Edited version of private advice

Authorisation Number: 1052363056768

Date of advice: 26 February 2025

Ruling

Subject: GST - sale of real property

Question

Is the sale of the Vacant Lot subject to GST?

Answer

No.

The sale of the Vacant Lot is not subject to GST as the sale is not a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

You are not making a taxable supply under section 9-5 of the GST Act when you sell the Vacant Lot. Although the sale of the Vacant Lot satisfies paragraphs 9-5(a) and 9-5(c) because the sale is for consideration and is connected with Australia, the requirements of paragraphs 9-5(b) and 9-5(d) are not satisfied. This is because:

•                     the sale is a mere realisation of a private asset and hence, is not made in the course or furtherance of an enterprise that you carry on (paragraph 9-5(b) of the GST Act), and

•                     you are neither registered nor required to be registered for GST (paragraph 9-5(d) of the GST Act).

Consequently, GST is not payable on the sale of the Vacant Lot.

Relevant facts and circumstances

You purchased the Property in 19YY. The Property was zoned low Density residential and had a large land area. The Property was your principal place of residence up until 20YY.

You started the process of subdividing the Property in late 19YY. You paid for a survey plan, plan submission, re-endorsement of survey plan, lodgement to subdivide the block into two and water and sewerage connection. However, you never completed the subdivision.

In 20YY, you were in retirement and the maintenance of the Property became too much and costly. You looked into subdividing the Property and selling the land at the back and keeping the home at the front.

At this stage, you weren't sure what was left to do with the subdivision as many years had passed. You contacted the council, and they advised that paperwork had lapsed and needed to be redone.

As all the plumbing and water works had already been completed in the YYs, the only thing remaining to do was to submit the original plan to be re-endorsed and a new lodgement had to be made to subdivide the Property.

You resumed the process to re-submit the survey plans for re-endorsement in early 20YY. This was approved a few months later.

You spoke to some local real estate agents in early to mid-20YY to understand the value of the Property. You received various appraisals for the whole property, and for the block at the back if you were to subdivide.

In mid-20YY, you received that new Certificate of Titles for the subdivided lots.

The development costs were self-funded and included:

•                     subdivision proposal payment to the council

•                     subdivision preparation

•                     lodgement

•                     design for sewerage

•                     proposed subdivision of the Property

•                     water reticulation

•                     sewer connection as required by council

•                     survey of lots 1 and 2

•                     survey lodgement in 20YY

•                     plan seal resubmission in 20YY

From early 20YY, you leased the house at the front. The Vacant Lot was not part of the rental agreement. There is a fence separating the two sections of the land. The tenants did not maintain the lawn of the Vacant Lot.

A contract with a real estate agent was signed in mid-20YY, and the Vacant Lot was listed for sale shortly after.

The sale contract contains the following:

•                     Area - a portion of the original land

•                     Present use - Vacant land

•                     Purchase price - a particular amount

•                     In the GST withholding obligations clause, after the statement "The Seller gives notice to the Buyer in accordance with section 14-255(1)(a) of the Withholding Law" there is a tick mark in the box for the option "the Buyer is not required to make a payment under section 14-250 of the Withholding Law in relation to the supply of the Property".

The sale contract was settled in early-20YY.

You are retired and do not carry on any enterprise activities either individually or jointly.

You have not undertaken any subdivision or land development activities in the past and you will not undertake any subdivision or land development activities in the future.

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 23-5.