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Edited version of your written advice
Authorisation Number: 1012736064110
Ruling
Subject: GST and the sale of sub-divided land
Question 1
Is the sale of your interest in Lot 1 a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999?
Answer
No, the sale of your interest in Lot 1 is not a taxable supply as it is an input taxed supply.
Question 2
Is the sale of your interest in Lot 2 a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999?
Answer
No, the sale of your interest in Lot 2 is not a taxable supply as you are neither registered, nor required to be registered for GST.
Relevant facts and circumstances
Your spouse purchased a property which has been used as their and your private residence since 20XX.
You purchased an adjoining property which has been used as a residential rental property since 200X.
In 20YY you and your spouse engaged a surveyor to provide advice and assistance in regard to subdividing the two properties. The local council has approved the development application for the subdivision of the two properties into several lots.
• Lot 1 is part of the adjoining property plus part of the family residence. It contains a residential premise and is owned jointly by you and your spouse as tenants in common.
• Lot 2 is part of the adjoining property plus part of the family residence. It is vacant land and is owned jointly by you and your spouse as tenants in common.
The approval of the development includes various conditions relating to matters such as storm water, fencing, vegetation removal and planting, provision of water, electricity and sewerage services and the construction of the private carriageway.
Neither you nor your spouse, have undertaken property development previously and neither have borrowed funds to finance the development.
You are not registered for GST.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 9-5.
Reasons for decision
The sale of real property is subject to GST if it is a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). You make a taxable supply if:
• the sale is for consideration (payment); and
• the sale is made in the course or furtherance of an enterprise that you carry on; and
• the property is located in Australia; and
• you are registered, or required to be registered for GST; and
• the supply is neither GST-free nor input taxed
Generally, the sale of real property that is used for residential accommodation is input taxed. Lot 1 contains a residential premise that you rent out. The property has been used for providing residential accommodation for many years and therefore, the sale of Lot 1 is input taxed.
An isolated transaction involving real property may be 'in the course or furtherance of an enterprise'. However the sale of real property will only be subject to GST if the vendor is either registered or required to be registered for GST.
Generally, you are required to be registered for GST if you are likely to make supplies of greater than $75,000 in the current month plus the following eleven months. However, any transfers of a capital asset are excluded from the annual turnover calculation.
Lot 2 is vacant land that was previously part of your property and part of your spouse's property. Your property contained a house you rented out and, as such, was an income producing capital asset of yours. The sale of your interest in Lot 2 is the mere realisation of your interest in part of that capital asset and the sale is not included in the calculation of your annual turnover.
As you are neither registered, nor required to be registered for GST, the sale of you interest in Lot 2 is not a taxable supply.