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Edited version of your written advice
Authorisation Number: 1013003653744
Date of advice: 27 April 2016
Ruling
Subject: Goods and Services Tax (GST) and the sales of subdivided lots of land
Question:
Are the sales of the subdivided lots of land by you subject to 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 the indirect tax zone (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.
You are an individual who is not registered for goods and services tax (GST). You own property in Australia.
Both properties remained vacant since they were purchased.
In 20XX, the area in which the properties are located was rezoned from Low Density Residential to Residential upon the signing of a section 173 Agreement under the Planning and Environment Act 1987.
In 20XX, your spouse passed away and their share in the properties was transferred to you.
In 20XX, you sold one of the properties. You are planning to subdivide the remaining property and sell the subdivided lots of land. You are XX years old and unable to continue maintaining the property due to the decline in your health.
In late 20XX, you considered selling the property. However, you were advised that it would be advantageous to subdivide the property, and sell the subdivided lots to maximise your return.
You have not been involved with land subdivision in the past and have not been involved in any business connected with the development of land.
The subdivision will only be to the extent of obtaining the council's approval and will involve the following activities:
• Construction of roads and curbing
• Provision of water, electricity, gas and sewerage
• Boundary fencing; and
• Tree planting on the nature strips only.
Due to your age and lack of experience in development activities you have decided to engage the services of the Surveyor to undertake all of the activities involved in the planning approval stage.
The Surveyor has prepared a planning submission which outlines that the subdivision proposal is for a multi-lot subdivision consisting of XX proposed subdivided lots, with XX lots having a north-south orientation and two lots having an east-west orientation. The subdivision will be staged in two parts.
The entire project will be outsourced including the planning, development and sale of the subdivided lots.
Your only involvement in the subdivision will only be in relation to the final decision making, after being consulted by the Surveyor and you will not be physically involved in any way.
Once the subdivision approval has been granted, the Surveyors will tender out the subdivision project and a civil construction entity will be engaged to undertake the subdivision of the property.
The services of a local real estate agent will be engaged to sell the subdivided lots.
You have obtained a bank line of credit facility which will be used solely for the funding of the subdivision.
Neither you nor any related entities have undertaken any similar development activities in the past, and neither you nor any related entities have any intention to undertake similar activities in the future.
You advise that the disposal of subdivided lots of land will not be conducted in the manner of an enterprise but rather in the manner necessary for you to fund your daily needs.
You do not have a documented business plan, and there is no organisation set-up for the subdivision and sales of the lots of land.
You have not accounted for the property as a business asset or expense. You have not claimed any deductions for the purchase of the property or any subdivision costs for income tax purposes.
The property has not been used to conduct a business. You have not carried out any business on the vacant land.
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 9-25
A New Tax System (Goods and Services Tax) Act 1999, Section 23-5
A New Tax System (Goods and Services Tax) Act 1999, Section 40-40