Private ruling: Income tax and GST consequences for a real property sale
Date of advice: 15 July 2025
Published: 22 September 2025
Ruling period: From 1 August 2023 until 30 June 2026
Date scheme commenced: 23 August 2023

Ruling: Q1: Was the sale of the property a taxable supply of new residential premises? | A1: No. Issue 2 Income tax - Assessable income - Income vs capital | Q2: Will the proceeds from the sale of the property give rise to assessable income under either section 6-5 or section 15-15 of the Income Tax Assessment Act 1997 (ITAA 1997), on the basis that the transaction constitutes the profit from an isolated transaction or the profit arising from the carrying on or carrying out of a profit-making undertaking or plan? | A2: No. | Q3: Are the sale proceeds only brought to account under the CGT provisions in Part 3-1 and Part 3-3 of the ITAA 1997? | A3: Yes.

Relevant facts and circumstances: • Date of land acquisition - contract signed 20XX. The price was over $XXX,XXX. • Date of Registration/ settlement of land - 20XX. • B started working at a hospital 20XX. • B started working at a different hospital in 20XX. • Construction completed 20XX. The costs of construction were over $XXX,XXX. • Settlement date for sale of the completed property - 20XX. The sale price was over $XXX,XXX.

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 40-75 | Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 section 6-10 | Income Tax Assessment Act 1997 Part 3-1 | Income Tax Assessment Act 1997 Part 3-3

Reasons for decision: Summary: Please note all references to legislation are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) unless otherwise specified. | Detailed Reasoning - Question 1:: Was the sale of the property a taxable supply of new residential premises? Under section 40-65, a sale of residential premises is input taxed unless they are new residential premises. Subsection 40-75(1) defines 'new residential premises', amongst other things, as premises that have not been previously sold or subject to a long-term lease. As the premises in question are newly constructed with an occupancy certification issued in 20XX, the property is new residential premises. Subsection 40-75(2) provides an exception that they are not new residential premises if they have been rented continuously for a period of five years since they were constructed. The facts indicate that the property was never rented to tenants until its sale. As this was less than five years, the property is still new residential premises. Accordingly, we need to determine if the property will be supplied by way of a taxable supply. To determine whether you are making a taxable supply of new residential premises, section 9-5 contains the key elements to be applied to determine the answer to the question set out above. Section 9-5 provides that 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 to the indirect tax zone (Australia); and d) you are registered or required to be registered for GST. However, the supply will not be a taxable supply to the extent the supply is GST-free or input taxed. In this case, the property has already sold, so the sale of the property was made for arm's length consideration. This satisfies paragraph 9-5(a). The property is located in the indirect tax zone (Australia). This satisfies paragraph 9-5(c). As the property was not rented continuously for a five-year period when it was sold, there are no other factors that would make the sale input taxed and the facts provided do not indicate any possible GST-free treatment as you built the house to live in. As such, whether the sale of the property is a taxable supply, will depend on whether the supply is made in the course or furtherance of an enterprise that you carry on under paragraph 9-5(b). We note you are not registered for GST and, as such, you do not meet paragraph 9-5(d). This paragraph also needs to be considered in the context of whether you are required to be registered, but this does not need to be determined as the analysis below focuses on whether the supply was made in the course of your enterprise and concludes that it is not. | Detailed Reasoning - In the course or furtherance of an enterprise: The term 'enterprise' is defined in section 9-20. Subsection 9-20(1) states: An enterprise is an activity, or series of activities, done: a) in the form of a *business; or b) in the form of an adventure or concern in the nature of trade; or c) on a regular or continuous basis, in the form of a lease, licence or other grant of an interest in property. Please note an asterisk indicates a defined term in section 195-1. The phrase 'carrying on' an enterprise is defined in section 195-1 to include doing anything in the course of the commencement or termination of the enterprise. Under the first limb of the definition, subparagraph 9-20(1)(a), an issue to be decided is whether you conducted an activity or series of activities that amount to a business, or is in the form of a business of property development. Under the second limb, subparagraph 9-20(1)(b), we need to assess whether your activities are a one-off adventure in the nature of trade in dealing with the property as the activities of construction and eventual sale potentially are in the commencement and termination of a property development enterprise. The Commissioner, in 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 (MT 2006/1) provides guidance on the meaning of the term 'enterprise' for GST purposes. According to MT 2006/1, a business generally includes a trade that is engaged in on a regular or continuous basis, while an adventure or concern in the nature of trade includes a commercial activity that does not amount to a business but which has the characteristics of a business deal. Isolated or one-off transactions will fall into this category. The use of the words 'in the form of' before 'business' or 'an adventure or concern in the nature of trade' has the effect of extending the meaning of enterprise beyond entities carrying on a business or an adventure or concern in the nature of trade. Despite this, the focus is still on making an assessment of the factors indicating a business. Whilst there is no single test of whether a business is being carried on, Taxation Ruling TR 97/11 Income tax: am I carrying on a business of primary production? (TR 97/11), provides the main indicators of carrying on a business. These indicators include: These factors, in turn, are derived from a number of common law cases. The principles were picked up and followed in Taxation Ruling TR 92/3 Income tax: whether profits on isolated transactions are income . These principles are considered later in these reasons. These rulings indicate that the question whether a business is being carried on is a question of fact and the conclusion generally depends on weighing up all the relevant factors set out above. You purchased the land for over $XXX,XXX in 20XX and hired a builder to construct a residence on the property for approximately over $XXX,XXX. Construction completed in 20XX; you borrowed over $XXX,XXX for the acquisition and to construct the residence. When you acquired the land and builder's services, your intention was to use it as a residence. During the construction phase, you did not claim any input tax credits or deductions. Based on your acquisition prices and loans there is a minor profit prospect of the activity. However, you have stated that this was not your intention. Your stated reason for selling the property was due to a change in your domestic circumstances given that B obtained their qualifications to practice medicine and now has employment interstate. These facts indicate that the activity was not driven by its profitability. In terms of assessing the scale of your activity, it is a single suburban block. On this basis, the scale of the activity is low. Additionally, there is low repetition given you only sold the residence, compared with a situation where multiple units are constructed and sold. The facts indicate that the level of commercial activity is low. Your initial purpose or intention in this arrangement was to keep the property in its entirety. You retained an expert but only to the extent of hiring a builder who conducted the development on your behalf. A is a real estate agent and conducted the sale. This factor, of itself, does not point to an enterprise. It is noteworthy that you are not employed in any sector related to building or construction. This suggests the property sale is less likely to be a business-like venture. You stated you have had no previous experience with building and selling a property. These circumstances do not point to a coherent business plan nor that the property was being developed in a business-like way. On balance, we consider the abovementioned factors do not indicate you are conducting a business of property development in the form of a business or as a profit-making undertaking or scheme. It is not large scale and you did not have a business plan for developing the property as your original intent was to live in the residence. As the transaction volume may be described as one-off, we also need to consider the extended definition of enterprise under section 9-20(1)(b) and whether these activities fall 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. In our view, your activities are of a personal nature as you intended to reside in the property and there is limited prospect of a profit based on your basic costs and eventual sale of the property for $XXX,XXX. As the above factors are also relevant to one-off transactions, we conclude that you are not engaged in an enterprise either on the basis of activities you conduct in the form of a business or that you were engaged in an adventure in the nature of trade. This means that paragraph 9-5(b) is not met in relation to whether you are conducting a property development either in the form of a business or as an adventure in the nature of trade. | Detailed Reasoning - Conclusion: The original property was not intended to be acquired for the primary purpose of resale at a profit and that intention did not change. Even though the supply will be made for consideration and is located in the indirect tax zone (Australia), it is not made in the course or furtherance of a development enterprise you carry on. Consequently, you did not make a 'taxable supply' as defined when you sold the new residence you built on the property. | Detailed Reasoning - Question1: Will the proceeds from the sale of the property give rise to assessable income under either section 6-5 or section 15-15 of the Income Tax Assessment Act 1997 (ITAA 1997), on the basis that the transaction constitutes the profit from an isolated transaction or the profit arising from the carrying on or carrying out of a profit-making undertaking or plan? | Detailed Reasoning - Question 2: Are the sale proceeds only brought to account under the CGT provisions in Part 3-1 and Part 3-3 of the ITAA 1997. | Detailed Reasoning - Detailed reasoning - Applies in relation to both question 1 and 2: Profits from isolated transactions can be ordinary income and therefore be assessable under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997). Additionally, section 15-15 of the ITAA 1997 includes in assessable income the profit arising from the carrying on or carrying out of a profit-making undertaking or plan. Taxation Ruling TR 92/3 Income tax: whether profits on isolated transactions are income provides guidance in determining whether profits from isolated transactions are assessable as income. The term 'isolated transactions' refers to: a) those transactions outside the ordinary course of business of a taxpayer carrying on a business; and b) those transactions entered into by non-business taxpayers. However, where a taxpayer has merely enhanced or preserved the value of a capital asset, without entering into a commercial undertaking to profit from its sale, the gain will generally not be on revenue account. In this case, the taxpayers built a home on land with the intention of living in it but they subsequently changed their plans for employment reasons and sold the property. Consequently, it is considered that the proceeds are only of a capital nature on the basis that sale was a mere realisation of an asset. The proceeds from the sale of the property are not assessable under either section 6-5 or section 15-15 of the ITAA 1997 on the basis that the transaction constitutes the profit from an isolated transaction or the profit arising from the carrying on or carrying out of a profit-making undertaking or plan. Therefore, the proceeds received will be assessed on capital account under the capital gains tax provisions contained in Parts 3-1 and 3-3 of the ITAA 1997.

Relevant facts and circumstances: You acquired land and built a house on land located at the physical street address known as the property. | You appear on the title of the property. However, the invoices from the builder are solely addressed to A. | Your primary intention behind purchasing the land was to build on it and then live in that property, as A's work was around the area where the property was located. At the time of purchasing the land there were no other concurrent intentions whatsoever. | Neither of you have any prior experience in property development. B has a medical background being a doctor from overseas. She has been working as a qualified Doctor at XXXX base hospital. A has been working as a real estate sales agent for the last 5 years. | Neither of you previously owned any properties that underwent any form of development, such as a subdivision, during your ownership. | B is a doctor who is now practicing in another state, which led to the decision not to move into the property. | You sold the house through the real estate agency where A works. He received a commission for the sale. | The only consultants you hired were the entity who sold you the land and C who did the construction. | You borrowed more than $XXX,XXX to acquire the land and construction via a standard residential loan. | You have not prepared any accounts for the acquisition and construction but you kept receipts and bank account information. | The sale was at arms' length to an unrelated party. | A timeline of key events: | Neither of you resided in the property after practical completion occurred. | The original purchase of the land was subject to the margin scheme but the sale was not. | Your accountant registered the partnership of A and B under the ABN XX but the partnership is not registered for GST. | Address and real property description. | Price $XXX.XXX; Deposit $$. | Buyer not registered or acquiring for a creditable purpose. | Buyer not required to make a payment under 14-250 of the Withholding Law. | Sale was subject to the successful sale of the purchasers' home at another address before X DATE. (failure would end the contract and refund the purchaser deposit). | Sale was subject to suitable construction completion. | Standard conditions were those of 'Contract for houses and Residential Land, Eighteenth Edition'. | a significant commercial activity; | the purpose and intention of the taxpayer or taxpayers in engaging in the activity; | an intention to make a profit from the activity; | the activity is or will be profitable; | repetition and regularity of activity; and | the activity is organised and carried on in a businesslike manner.