Edited version of private advice

Authorisation Number: 1051960174279

Date of advice: 14 March 2022

Ruling

Subject: GST and the sale of vacant land

Question

Will the sale of the vacant land located in the indirect tax zone (the Property) be a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No. Your sale of the Property will not be a taxable supply under section 9-5 of the GST Act because you are neither registered nor required to be registered for GST.

Your sale of the Property will be a sale of a capital asset and therefore excluded from the calculation of your projected GST turnover in accordance with section 188-25 of the GST Act. As your projected GST turnover is under $75,000, you are not required to be registered for GST.

Therefore, GST will not be payable on the sale of the Property.

This ruling applies for the following periods:

1 July 20XX - 30 June 20XX

1 July 20XX - 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

Person A and Person B (You) are siblings in a partnership.

You are not registered for GST as a partnership or individually, nor have you been registered in the past.

ATO systems show that on DD/MM/YYYY, you applied for and obtained a partnership Tax File Number (TFN), citing the main activity from which the entity derives the majority of its business income to be 'Property Rental - Residential, as owner or leaseholder (except holiday houses, holiday flats or holiday units)'.

On DD/MM/YYYY, you purchased the property located in the indirect tax zone (the Property) for $X, funded through combined savings and borrowed funds.

The Property comprises an area of Xm² and is vacant land.

The Property is situated directly next to your parents' home.

Your intention when you purchased the Property was to build a residential premise for the purpose of long-term rent. If at a later stage it was deemed necessary, the Property would be available for you to live in either due to your own personal circumstances or to enable you to reside close to your parents as they aged.

Since purchasing the Property, the following activities have been undertaken:

•         On DD/MM/YYYY, you obtained a quote from a local contractor, 'Contractor Name', for the removal of trees on the Property.

•         You engaged an engineering company, 'Engineering Company Name', to determine the site classification (soil test) to enable the land to be built upon. On DD/MM/YYYY, 'Engineering Company Name' provided a report to you on their foundation investigation for a proposed new residence at the Property.

•         In MM/YYYY, improvements were made to fence the Property. The style of fence was an extension to that of your neighbouring parent's property. The fence was installed primarily by your parent with assistance from an independent contractor.

•         Additional trees were planted along the boundary fence adjoining your parent's property, but not other boundaries due to the availability of water.

•         The Property has been regularly maintained with lawn mowing completed by your parents.

•         Your parents have undertaken informal communications with different builders on your behalf for future intentions.

Your circumstances have now changed and you need to sell the Property to meet your own individual financial needs.

You will not be undertaking any subdivision or development activities and will be selling the Property in an as is condition. An easement runs through the Property which precludes further subdivision of the Property.

The Property has not been used by you for any income producing activity.

You have not carried on a business of buying and selling land or property development in the past and you do not intend to purchase any other property in joint ownership.

The Property will be advertised for sale once you have confirmed the tax implications of the sale.

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 23-5

A New Tax System (Goods and Services Tax) Act 1999 Division 38

A New Tax System (Goods and Services Tax) Act 1999 Division 40

A New Tax System (Goods and Services Tax) Act 1999 subsection 188-10(1)

A New Tax System (Goods and Services Tax) Act 1999 section 188-15

A New Tax System (Goods and Services Tax) Act 1999 section 188-20

A New Tax System (Goods and Services Tax) Act 1999 section 188-25

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