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This edited version has been archived due to the length of time since original publication.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: 1012835476874

Date of advice: 14 July 2015

Ruling

Subject: GST and property

Question 1

Will you make any taxable supplies under your Proposal?

Answer

No

Relevant facts and circumstances

You are registered for GST.

You currently hold a lease over land.

Over time you have made significant improvements to the land.

The Proposal involves commercial 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 9-10.

Reasons for decision

In this ruling, all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) unless otherwise specified.

You currently hold a lease over land. You also hold an interest in common property.

The proposal includes the surrender of the lease you currently have and the receipt of a new leases once the land has been subdivided. You will continue to own the same area of property.

You have asked whether you will make any taxable supplies as a result of undertaking this proposal.

Under section 9-5, you make a taxable supply if:

      (a) you make the 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 the indirect tax zone; and

      (d) you are *registered, or *required to be registered, for GST.

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

[note: the terms marked with an * are defined in section 195-1 of the GST Act.]

You are registered for GST and conduct an enterprise that includes leasing of commercial property in the indirect tax zone. Based on the information provided, this proposal is considered to be in the course of your leasing enterprise and it will not be GST-free or input taxed.

To satisfy paragraph 9-5(a) there must be a supply and consideration and there must be a connection between the supply and the consideration. We need to consider whether the elements of supply and consideration as defined in the GST Act exist.

Supply

'Supply' has the meaning given by section 9-10 of the GST Act and is any form of supply whatsoever. Subsection 9-10(2) expands the meaning of supply. This subsection provides that supplies include, but are not limited to:

    • A supply of goods and services;

    • A creation, grant, assignment or surrender of any right;

    • A grant, assignment or surrender of real property;

    • An entry into, or release from, an obligation to do anything.

Goods and Services Tax Ruling GSTR 2006/9 GST: supplies (GSTR 2006/9), provides guidance in relation to the identification and character of supplies. It sets out a number of propositions in relation to supply.

Where the steps in a process to produce a specified outcome will be brought about solely by the action of the law they will not be supplies and therefore there will be no taxable supply as a consequence of cancelling the Units Plan or surrendering the lease (GSTR 2006/9 paragraph 78).

In Goods and Services Tax Ruling GSTR 2009/2 Goods and services tax: partitioning of land (GSTR 2009/2) the Commissioner explains at paragraph 50 that:

      50. The Commissioner considers that the subdivision of land by co-owners does not constitute a supply for the purposes of GST. All that results is that the subdivided land is held under different titles by the same owners. While the effect of the subdivision is to create new rights and titles in substitution of the original rights and titles, there is no change in the ownership of the subdivided land. Accordingly, where land is jointly held, a subdivision, by itself, does not involve a transfer of any interests in the land between the co-owners.

Therefore the subdivision of property by itself does not result in a supply being made.

The proposal does not result in any supplies being made and consequently there are no taxable supplies being made by you for the purposes of the GST Act.


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