Edited version of private advice

Authorisation Number: 1052171876754

Date of advice: 13 October 2023

Ruling

Subject: Sale of deceased estate vacant land

Question 1

Does GST apply on the sale of the vacant land?

Answer

No. The supply of the land is not made in the course or furtherance of an enterprise. As such, it is not a taxable supply.

Question 2

If GST does apply, can the valuation method be used?

Answer

Unnecessary to answer.

Question 3

Is any capital gain or loss you make due to the sale of the vacant land disregarded?

Answer

No

This ruling applies for the following period:

For the income year ended 30 June 2024

The scheme commenced on:

1 July 2023

Relevant facts and circumstances

The deceased purchased land in 1964 and 1978 respectively (vacant land).

The deceased was not a resident of Australia for tax purposes.

Their intention was to build a house using both blocks of land but he never progressed past the planning stage.

The properties will be sold by the executor of the estate and proceeds distributed to the beneficiaries.

Relevant legislative provisions

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

Income Tax Assessment Act 1997 section 102-20

Income Tax Assessment Act 1997 subsection 104-10(1)

Income Tax Assessment Act 1997 subsection 104-10(2)

Income Tax Assessment Act 1997 paragraph 104-10(3)(a)

Income Tax Assessment Act 1997 subsection 104-10(4)

Income Tax Assessment Act 1997 paragraph 104-10(5)(a)

Income Tax Assessment Act 1997 Division 109

Income Tax Assessment Act 1997 section 109-55

Income Tax Assessment Act 1997 subsection 128-15(4)

Reasons for decision

You can make a capital gain or capital loss if and only if a CGT event happens. The gain or loss is made at the time of the event (section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997)).

CGT event A1 happens if you dispose of a CGT asset (subsection 104-10(1) of the ITAA 1997).

You dispose of a CGT asset if a change of ownership occurs from you to another entity, whether because of some act or event or by operation of law (subsection 104-10(2) of the ITAA 1997).

The time of the event is when you enter into the contract for the disposal (paragraph 104-10(3)(a) of the ITAA 1997).

Division 109 of the ITAA 1997 sets out the ways in which you can acquire a CGT asset and the time of acquisition. The time of acquisition is important for indexation, and for the exemption of assets acquired before 20 September 1985. Generally, you acquire a CGT asset when you become its owner.

Item 1 in the table in section 109-55 of the ITAA 1997 explains that in circumstances where a CGT asset devolves to you as the legal personal representative of a deceased individual, you acquire the asset at the time when the individual died.

Section 109-55 of the ITAA 1997 points to section 128-15 of the ITAA 1997 which is contained in Part 3-3 of the Act.

Subsection 128-15(2) of the ITAA 1997 explains that in circumstances where a CGT asset devolves to you as the legal personal representative of a deceased individual, you acquire the asset at the time when the individual died.

A capital gain or loss you make is disregarded, only if you acquired the asset before 20 September 1985 (paragraph 104-10(5)(a) of the ITAA 1997).

Application to your situation

The Estate did not acquire the asset before 20 September 1985. The conditions of paragraph 104-10(5) of the ITAA 1997 are therefore not satisfied and a capital gain or capital loss cannot be disregarded on the sale of the vacant land.