Private ruling: GST - sale of vacant land
Date of advice: 2 November 2023
Published: 11 December 2023
Ruling period: Year ended 30 June 2023
Date scheme commenced: 1 July 2023

Ruling: Q1: Is the supply by the Vendor to the Buyer of the vacant land under the Contract of Sale a taxable supply under section 9-5 of the A New Tax System (Goods and services Tax) Act 1999 (GST Act)? | A1: No, the supply by the Vendor is not a taxable supply. Under section 9-40 of the GST Act, you are liable to pay GST on any taxable supply that you make. Section 9-5 of the GST Act provides that you make a taxable supply if: (a) you make the supply for consideration (b) the supply is made in the course or furtherance of an enterprise that you carry on (c) the supply is connected with the indirect tax zone (Australia) and (d) you are registered, or required to be registered. However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. In this case the Vendor will not satisfy section 9-5 of the GST Act as paragraph 9-5(b) of the GST Act is not met. On this basis the Vendor is not liable for GST on the sale of the vacant land.

Relevant facts and circumstances: The Vendor purchased a property comprising vacant land in 20XX. The property was larger than a normal residential block. The zoning of the property at the time of purchase was 'special residential' and had stipulations as to how much bushland and vegetation had to be retained. The property was next to several other lots of land of the same size which had the same zoning conditions as the property. The Vendor and her spouse had planned to build their matrimonial home on the property and had plans for a house drawn up. However due to personal and financial reasons at the time, the Vendor did not get around to building the house on the property. Some years later the Vendor and her spouse separated, and the marriage breakdown contributed to the Vendor's ill health a result of which the Vendor did not pursue building the house on the property or developing it in anyway. Several years ago, the Vendor and the owners of the neighbouring properties (which now had houses on them) were approached by an individual who offered to apply on their behalf to get the zoning of their properties changed which would allow the properties to be subdivided. The Vendor and the other owners agreed and paid the individual to initiate the application for the re-zoning. The Vendor paid approximately $XX to the individual to undertake the application for the re-zoning. The individual was initially knocked back by the Council but on the second application was successful and the re-zoning was granted sometime between July 20XX and August 20XX. Pursuant to the re-zoning, the Vendor has not done anything to the property to further the advancement of any development or subdivision on the property. The Vendor has made no enquiries or efforts to develop the land or go into partnership with anyone to develop the land. The Vendor states that she would not be able to afford to go into business of actually doing the subdivision herself. On XXXX date, the Vendor signed a Contract for Sale of land or strata title by offer and acceptance (Contract of Sale) to sell the property (which remains vacant land) to the Buyer (who signed the Contract of Sale on YYYY date). Settlement of the property is to take place around ZZZZ date. The special conditions of the Contract of Sale state that the sale of the property is eligible for the Margin Scheme and that the Vendor confirms that they will not be using the Margin Scheme for their GST calculation so that the Buyer can use the Margin Scheme for future sales.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 Section 9-5