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Edited version of your written advice
Authorisation Number: 1012772176448
Ruling
Subject: GST and the sales of subdivided lots of land
Question
Are the sales of the subdivided lots of land by you subject to goods and services tax (GST)?
Answer
No, the sales of the subdivided lots of land are not subject to GST.
GST is payable on a taxable supply. You make a taxable supply if all the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) are satisfied as follows:
(a) you make the supply for consideration;
(b) the supply is made in the course or furtherance of an enterprise that you carry on;
(c) the supply is connected with Australia; and
(d) you are registered or required to be registered.
However, a supply is not a taxable supply to the extent that it is GST-free or input taxed.
The supply of the sales of the subdivided lots of land will be taxable if it meets all the requirements in section 9-5 of the GST Act.
Based on the information provided, your sales of the subdivided lots of land do not satisfy all the requirements of a taxable supply under section 9-5 of the GST Act because:
(i) your activity of selling land does not constitute the carrying on an enterprise; and
(ii) you are neither registered nor required to be registered for GST.
Accordingly, your sales of the subdivided lots of land are not a taxable supply and are not subject to GST.
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
A and B (referred together as 'you') are not registered for goods and services tax (GST) as individuals or as a partnership. You jointly own real property which has an area of X hectares and is used for farming and residential purposes.
B and their late spouse acquired the property more than 50 years ago. B's spouse inherited their share in the property when their parent passed away in XXXX.
There are two houses on the property. A has occupied one of the houses on the property as their principal place of residence since XXXX. Another house has been rented out by you.
A carries on a primary production business in the partnership on the property. The partnership does not pay you fees for the use of the land in its enterprise. The property is not recognised as an asset of the partnership.
A previously had a primary production business and was registered for GST as a sole trader. The property was not used in this business. The ABN for this business was cancelled.
In XXXX, you were approached by a Company with a proposal to develop a section of land. It is proposed that the Company will develop approximately XX hectares to create approximately XXX lots in two stages. It is anticipated that the development will be completed towards the end of XXXX.
The land around the dwellings will be excluded from the development. The house which is rented out will be transferred to B's name and the other house which A uses as their residence will be transferred to their name subject into council approval.
The current projections are that the sale of lots will generate total sales revenue of approximately $XX.X million and an estimated return to you of $XX.X million.
You have signed a property development agreement (Agreement) with the Company. Under the Agreement the company will:
(a) carry out all the development activities;
(b) obtain all permits and approvals;
(c) manage the day to day running of the development;
(d) meet all the costs of the development;
(e) prepare the final development plan; and
(f) be solely responsible for marketing strategies for the sale of the lots.
The Company will be paid a management fee equal to X% of the total proceeds from the sale of the lots. The development fee will be determined as a proportion of the proceeds from the sale of the lots.