Edited version of private advice

Authorisation Number: 1051968233319

Date of advice: 31 March 2022

Ruling

Subject: GST and sale of subdivided land

Question:

Is the sale of subdivided land by you subject to GST?

Answer:

No. The sale of subdivided land by you will not be subject to GST.

You are not making taxable supplies in relation to sales of the subdivided lots of land.

Under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), you make a taxable supply if:

(a)  you make the supply for consideration; and

(a)  the supply is made in the course or furtherance of an enterprise that you carry on; and

(b)  the supply is connected with Australia; and

(c)   you are registered or required to be registered.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed

Based on the information provided, your subdividing and selling of the subdivided lots of land does not satisfy all the requirements of a taxable supply under section 9-5 of the GST Act because:

              i.        your activities of subdividing and selling of the subdivided lots of land do not constitute the carrying on of an enterprise, and

             ii.        you are neither registered nor required to be registered for GST.

Accordingly, your sale of the subdivided lot of land does not satisfy all the requirements of a taxable supply under section 9-5 of the GST Act, and are not taxable.

Relevant facts and circumstances

You are two individuals who are not registered for goods and services tax (GST) as individuals or as a partnership. You jointly own real property.

You acquired a property on XX XXXXXXXXX XXXX. The area of the property was XXX Sqm. The property included a house and vacant land.

The purchase was funded by a loan from the bank.

You occupied the house on the property as your principal place of residence since you purchased it. The vacant land was always used by you for private purpose. You have not carried out any business on the vacant land.

You have been planning to subdivide the Property since XXXX.

You are planning to demolish existing house and subdivide the property into two allotments. You will build a residential property on one lot for you to reside and sell other subdivided lot.

A minimal amount of work will be undertaken in order to prepare the subdivision of the land for sale. The only work to be undertaken will be done to secure the council approval for the subdivision of the land. There are no buildings on the new subdivided lots of land that are for sale.

You advise that the disposal of subdivided lots of land will not be conducted in the manner of an enterprise but rather in the manner necessary for you to fund to build your residential house.

There is no change of purpose or object for which the land is held.

The level of activities undertaken for the subdivision will be minimal development work to meet the council requirements.

The Property has not been used to conduct a business.

You do not have a documented business plan, and there is no organisation set-up for the subdivision and sale of the lot of land.

You have not been involved in any land subdivision or development activity. You have engaged in any subdivision activity or in the business of land development in the past. You do not own, nor are associated with any entities that have or could have been involved in subdivision or land development. The only subdivision activity you propose to be involved in is e the subdivision of your Property and that is only for the purpose of funding the building of a new home for you on the allotment which you will keep for yourselves. You do not propose to be involved in any further subdivision or land development activities.

You plan to fund the demolition and subdivision from your savings. You will need to sell one allotment in order to part fund the building of your home on your allotment. You will not receive any government grants to help with building your home.

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 23-5

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