Private ruling: GST and the sale of subdivided land
Date of advice: 24 December 2020
Published: March 2021

Ruling: Q1: Will GST be payable, pursuant to section 9-40 of the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act), for the supply of the x lots subdivided from land located at XYZ (the Lots)? | A1: No, GST will not be payable under section 9-40 of the GST Act when each of the Lots are sold. This is because the Commissioner considers the activities carried on in relation to the subdivision and sale of the Lots do not amount to an enterprise for GST purposes and accordingly the sale will not be a taxable supply under section 9-5 of the GST Act. | Q2: Will the buyer, in relation to each of the Lots, be required to make a GST withholding at settlement under section 14-250 of Schedule 1 to the Taxation Administration Act 1953 (Sch 1, TAA 1953)? | A2: No, the buyer of each of the Lots will not be required to make a GST withholding at settlement under section 14-250 of Sch 1, TAA 1953. This is because each buyer will not be the recipient of a taxable supply.

Relevant facts and circumstances: In DDMMYY you and X purchased a property with an existing house on the land located at XYZ (the Property/the Land) for the purchase price of <$>. You contributed all the funds for the purchase. The description of the Property includes the following: • Land area: x square meters • Present use: residential • Zoning: residential • Other than the house, there is no other structure on the Land • Certificate of title includes the following details: Title reference: x Lot x Registered Plan x Registered owner (as Joint tenants): A B You and B lived at the Property as your residence until the house was demolished in DDMMYY. In DDMMYY, you made first contact with x town planner regarding the subdivision. The property is being subdivided into x blocks. You have a medical issue which contributed, among other things, towards your financial difficulties and the delay in completing the development of the Property. You did not obtain finance to undertake the subdivision. Your parents assisted financially when you were in financial difficulties in relation to the subdivision and holding costs. You and B are not registered as a partnership with an Australian Business Number (ABN) for the purpose of carrying on the activities of property development. You and B have entered into a contract of sale for each of the x subdivided Lots. The sale contracts include information as summarised in Table 1 below: Table 1: Information included on the sale contracts of the respective Lots Land address Description Built on or vacant Area Present use Purchase price The x Lots are currently vacant land and the buyers plan on building a home on their Lot. At this stage, the development is not finalised and details relating to the following are pending. (i) the Lot number, (ii) the registered plan number, and (iii) the title reference number Under the GST Withholding Obligations section of each of the x sale contracts, the following are recorded: • A 'no' against the question 'Is the Buyer registered for GST and acquiring the Land for a creditable purpose?' • The Seller gives notice to the Buyer in accordance with section 14-255(1)(a) of the Withholding Law that 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 Other than the property development activities, you and B do not carry on any other enterprise. You have previously owned properties at XYZ that were your principle place of residence. You subdivided each of these properties into x lots and currently reside again at the XYZ property.

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 division 23-5 | A New Tax System (Goods and services Tax) Act 1999 division 38 | A New Tax System (Goods and services Tax) Act 1999 division 40 | A New Tax System (Goods and services Tax) Act 1999 section 195-1 | Taxation Administration Act 1953 Schedule 1 section 14-250 | Taxation Administration Act 1953 Schedule 1 section 14-255