Edited version of private advice

Authorisation Number: 1051954171679

Date of advice: 28 February 2022

Ruling

Subject: GST and supply of vacant land

Question

Is the supply by you of the Property a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No. The supply of the Property is not a taxable supply.

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 the Property by you is not a taxable supply as it is not part of any enterprise that you carry on. Consequently, the sale 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.

This ruling applies for the following period:

XX Month 20XX till quarter ending XX Month 20XX

The scheme commences on:

XX Month 20XX

Relevant facts and circumstances

You carry on an enterprise of leasing properties and are registered for GST.

You acquired the Property prior to 1 July 2000 which consisted of vacant land.

You acquired the Property for the purpose of building a residential premise, which you would use as your home. In addition, one of the rooms within the home was to be used as your home office. However, since acquiring the Property you have not commenced any development activity on the Property.

You have not claimed any input tax credits in respect of the Property, nor have you claimed any input tax credits for any acquisition made in connection with the Property.

You have only conducted development activity when doing renovations on the properties that you lease as part of your leasing enterprise and you have not previously developed property for the purpose of resale.

You (as Vendor) have entered into a Contract of Sale under which you will supply the Property.

Relevant legislative provisions

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