Edited version of private advice

Authorisation Number: 1051871089616

Date of advice: 21 July 2021

Ruling

Subject: GST and property

Question

Is the supply by you to the purchaser of the subdivided lot (Lot 1) a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No

Section 9-5 of the GST Act provides that you make a taxable supply if:

•         you make the supply for consideration;

•         the supply is made in the course or furtherance of an enterprise that you carry on,

•         the supply is connected with the indirect tax zone (Australia); and

•         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.

In this case, it is accepted that the sale of Lot 1 is not a supply that is made in the course or furtherance of an enterprise that you carry on. Consequently, the sale is not a taxable supply and is not subject to GST.

Note, Miscellaneous Taxation Ruling MT 2006/1 The New Tax System: the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian Business Number (MT 2006/1) provides the Commissioner' view on the meaning of on an enterprise.

MT 2006/1 provides that assets can change their character from investment, which is capital in nature, to trade and therefore revenue in nature (paragraphs 258 to 260). If the activities on an objective assessment have the characteristics of trade, the person's motive is not relevant (paragraph 254). The characteristics of trade are explained in paragraphs 243 to 261 and include the length of period of ownership and the frequency or number of similar transactions. In particular attention is drawn to paragraph 251 of MT 2006/1 which states:

251. The greater the frequency of similar transactions the greater the likelihood of trade.

Relevant facts and circumstances

Individual A (you) registered for GST as you provide taxi travel.

In respect of your taxi travel activity you charge GST on your supplies and claim input tax credits for any creditable acquisitions that you make related to the taxi travel.

You are also employed as an aged carer and have received salaries and wages for this employment.

You acquired a property in the early 19XX's located at the address XYZ. This property consisted of a residential home and since purchase this property has been used by you to live in and raise your children/family.

Your children moved out of home and you no longer require such a large house. As such you demolished the existing home and split the property into 2 lots with the intention to build a new house in which to live in and sell the other lot as vacant land. The subdivided lots became known as:

•         Lot 1

•         Lot 2

You built your new home on Lot 2, which you currently use as your residence.

You did not claim any input tax credits for the preparation costs involved in splitting the block or building your new home.

As part of the council requirements for subdivision you were required to provide water to Lot 1, however no further development has taken place on this lot.

In early 20XX you entered into a contract of sale to sell Lot 1 to a purchaser.

No money was borrowed to prepare the subdividing of the block.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 9-5