Edited version of private advice

Authorisation Number: 1052061047447

Date of advice: 24 November 2022

Ruling

Subject: GST - sale of vacant land

Question

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

Answer

Yes, the sale of the land is a taxable supply under section 9-5 of the GST Act.

This ruling applies for the following period:

23 November 20XX to 22 November 20XX

Relevant facts and circumstances

You purchased the land to build premises from which to operate your business.

You registered for GST.

You are selling the land because you bought an established building instead.

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

Reasons for decision

You are liable for GST on taxable supplies that you make.

You make a taxable supply where you satisfy the requirements of section 9-5 of the GST Act, which states:

You make a taxable supply if:

(a) you make the supply for *consideration; and

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

(c) the supply is *connected with the indirect tax zone; and

(d) 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.

The sale of the property would satisfy the requirements of paragraph 9-5(a) of the GST Act as the sale would be made for consideration. Additionally, the property is connected with Australia as the property is located in Australia which would satisfy the requirements of paragraph 9-5(c) of the GST Act. Furthermore, you are registered for GST therefore you would satisfy the requirements of paragraph 9-5(d) of the GST Act.

There are no provisions of the GST Act under which the sale of the property could be GST-free or input taxed. Thus, what remains to be determined is whether the sale of the property would be a supply made in the course or furtherance of an enterprise carried on by you.

Paragraph 9-5(b) of the GST Act

In accordance with section 9-20 of the GST Act, an enterprise includes:

•         an activity or series of activities done in the form of a business (paragraph 9-20(1)(a) of the GST Act)

•         an adventure or concern in the nature of trade (paragraph 9-20(1)(b) of the GST Act)

•         an activity or series of activities done on a regular or continuous basis in the form of a lease, licence or other grant of an interest in property (paragraph 9-20(1)(c) of the GST Act).

Furthermore, 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 provides the Commissioner's view on the meaning of enterprise for ABN purposes.

Commencement of an enterprise

122. ...activities done by an entity that are part of a process of beginning or bringing into existence an enterprise are activities in carrying on an enterprise.

123. In the Commissioner's view the term, 'doing anything in the course of the commencement....of an enterprise' describes the kind of activities undertaken. The ultimate outcome of the activities and whether or not an ongoing enterprise eventuates is not a determinative factor. An entity has to determine its entitlement to an ABN from the time of its first activities.

124. If the activities have the character of those ordinarily undertaken to commence an enterprise they will be accepted as falling within the statutory definition. This leads to a broad range of preliminary activities being accepted as an enterprise. These types of activities may still be considered to be commencement activities even where the eventual enterprise is conducted differently from the one originally contemplated.

You purchased the land with an intention of building premises to operate your business. You subsequently found an existing property to operate your business from and purchased it. These acquisitions were made in the commencement of your enterprise. Therefore, the property is a business asset and the sale is made in the course or furtherance of this enterprise. Therefore, the sale of the land would satisfy the requirements of paragraph 9-5(b) of the GST Act.

We accept that you are not carrying on a property development enterprise in relation to the sale of the land. As the land was purchased to operate your business, we accept it is a capital asset. However, the sale of capital assets that are part of your business are supplies made in the course or furtherance of your enterprise as you purchased the asset for that purpose.

As all the requirements of section 9-5 of the GST Act are satisfied, the sale of the land would be a taxable supply and therefore, GST is payable.