Edited version of private advice

Authorisation Number: 1051778542598

Date of advice: 20 November 2020

Ruling

Subject: GST and sale of real property

Question

Is GST payable on the sale of the Vacant Lots, which are subdivided from the property located at a specified location?

Answer

No.

GST is not payable on the sale of the Vacant Lots because you are not making a taxable supply.

For the sale of real property to be a taxable supply the supply must satisfy all the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

In your case, although the sale of the Vacant Lots is for consideration and connected with Australia and hence satisfies paragraphs 9-5(a) and 9-5(c) of the GST Act, the requirements of paragraphs 9-5(b) and 9-5(d) are not satisfied. This is because:

• the sale is a mere realisation of a private asset and hence, is not made in the course or furtherance of an enterprise that you carry on (paragraph 9-5(b) of the GST Act) and
• you are neither registered nor required to be registered for GST (paragraph 9-5(d) of the GST Act).

Relevant facts

X and Y (together referred to as "You") are the joint owners of the property at a specified location (the Property). The land, zoned rural, is a particular size in square meters and contains a house and garage.

You are both in your late 60s.

In Year XXXX, a bank loan was taken out by you for an owner occupier purchase of an established house. The term of the loan was a number of years.

The purchase of the Property for a specified amount was settled in early Year XXXX

You purchased the Property for the purpose of occupying it as your principal place of residence. You moved into the Property shortly after the purchase.

In the middle of Year XXXX, you sold your house at a specified location where you have lived for a number of years. The settlement was in late Year XXXX.

Excess funds from the sale of your previous residence was used to reduce the current bank loan.

You have been living in the Property for several years and have considered your future options if the land became too large for you to manage. You looked at moving to a regular sized block elsewhere but decided to stay where you are. Two main factors that convinced you to stay rather than move, were that X had a big garage on the property which was ideal for retirement activities and that your immediate family members live nearby, making it easier to stay in touch.

Last year, you decided that you would build a more suitable house on the land which you could manage easier.

You engaged a project manager to carry out the development application and all the subdivision matters, in which you have no experience.

You subsequently lodged an application with council to subdivide the land into a number of lots as shown in the map of subdivision.

Early in the current year, the Development Application for the subdivision was approved by the Council. The works to be done include:

• provision of kerb and gutter in a specified street
• servicing of all lots in the subdivision with water, sewer, underground electricity and underground telecommunications facilities.
• street lighting shall be provided for the development. The street lighting shall include the upgrading of the lighting of the intersection of any new roads with existing roads.

The development activities commenced in the middle of the current year and were completed recently.

You provided a subdivision cost sheet which shows the total cost at approximately a particular sum. Of this amount, a large portion was for upgrade of the existing one-way road next to the house to two-way.

There was no financing involved for the subdivision as you paid all costs from your own funds.

The house that you have been living in since Year XXXX is situated on the newly subdivided Lot B.

You are planning to build your new home on Lot A and rent out your current home on Lot B to provide an income.

You recently entered into contract of sale for the remaining lots. The sale price of each lot is in excess of $75,000.

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 23-5.