean any form of supply whatsoever. Subsection 9-10(2) of the GST Act provides a list of things considered to be a supply including a grant, assignment or surrender of real property.

Real property is defined in section 195-1 of the GST Act to include any interest in or right over land.

Therefore, the sale of the Property falls within the meaning of supply as defined in subsection 9-10(2) of the GST Act and will be subject to GST if it is a taxable supply.

Section 9-5 of the GST Act defines taxable supplies and state:

You make a taxable supply if:

a) you make the supply for *consideration; and

b) the supply is made in the course of 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.

(terms marked with asterisks (*) are defined in section 195-1 of the GST Act)

Therefore, the supply of the Property will be a taxable supply if all of the requirements above are met and it is not a GST-free or input taxed supply.

Subsections 9-30(1) and (2) of the GST Act states:

Supplies that are GST-free or input taxed

GST-free

(1) A supply is GST-free if:

(a) It is GST-free under Division 38 or under a provision of another Act; or

(b) It is a supply of a right to receive a supply that would be GST-free under paragraph (a).

Input taxed

(2) A supply is input taxed if:

(a) it is input taxed under Division 40 or under a provision of another Act; or

(b) it is a supply of a right to receive a supply that would be input taxed under paragraph (a).

Subsection 40-65(1) of the GST Act states:

(1) 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).

In this case, there are no provisions within the GST Act that make the supply of the Property GST-free.

Furthermore vacant land is not residential premises because it is not capable of being occupied as a residence or for residential accommodation.

Therefore your supply of the Property is not input taxed or GST-free.

Whether your supply of the Property is a taxable supply would depend on all the conditions for a taxable supply, as set out in paragraphs 9-5(a) to 9-5(d) of the GST Act, being satisfied.

The supply of the Property by you is made for consideration and is connected with Australia, therefore paragraphs 9-5(a) and (c) of the GST Act are satisfied.

We therefore need to consider if your supply of the Property is made in the course of furtherance of an enterprise that you carry on and if you are registered or required to be registered.

Section 9-20 of the GST Act explains the definition of "Enterprise" and state:

9-20 Enterprise

(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) …….

Miscellaneous Taxation Ruling MT 2006/1 contains the ATO's view on what constitutes an enterprise for the purposes of eligibility for registration for an Australian Business Number (ABN). Goods and Services Tax Determination GSTD 2006/6 extends the application of MT 2000/1 to GST.

Paragraphs 170 to 179 of MT 2006/1 discuss the concept of activities or a series of activities done "in the form of a business". Your activities in relation to the Property do not constitute activities done in the form of business.

Paragraphs 233 to 261 of MT 2006/1 discuss the ATO's view in relation to "in the form of an adventure or concern in the nature of trade". Your activities in relation to the Property do not constitute activities conducted in the form of an adventure or concern in the nature of trade.

Paragraphs 262 to 270 of MT 2006/1 discuss isolated transactions and sales of real property. In particular paragraph 270 of MT 2006/1 provides that an isolated transaction, where land is sold that was purchased with the intention of resale for profit, would be considered to be an enterprise.

In your case, you purchased the Property with the intent of building residential premises at a later date and moving there to live. Due to a change in your circumstances and interests, you have not erected any buildings on the Property and there has been no further activity on the Property since you acquired it.

Therefore, your supply of the Property will not constitute a supply made in the course of furtherance of an enterprise that you carry on and as such, paragraph 9-5(b) of the GST Act is not met. Accordingly, your supply of the Property is not a taxable supply and no GST is payable.

There is no need to consider whether you are registered or required to be registered in accordance with paragraph 9-5(d) of the GST Act.