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This edited version has been archived due to the length of time since original publication.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 your written advice

Authorisation Number: 1012690978220

Ruling

Subject: Sale of vacant land

Question

Is the sale of the vacant land (Property) a taxable supply?

Advice

Yes

Relevant facts and circumstances

• You are registered for the goods and services tax (GST).

• You are the proprietor of the Property.

• The Property is vacant land and no enterprise is currently being conducted on the Property.

• You confirmed your GST turnover is nil.

• However, you have been claiming GST credits for your creditable acquisitions.

• You had conducted an enterprise previously on the Property. You had ceased trading and the Property has been left vacant since then.

• You have entered into an agreement to sell the Property for consideration.

• The sales contract confirmed that margin scheme was not elected.

Reasons for decision

Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states:

    You make a taxable supply if:

        a) you make a 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 for GST.

    However, the sale is not a *taxable supply to the extent that it is *GST-free or *input taxed.

* is a defined term in the GST Act

The sale of the Property satisfies paragraph 9-5 (a), (c) and (d) of the GST Act. You have entered into an agreement to sell the Property for consideration. The sale is connected with Australia and you are registered for GST.

Paragraph 9-5(b) of the GST Act - supply made in the course of an enterprise

The Property is vacant land. You had conducted an enterprise previously on the Property. You had ceased trading and the Property has been left vacant since then. GST turnover is nil. The issue to consider is whether the sale of the Property is made in the course of your enterprise.

The word "enterprise" is outlined in subsection 9-20(1) of the GST Act as an activity or activities done

    • in the form of a business, or

    • in the form an adventure or concern in the nature of a trade; or

    • on a regular or continuous basis, …grant of an interest in property…

In addition the Miscellaneous Taxation Ruling MT 2006/1 provides an explanation on "enterprise" in relation to the entitlement for an Australian Business Number. The relevant paragraphs to the sale of the Property are paragraphs 140 to 148 of MT 2006/1, which provide that carrying on an enterprise includes the activities to terminate the enterprise. Paragraphs 140 to 141 state:

      140.Carrying on an enterprise includes doing anything in the course of the termination of the enterprise. An enterprise terminates when the activities related to that enterprise cease. Ordinarily, that occurs when all assets are disposed of or converted to another purpose or use and all obligations are satisfied. Disposal of assets may include the sale, scrapping, or other disposal of the assets.

      141.In the course of terminating an enterprise, a number of obligations may need to be finalised. These include finalising accounts, paying creditors, repaying loans, cancelling licences and business registrations.

You had ceased trading and the Property has been left vacant since then. Although your GST turnover is nil, you are registered for GST. You have been claiming GST credits for your creditable acquisitions.

The Australian Taxation Office publication "Guide for final activity statements - Leaving the GST System" provides that an entity operates on a GST registered basis if the entity claims GST credits in their AS.

Based on the information provided, we consider you continue to operate on a GST registered basis even after you have ceased your business. The Property was a business asset in your enterprise and you have been claiming GST credits for your creditable acquisitions. The disposal of the Property is made in the course of terminating your business (paragraph 9-20(1)(a) of the GST Act) that is, the sale of the Property is made in the course of your enterprise. Therefore, the sale satisfies all the criteria of section 9-5 of the GST Act. As the sale of the Property is neither GST-free nor input taxed, the sale of the Property is a taxable supply under section 9-5 of the GST Act.

The rulings in the register have been edited and may not contain all the factual details relevant to each decision. Do not use the register to predict ATO policy or decisions.


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