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Edited version of your written advice
Authorisation Number: 1012762896320
Ruling
Subject: GST and sale of land
Question
Will your supply of the Property be a taxable supply?
Answer
Yes
Relevant facts and circumstances
You are registered for GST.
On ddmmyyyy, you purchased Property 1 (the original property), which contained a house.
You purchased this property with the intention of using part of it as a road reserve.
You rented the house for several years from the date of purchase to ddmmyyyy. You ceased to rent the house after this time, as the process had commenced to complete a road reserve dedication, which required the demolition of the house.
On ddmmyyyy, you lodged a Survey Plan to create Lots xx and yy.
The larger part of the original property, which contained the house, has been used as road reserve.
You are now in the process of selling the smaller lot (the Property).
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 40-65
A New Tax System (Goods and Services Tax) Act 1999 section 195-1
Reasons for decision
Note: In this ruling, unless otherwise stated,
• all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)
• all reference materials referred to are available on the Australian Taxation Office (ATO) website www.ato.gov.au
Under section 40-65, 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).
At the time of purchasing the original property, the house and (at least) some of the land were residential property.
The larger part of the original property, which contained the house, has been used as road reserve. As explained at paragraph 34 of Goods and Services Tax Ruling GSTR 2003/3 Goods and services tax: when is a sale of real property a sale of new residential premises? (GSTR 2003/3), this reduced land area and building, as a 'package', has previously been sold as residential premises.
You are now in the process of selling the smaller lot (the Property).
As stated at paragraph 35 of Goods and Services Tax Ruling GSTR 2003/3 this smaller lot is not residential premises. The Property is newly created vacant land and has not previously been sold as part of a larger package.
As explained in paragraph 47 of Goods and Services Tax Ruling GSTR 2012/5 Goods and services tax: residential premises, vacant land is not residential premises because it is not capable of being occupied as a residence or for residential accommodation as it does not provide shelter and basic living facilities. Vacant land is not residential premises.
Your supply of the Property will satisfy the requirements for a taxable supply set out in section 9-5. Further, it will be neither GST-free nor input taxed. Therefore, it will be a taxable supply.