Edited version of private advice

Authorisation Number: 1052071422956

Date of advice: 20 December 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

No, the sale of the land is not a taxable supply under section 9-5 of the GST Act.

This ruling applies for the following period:

20 December 20XX to 20 December 20XX

Relevant facts and circumstances

You purchased the land to build a private dwelling with your spouse.

You are selling the land because you separated from your spouse.

You are not registered for GST.

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

Detailed reasoning

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.

There are no provisions of the GST Act under which the sale of the property could be 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 the indirect tax zone as the property is located in Australia (paragraph 9-5(c) of the GST Act). Accordingly, we need to determine whether the other two elements, paragraphs 9-5(b) and (d) of the GST Act, would also be satisfied.

Are you carrying on an enterprise? (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.

Goods and Services Tax Determination GSTD 2006/6 Goods and Services Tax: does MT 2006/1 have equal application to the meaning of 'entity' and 'enterprise' for the purposes of the A New Tax System (Goods and Services Tax) Act 1999? provides that the discussion in MT 2006/1 applies equally to the term 'enterprise' as used in the GST Act and can be relied on the GST purposes.

Paragraphs 170 to 179 of MT 2006/1 discuss factors to consider when determining whether an activity or series of activities are done in the form of a business. Paragraph 178 of MT 2006/1, with reference to Taxation Ruling 97/11 Income tax: am I carrying on a business of primary production lists indicators of carrying on a business:

•         a significant commercial activity;

•         an intention of the taxpayer to engage in commercial activity;

•         an intention to make a profit from the activity;

•         the activity will be profitable;

•         the recurrent or regular nature of the activity;

•         the activity is systematic, organised and carried on in a business-like manner and records kept;

•         the activities are of a reasonable size and scale;

•         a business of product; and

•         the entity has relevant knowledge or skill.

Paragraph 179 of MT 2006/1 states that there is no single test to determine whether a business is being carried on. Whilst each case might turn on its own particular facts, the determination of the question is generally the result of a process of weighing all the relevant indicators.

Given the facts of this case, we consider that the proposed sale of the land by you does not display the characteristics of a 'business' as listed above.

As the transaction may be described as one-off, we also need to consider the extended definition of 'enterprise' and whether this activity falls in the form of an adventure or concern in the nature of trade. MT 2006/1 provides guidance on the meaning of this expression.

An 'adventure or concern in the nature of trade' refers to transactions that have a commercial nature which are entered into for a profit-making purpose.

Paragraph 245 of MT 2006/1 refers to 'the badges of trade' while paragraphs 247 to 257 consider the six badges of trade being:

•         The subject matter of realisation

•         The length of period of ownership

•         The frequency or number of similar transactions

•         Supplementary work on or in connection with the property realised

•         The circumstances that were responsible for the realisation; and

•         Motive.

You purchased the vacant land. Your intention was to build a private dwelling and move in with your spouse. Whilst your intention changed due to separation, you are merely disposing of a private asset due to a change in circumstances and have not conducted any activities that constitutes an adventure or concern in the nature of trade. As you are not carrying on an enterprise in relation to the sale of the land, the sale of the land will not be a taxable supply under section 9-5 of the GST Act.