Edited version of private advice

Authorisation Number: 1052218361890

Date of advice: 8 February 2024

Ruling

Subject: GST - sale of vacant land

Question

Will you, <Entity A>, be making a taxable supply pursuant to section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when you sell your property located at <address> (the Property)?

Answer

No, you will not be making a taxable supply under section 9-5 of the GST Act when you sell the Property as you will not satisfy all of the requirements under the section. This is because the Commissioner has determined that your supply will not be made in the course or furtherance of an enterprise that you carry on. Therefore, GST will not be payable on the sale of the Property.

This ruling applies for the followingperiods:

DDMMYYYY to DDMMYYYY

The scheme commenced on:

DDMMYYYY

Relevant facts and circumstances

<Entity A> (you) was established in <date> to acquire investment property for the family.

You have been registered for both an Australian business number (ABN) and GST since <date>.

On <date>, you acquired the Property for <$amount>.

The Property is vacant land with a land area of <number> square metres.

The Property was fully paid off without the need for any financial assistance.

The original intention was to build a house to allow the family to occupy the Property during the holiday periods and to lease it out to generate rental income during other periods. Due to financial constraints and unforeseen circumstances, the house has not been constructed over the past <number> years.

In <date>, you used the Property as security to obtain a loan intended for the acquisition of additional investment properties. In <year>, you acquired two more investment properties, using the refinanced loan mentioned earlier, along with additional loans from <name> Bank. These properties are as follows:

<address> (Property A) - The property was an investment property and generated rental income from <year to year> before being sold in <year>.

<address> (Property B> - The property was an investment property and generated rental income from <year to year>. The property was subdivided and sold in <year> and the sale resulted in capital gains, and GST was paid in the <specified> quarter.

Throughout the period of ownership of both investment properties, you refinanced twice using the Property as security. That is, in <date> the loan amount increased to <$amount> and in <year> the loan was refinanced with <name> for <$amount>. These refinancings were to fund the rental losses incurred by Property A and Property B.

You had intended to sell the Property in <year -year> due to financial constraints. You were not able to find a buyer and you sold the other investment properties instead, being Property A and Property B.

Despite the sale of these properties, the proceeds were insufficient to fully pay off the outstanding loan amount, resulting in a shortfall. Consequently, you had to rely on income from other sources to cover the loan repayments over the past decade.

You are motivated to pay off the loan quickly, considering it a significant burden on the family. You believe that once you sell the Property there should be enough funds to settle the debt.

The Property has been held as vacant land during the period of your ownership and remained vacant land to current date. No improvements were made to the Property since you acquired it.

You have not yet entered into a contract of sale for the sale of the Property.

You currently do not own any other properties and you do not currently carry on any business activity or enterprise.

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 9-40

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