Private ruling: GST and the subdivision of land
Date of advice: 23 November 2016
Published: April 2017

Ruling: Q1: Will your sale of the subdivided blocks of the land at the Property be a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: No. One of the requirements for making a taxable supply under section 9-5 of the GST Act is that the supply is made in the course or furtherance of an enterprise you carry on. We do not consider your activities in relation to the subdivision and sale of the Property amount to the carrying on of an 'enterprise' as defined in section 9-20 of the GST Act. Therefore as the sale of subdivided land will not be in the course or furtherance of an enterprise that you carry on, it will not be a taxable supply.

Relevant facts and circumstances: You are not registered for GST. In DDMMYYYY you purchased property with a dwelling on it. The parcel was acquired as a whole and on one title. The dwelling on the property has been your main residence since acquisition. The land surrounding the dwelling has never been used for income producing purposes. The council changed the zoning of the land to residential. This meant that subject to council approval, the land could be subdivided and sold as residential lots. You were not involved in the land rezoning process. Now that your children have moved out, the property is too big and requires high maintenance. You intend to retire soon and would like to build a new dwelling with less land. In DDMMYYYY you engaged a surveyor provide some suggestions on the best way to develop the land. The surveyor was engaged to provide a map of a potential X lot development scenario. You were hoping to sell the land and increase the capital proceeds by providing the map to interested buyers. Your original plan was that the subdivision development work would be undertaken by the potential buyer of the Property. You tried to sell the land and dwelling as is. You listed the property for sale through a real estate agent for a period of X months. You received an offer however this was not accepted as it was considered too low. Once the contract with the agent ceased, a developer offered to carry on the development of the X lot subdivision on your behalf for a fee. The fee was going to be a set percentage on gross sales; this was not determined. You were not confident about the ability of the developer to complete the project so you did not accept their offer. You carried out investigations into carrying out the X lot subdivision yourselves. You decided to reduce the amount of lots to X as this was a more affordable option and you could fund the project entirely without borrowings. It also meant there was no need for streets or services to complete the development. Minor development works will be undertaken to effect the planned subdivision. This includes the construction of a private road and connections to services such as sewerage, water and electricity. The works are limited to what is necessary for council approvals. You have engaged Professionals to assist with the planning permits and the subdivision process. The Professionals lodged planning permit with the Council for a multi lot subdivision and removal of native vegetation. You expect council approval to be obtained within X months as the council has asked for a couple of minor changes which has been delaying the process. You will fund the development costs with personal savings. You will not borrow funds to carry out the project. You will carry out the subdivision in two stages. Stage 1 will involve X lots. You plan to commence this stage once the planning permit has been attained. Stage 2 will involve the subdivision of the blocks. You will undertake this when you have sufficient funds available from the sale of lots in Stage 1. You will not be actively undertaking any sales marketing activity in relation to the lots sold to the general public. You will not appoint a real estate agent as you expect to sell these lots by word of mouth and contacts you have. You will engage an independent conveyancer to prepare any legal documentation required for the sales. You have not identified any specific person or firm to do this yet. X blocks that have not yet been identified will be sold to family members for the market value. One lot includes your existing main residence and will not be sold. You will rent this dwelling, keeping it as an investment once you have built a new home on Lot X. You will build the home within X months depending on how much funds you have available. You have not undertaken a similar land subdivision project before and do not have any experience in land subdivision or property development. There is no relationship between you and the Professionals. You will sell X lots out of the X lots.

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