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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of private advice

Authorisation Number: 1012648844073

Ruling

Subject: Goods and services tax (GST) and the sale of real property

Question

Was your supply of land a GST-free supply of real property under section 38-445 of the A New Tax System (Goods and Services Tax) Act 1999?

Answer

Yes.

Relevant facts and circumstances

You are registered for GST.

You are a local government.

You sold land. No GST was applied to the sale. You have provided a copy of the contract.

The vacant land was acquired by you before 1 July 2000.

The land has not been levelled or cleared. The land comprises sand dunes and naturally occurring scrub. You have provided photos of the land which confirm this.

The general area of the property comprises bushland and dense trees. The immediate surrounding land is undeveloped. Residential subdivisions have been developed in other parts of the street. You have provided photos which confirm this.

There is electricity running down the street available for connection to the block (dome). It is not on the land.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-445(1) and

A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-445(2).

Reasons for decision

In this ruling, please note:

    • All legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) unless stated otherwise.

    • All terms marked by an asterisk are a defined term in the GST Act unless stated otherwise.

Section 38-445 states, in part:

    (1) A supply by the Commonwealth, a State or a Territory of land on which there are no improvements is GST-free if:

      (a) the supply is of a freehold interest in the land; or

      (b) …

      …

      (2) However, the supply is not GST-free if, since 1 July 2000, the land has already been the subject of a supply that is GST-free under this section.

Goods and Services Tax Ruling GSTR 2006/5 Goods and services tax: meaning of 'Commonwealth, a State or a Territory' discusses the meaning of 'Commonwealth, a State or a Territory' for the purposes of section 38-445.

You are a local government and we accept you are a State.

For the purposes of section 38-445, the supply of the land is a supply of a freehold interest in land by a State, you held the land prior to 1 July 2000 and it has not previously been supplied under section 38-445.

All that remains to be determined is whether this is 'land on which there are no improvements'.

Goods and Services Tax Ruling GSTR 2006/6 Goods and services tax: improvements on the land for the purposes of Subdivision 38-N and Division 75 (GSTR 2006/6) discusses the meaning of the phrase 'land on which there are no improvements'.

Paragraph 20 of GSTR 2006/6 states:

      20. Unimproved land is taken to be land in its natural state. Thus, to establish whether there are improvements on the land for the purpose of these provisions, the land is compared with land in its natural state.

GSTR 2006/6 follows the principle of 'improvement' established by the High Court in Morrison v. Federal Commissioner of Land Tax (1914) 17 CLR 498 at 503:

      Any operation of man on land which has the effect of enhancing its value comes within the definition of 'improvement'.

The application of this principle to 'improvements on the land' is set out in paragraph 22 of GSTR 2006/6, which states:

    22. Applying this principle means that, for there to be 'improvements on the land':

      • there must have been some human intervention;

      • the human intervention must have been physically located on the land; and

      • that human intervention must enhance the value of the land at the relevant date... for ascertaining whether there are improvements on land.

Examples of human interventions that may enhance the value of land are provided in paragraph 25 of GSTR 2006/6, which states:

      25. The following are examples of human interventions that may enhance the value of land:

      • houses, town-houses, stratum units, separate garages, sheds and other out-buildings;

      • commercial and industrial premises;

      • farm houses, farm outbuildings, internal fencing, stockyards, wells and bores, excavated tanks, dams, surface drains, culverts, bridges, sown pasture, formed internal roads, and irrigation layouts;

      • formed driveways, swimming pools, tennis courts, and walls;

      • any other similar buildings or structures;

      • fencing - internal or boundary fencing;

      • utilities, for example, water, electricity, gas, sewerage connected or available for connection;

      • clearing of timber, scrub or other vegetation;

      • excavation, grading or levelling of land;

      • drainage of land;

      • building up of soil fertility;

      • removal of animal pests, rabbit burrows etc;

      • removal of rocks, stones or soil; and

      • filling of land.

We consider that there have been no human interactions on the land and it remains in its natural state.

As such, your supply of the land satisfies subsection 38-445, as being a supply of land on which there are no improvements. Your supply of the land was GST-free.


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