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Edited version of your written advice
Authorisation Number: 1012901287010
Date of advice: 27 October 2015
Ruling
Subject: GST and the sale of property
Question:
Is the supply of the property 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:
Mr and Mrs A (referred together as 'you') are not registered for GST. You purchased a property in 19XX, The property is used for farming and residential purposes.
There is a house on the property in which you do not live in, although, you have lived in the house at various times over the years. This house has been also rented to unrelated third parties at various times over the years, with a small amount of rental income. The house is currently vacant and you have no intention to rent it out again.
You obtained an Australian business number (ABN) for a family partnership in respect of your farming business. However, the farming business is not registered for GST as its annual GST turnover is less than the GST registration turnover threshold.
The property was rezoned as an Urban Zone under a 'Precinct Structure Plan' in 20XX. You did not apply to have, nor took part in the rezoning of the property.
As a result of rezoning, and the significant increase in council rates, it has become unsustainable for you to continue to hold the property. Given uncertainty surrounding the application of land tax and risk of an unsuccessful appeal, you decided to sell the property in order to fund the potential land tax liability.
You entered into a development agreement ('Agreement') with a developer to subdivide the property into several lots. The Agreement with the developer is a purely commercial one and entered into good faith. You do not have any connection with the developer apart from the Agreement.
The intention of the Agreement is to allow the developer to do all things to the land to capitalise on the subdivision approval and for you to deliver the land for sale.
Under the Agreement, the developer undertakes and completes the development works at its discretion.
The developer has no beneficial or equitable interest in the land for the terms of the Agreement.
The developer is responsible for all outgoing in relation to the land from the date of the Agreement.
Under the Agreement, the developer will be responsible for funding all the project costs. You will not commit any funds for the development.