Edited version of private advice

Authorisation Number: 1051902268087

Date of advice: 18 October 2021

Ruling

Subject: GST and sale of vacant land

Question

Will GST be payable on the sale of the vacant land (Lot B) which is subdivided from the property located in Australia (the Property)?

Answer

No.

GST will not be payable on the sale of Lot B because the sale will not be a taxable supply.

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

In your case, the sale of Lot B will be for consideration and connected with Australia; hence paragraphs 9-5(a) and 9-5(c) of the GST Act will be satisfied. However, the requirements of paragraphs 9-5(b) and 9-5(d) will not be satisfied because:

• the sale will be a mere realisation of a private asset and hence, will not be 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 will be required to be registered for GST (paragraph 9-5(d) of the GST Act).

Relevant facts

Mr A and Mrs A (together referred to as "You") are the joint owners of the Property.

The Property was purchased a number of years ago in Mrs A's name only. Since retiring, a part interest in the Property was transferred to Mr A.

Mrs A purchased the Property in cash using the proceeds of the sale of your previous home.

You provided a copy of the Record of Certificate of Title for the Property, which lists the registered proprietor, as tenants in common.

At the time of purchase, there was an old timber 2 storey house that had been there for over XXX years and had a bit of history to it.

You initially wanted to restore and extend the existing house and had some concept plans drawn and circulated to several builders. However, due to issues with the location of the Property, you decided to demolish and rebuild using the existing structure as a guide.

The construction of a new house was started shortly after Mrs A's purchase of the Property.

When the new house was completed you moved into the Property and lived there as your main residence.

After a number of years, you moved interstate for business and as a result you leased your home.

The Property was leased for a number of years until recently when the last tenant left.

You did not return to the Property as all your children were no longer living at home and you decided to try apartment living.

You considered selling the Property as a whole and it was last listed for sale a few years after you moved interstate.

You were aware that the Property could technically be subdivided from when it was purchased. With the zoning it was capable of being subdivided into a number of lots. You were approached by adjoining owners who were keen to acquire some of your land to enable them to subdivide their block. You agreed to a land swap which resulted in the adjoining owners getting some extra land in exchange for a separate access to a road which was considered useful to your ability to subdivide. You and the adjoining owners obtained a land report which confirmed that the property was capable of being subdivided and from there you and the adjoining owners have been progressing the subdivision.

You and the adjoining owners engaged professional planners. In the course of the negotiations with Council it became apparent that they would not approve the number of lots originally planned so you agreed to reduce your part of the subdivision to just 2 lots. This was approved (subject to various conditions). You and the adjoining owners are working through those conditions and are hoping to obtain clearances and separate titles by the end of the year.

You provided a copy of the approval of the subdivision, which lists the owners as you and the adjoining owners. The conditions include provision of services and utilities to Lot B.

You provided the proposed freehold subdivision which shows that the Property is subdivided into 2 lots:

• Proposed Lot A contains the existing house
• Proposed Lot B is vacant land

You have appointed a surveyor and an engineer to provide the necessary information required by the Council.

The only activities undertaken were the obtaining of the development assessment and the engagement of planners, surveyors and engineers. The bulk of the engineers report relates to your new lots. You and the adjoining owners have both appointed separate surveyors.

Total costs for the creation of your lots are expected to come to be less than $75,000 being land assessment report and planning fees, engineering fees and surveying fees.

The development activities are funded through your savings.

Once all clearances are received, you will list Lot B for sale.

You have not claimed income tax deductions for any of the development costs or interest on loans.

You are not carrying on any business and are not registered for GST.

You have not previously undertaken any subdivision activities or any business of land development nor do you intend to undertake any subdivision activities or any business of land development in the future.

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.