Edited version of your written advice

Authorisation Number: 1012675866356

Ruling

Subject: GST and sale of subdivided blocks of vacant land

Question

Will the goods and services tax (GST) apply to your sale of vacant blocks of land which have been subdivided from the property located in Australia?

Answer

No, GST will not apply to your sale of vacant blocks of land which have been subdivided from the property located in Australia.

The definition of an 'enterprise' in subsection 9-20(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) includes (amongst other things) an activity or series of activities done in the form of an adventure or concern in the nature of trade.

Miscellaneous Taxation Ruling MT 2006/1 The New Tax System: the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian Business Number (MT 2006/1) considers the meaning of carrying on an enterprise. Paragraph 265 of MT 2006/1 outlines factors that indicate whether the activities undertaken are an 'adventure or concern in the nature of trade'.

Based on the information received, the purpose for which the land was held remains unchanged, it will be your principle place of residence after the subdivision is made. You have a coherent plan for the subdivision in that you have lodged the development application and completed all the requirements to obtain the subdivision approval and you will also engage a real estate agent to sell the vacant blocks of land. However, the level of development on the land consisted only of that necessary to obtain Council approval for the subdivision and no buildings are erected on the vacant blocks of land. Further you have funded the subdivision yourself and have advised that there will be no interest to claim as a business expense.

We consider that while some factors listed in paragraph 265 of MT 2006/1 are present, on balance the subdivision does not amount to an enterprise and is a mere realisation of a capital asset. Accordingly, you will not be selling the vacant blocks of land in the course of an enterprise that you are carrying on under paragraph 9-5(b) of the GST Act.

Relevant facts and circumstances

You purchased a property located in Australia and built your main residence on the property. This has been your main residence since construction. The property is also used as a hobby farm, maintaining a small herd of livestock.

You are not registered for GST and do not carry any business activities on the property.

Neighbouring land has recently been subdivided, or approved for subdivision. Given this activity, you have decided to subdivide a section of your property.

Your subdivision proposal will include:

• X blocks of approximately 1 hectare each;

• one block of the remaining land which you will retain.

You will continue to live on your retained block after the completed subdivision.

In the future you may consider subdividing your remaining block, for a further Y blocks. This will be subject to future development approval however.

You have engaged a town planner to assist in managing the subdivision including the approval process and ensuring the development will comply with the approval.

You intend to only do the minimum amount of work as required by council under the development approval.

Your involvement in the subdivision will be limited to:

• arranging contractors to carry out earth works and to widen the existing road the property;

• superficial work in improving the presentation of the blocks;

• engage a real estate agent to sell the subdivided blocks.

You intend to fund the subdivision yourself and you advised that there is no interest on borrowing to claim as a business expense.

The subdivided blocks are expected to be ready for sale shortly. The property has not been brought into account as a business asset and no buildings will be erected on the subdivided blocks.

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 Section 9-20