Edited version of your written advice

Authorisation Number: 1051350320765

Date of advice: 17 April 2018

Ruling

Subject: GST and sale of vacant land

Question

Is the sale of vacant land located at specified address (the Property/the named Land) by the Trustee for The Estate of Deceased (you) a taxable supply under section 9-5 of the GST Act and is GST payable on the supply?

Answer

No, the sale of the Property by you is not a taxable supply under section 9-5 of the GST Act and GST is not payable on the supply.

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 the trustee for the Estate of Deceased (the Trustee). In your capacity as the trustee, you are carrying on a specified enterprise in relation to n properties known as <name of properties> and are registered for GST from ddmmyyyy.

The Deceased passed away on ddmmyyyy and under the Will of the deceased you were named as the executor (the Executor) and trustee of your deceased parent’s estate. You are also the residuary beneficiary.

Probate was granted to you by the Supreme Court of State on ddmmyyyy. A request was made to the State Titles Registry office for you to be registered as proprietor of lots lot numbers on Title reference XXXX as personal representative. The lots are referred to as the named Land. You became the owner of the named Land on ddmmyyyy. You became the owner of the XXXXXX Land on ddmmyyyy.

The Deceased’s Will was challenged by the Executor’s family members. The Will was also challenged under the Testators Family Maintenance provisions of the Succession Act 1999. The court case was resolved by settlement reached on ddmmyyyy, when the Supreme Court of State issued an order for the settlement.

In order to fulfil your obligations under the Will and the settlement agreement, you entered into a Sale Contract dated ddmmyyyy for the sale of the named Land for $.

The named Land was sold as vacant land located at specified address in named State under Title reference XXXX and described as lots lot numbers on registered plan number XXXX.

The deceased had not conducted any improvements to or leased the named Land. Prior to the sale, the Executor apart from mowing did not carry out any other activities on the land and did not sell, subdivide, lease or create any interest in the named 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 9-20

A New Tax System (Goods and Services Tax) Act 1999 Section 9-40

A New Tax System (Goods and Services Tax) Act 1999 Section 195-1

Reasons for decision

These reasons for decision accompany the Notice of private ruling for THE TRUSTEE FOR THE ESTATE OF DECEASED.

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

Summary

The sale of the named Land was not made by you in the course or furtherance of an enterprise that you carry on for the purpose of paragraph 9-5(b). This means the sale does not satisfy section 9-5 to be a taxable supply. Accordingly, no GST is payable on the sale.

Detailed reasoning

Under section 9-40, an entity must pay the GST payable on any taxable supply that the entity makes. Section 9-5 states:

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.

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

Note:

● Terms marked with an asterisk are defined under section 195-1.

● If a provision of the GST Act uses the expression you, it applies to entities generally, unless its application is expressly limited.

We consider the provisions in Divisions 38 and 40 do not apply to the facts of this case to make the supply of the vacant land a GST-free or an input taxed supply respectively. Accordingly, we will consider if all of the requirements specified in paragraphs 9-5(a) to (d) are satisfied for the sale of the Property to be a taxable supply.

In this case:

● You are registered for GST from ddmmyyyy.

● The Sale Contract specifies the purchase price of the Property being $.

● The Property is located in Australia.

Accordingly, the conditions specified in paragraphs 9-5(a), (c) and (d) are satisfied.

Paragraph 9-5(b) requires the supply to be made by an entity in the course or furtherance of an enterprise that the entity carries on. Accordingly, we need to determine whether the sale of the Property by you was made in the course or furtherance of an enterprise that you carry on.

The definition of the term ‘enterprise’ in subsection 9-20(1) includes that an enterprise is an activity, or series of activities, done:

(a) in the form of a *business; or

(b) in the form of an adventure or concern in the nature of trade; or

(c) on a regular or continuous basis, in the form of a lease, licence or other grant of an interest in property; or

…

In your case, the facts do not indicate you are or will be selling properties on a regular or continuous. Accordingly, paragraph 9-20(1)(c) is not satisfied.

Miscellaneous Taxation Ruling MT 2006/1The New Tax System: the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian Business Number (MT 2006/1) considers, amongst other things, the meaning of certain key words and phrases used to define ‘an enterprise’.

Goods and Services Tax Determination GSTD 2006/6 Goods and services tax: does MT 2006/1 have equal application to the meaning of 'entity' and 'enterprise' for the purposes of the A New Tax System (Goods and Services Tax) Act 1999? states that the ABN Act uses the definitions of these terms that are contained in the A New Tax System (Goods and Services Tax) Act 1999. The principles in MT 2006/1 apply equally to the terms 'entity' and 'enterprise' and can be relied upon for GST purposes.

MT 2006/1 explains:

234. Ordinarily, the term 'business' would encompass trade engaged in, on a regular or continuous basis. However, an adventure or concern in the nature of trade may be an isolated or one-off transaction that does not amount to a business but which has the characteristics of a business deal.

244. An adventure or concern in the nature of trade includes a commercial activity that does not amount to a business but which has the characteristics of a business deal…

262. The question of whether an entity is carrying on an enterprise often arises where there are 'one-offs' or isolated real property transactions.

263. The issue to be decided is whether the activities are an enterprise in that they are of a revenue nature as they are considered to be activities of carrying on a business or an adventure or concern in the nature of trade (profit making undertaking or scheme) as opposed to the mere realisation of a capital asset…

In this case,

● the named Land is vacant land that was not leased or used to carry out any activities that could amount to a business or enterprise.

● the named Land does not form part of the leasing enterprise that you carry on in relation to your other properties.

● the facts indicate the sole purpose for the sale of the named Land was to raise money and use the sale proceeds towards fulfilling the Executor’s obligations in relation to the Deceased’s Will and the court ordered settlement.

Accordingly, we consider the sale of the named Land does not amount to an enterprise for the purpose of the GST Act. This means the condition for a taxable supply in paragraph 9-5(b) is not met and the sale is not a taxable supply under section 9-5. As such, GST is not payable on the sale.