Private ruling: Property development
Date of advice: 9 April 2026
Published: 29 June 2026
Ruling period: Year ended DD MM YY | Year ending DD MM YY
Date scheme commenced: DD MM YY

Ruling: Q1: Will the profit from the sale of the two units be assessable as ordinary income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997), on revenue account, as a result of entering into a profit-making undertaking or isolated transaction? | A1: Yes. | Q2: Would any applicable capital gain be reduced by any amount assessable as ordinary income? | A2: Yes. | Q3: Were the sales of newly constructed residential premises situated at Unit Address A and Unit Address B taxable supplies in accordance with section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A3: Yes.

Relevant facts and circumstances: The property is located at Address A. You are family member, Person A and Person B (hereinafter collectively referred to as 'you'). Person B works as Occupation A and Person A is retired. In MM YY you jointly purchased the property for $X. At the time of purchase, the Property was Xm 2 with one existing dwelling on it and was zoned residential. You purchased the property with the intent of holding it for other family members. At the time of the purchase the family members were in primary school. Your intent was to rent the property in the interim. Purchase of the property was funded by: • Person A utilised personal savings and drew down on their superannuation for their share, • Person B drew funds from their spouse's offset account linked to their investment property loan under a private arrangement with them. In MM YY the property was rented out. Around MM YY you decided that demolishing the existing dwelling on the property and building two units on it, would provide the family members with a separate home each to live in. In MM YY you approached builder/property developer Firm A to design, develop, and build the two units. In MM YY Person B's oldest child commenced schooling. In MM YY your tenants left the property. In MM YY the planning permit/development application for the units, each compromising X bedrooms and X bathrooms, was lodged. In MM YY, the school advised Person B and their spouse of an X% increase in fees. On DD MM YY the contract for the construction of the two units was signed and work commenced on the build. Total construction costs of the two units was to be $X. This was funded by: • Person A took out a loan for $X, drew $X from their savings, and drew $X from their superannuation for their share, • Person B took out a loan for $X and drew $X from the offset account linked to their spouse's investment property loan under a private arrangement with them. In MM YY demolition of the existing dwelling took place. In MM YY Person A was diagnosed with a medical condition. In MM YY the building and planning permits were granted. In MM YY Person A commenced a X-year treatment regime. In MM YY construction of the premises commenced. In MM YY the school advised all parents of a further increase in school fees of X%. On DD MM YY, Person B's spouse was notified that their fixed-term contract for their current role was due to end on DD MM YY. At the same time, they were advised that a new position had been approved, with a more expansive scope. As they had expressed an interest in the new role, their contract was extended to DD MM YY to enable them to participate in the recruitment process, with applications closing on DD MM YY. Following this, and considering the accumulation of prior events, discussions took place regarding the possibility of selling one or both investment units. Person B's spouse had previously been made redundant on X occasions and had been out of work for approximately X months, contributing to concerns about ongoing employment stability. On DD MM YY, Person B's spouse was advised that the end date of their fixed-term contract for their current role would be extended to DD MM YY. In MM YY the second of Person B's children commenced school. In MM YY you decided to sell both units for the following reasons: • The original intended strategy was to build the 2 units, one for each family member. Selling just one would have made this intent unattainable. • While the sale of one unit would address the financial situations that arose in the increased school fees and the medical treatment costs, that outcome depended on the continuity of Person B's spouse's contract. Given their previous period of unemployment, the imminent end of their contract, and their private loan to you, the decision was made to sell both units. In the month prior to the completion of the units, you interviewed real estate agents and obtained verbal estimates of the value of units. In MM/MM YY construction of the units was completed. Their estimated market value on completion was Unit A - $X, and Unit B - $X. On DD MM YY the occupancy permit was issued. Your total debt owing on completion of the units was: • Person A had the loan for $X (and reduced retirement savings due to drawdowns on their superannuation), • Person B had the loan for $X (and drawdowns from the offset account linked to their spouse's investment property loan). On DD MM YY Person B's spouse received an email advising their employer was hoping to extend their contract to DD MM YY. On DD MM YY a real estate agent was engaged to sell the units. In late MM YY, you sought advice from your tax agent regarding the taxation and GST implications of the sales of the units. You registered for GST based on advice received from your tax agent. On DD MM YY the contract of sale for one of the units, Unit Address B, was signed. The sale price was $X and settlement occurred on DD MM YY. On DD MM YY you applied for a partnership ABN, requesting it be backdated to DD MM YY. On DD MM YY you registered for GST as a partnership, effective from DD MM YY. On DD MM YY the second unit, at Address A, sold at auction for $X with settlement occurring on DD MM YY. The sale contracts for both units indicated that the sales were subject to the margin scheme. GST withholding was applied to both sales, and the margin scheme was used to calculate the GST. On DD MM YY Person B's spouse received an email confirming their short term contract would end on DD MM YY. The email advised a new position had been created that was "substantially different in scope to your current role". They were encouraged to apply but were not successful. They are not currently employed. The sale of Unit B was reported under the Partnership. The sale of Unit A has not been reported as the BAS for the MM YY has not been lodged. You have no prior property development or subdivision experience, nor do you expect to undertake any in the future.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 section 102-5 | Income Tax Assessment Act 1997 section 102-20 | Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 section 118-20 | 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 subsection 9-25(4) | A New Tax System (Goods and Services Tax) Act 1999 section 23-5 | A New Tax System (Goods and Services Tax) Act 1999 section 40-65 | A New Tax System (Goods and Services Tax) Act 1999 section 40-75 | A New Tax System (Goods and Services Tax) Act 1999 section 195-1

Reasons for decision: Detailed Reasoning - Issue 1: Income or capital | Detailed Reasoning - Question 1: Will the profit from the sale of the two units be assessable as ordinary income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997), on revenue account, as a result of entering into a profit-making undertaking or isolated transaction? | Summary: It is the Commissioner's opinion that the demolition of the existing dwelling, followed by subdivision of the property and the construction of two units, is considered to be in the nature of an isolated commercial transaction undertaken for the purpose of making a profit. As such the profit from the sale of the two units will be assessable as ordinary income under section 6-5. | Detailed Reasoning - Detailed reasoning: In broad terms, there are three ways profits from the subdivision and sale of property can be treated for taxation purposes: (1) as ordinary income under section 6-5, on revenue account, as a result of carrying on a business of property development (2) as ordinary income under section 6-5, on revenue account, as a result of an isolated business or commercial transaction entered into by a non-business taxpayer or outside the ordinary course of business of a taxpayer carrying on a business, where the land was acquired or subsequently held for profit making purpose and/or (3) as statutory income under the CGT legislation on the basis that a realisation of a capital asset has occurred. | Detailed Reasoning - Carrying on a business of property development: Section 995-1 of the ITAA 1997 defines what activities may be included in a business. It is not a source of guidance for determining whether the nature, extent, and manner of undertaking those activities amount to carrying on of a business. Taxation ruling TR 97/11 Income Tax: am I carrying on a business of primary production? provides guidance towards those aspects that are seen to be relevant as indicators that an individual is carrying on a business. The relevant indicators are: • whether the taxpayer has more than just an intention to engage in business • whether the taxpayer has a purpose of profit as well as a prospect of profit from the activity • whether there is repetition and regularity of the activity • whether the activity is of the same kind and carried on in a similar manner to that of the ordinary trade in that line of business • whether the activity is planned, organised, and carried on in a businesslike manner such that it is directed at making a profit • the size, scale and permanency of the activity, and • whether the activity has a significant commercial purpose or character (this indicator comprises many aspects of the other indicators). No one point above is a clear indicator of whether a taxpayer is carrying on a business. It is more a question of fact and degree. | Detailed Reasoning - Application to your circumstances: In your case, you are not, nor have you ever been, in the business of property development. The development of the property was a 'one off' development with no repetition or regularity. You have no history of property development. You had no active involvement in the development, engaging a third-party builder/property developer to handle the design and build. Consequently, it is the Commissioner's view that the profit from the sale of the two units will not be assessable as ordinary income under section 6-5 as a result of carrying on a business of property development. | Detailed Reasoning - Isolated commercial transaction with a view to a profit: Profits from isolated transactions will be assessable as ordinary income where the intention or purpose in entering into the transaction was to make a profit or gain, even though the transaction may not be part of the ordinary activities of the taxpayer's business ( FC of T v. Myer Emporium Ltd 1987 163 CLR 199; 87 ATC 4363; 18 ATR 693) ( Myer Emporium ). Taxation Ruling TR 92/3 Income tax: whether profits on isolated transactions are income sets out the Commissioner's view as to the application of the decision in Myer Emporium and provides guidance in determining whether profits from isolated transactions are assessable under section 6-5. Paragraph 1 of TR 92/3 outlines that isolated transactions are: • those transactions outside the ordinary course of business of a taxpayer carrying on a business; and • those transactions entered into by non-business taxpayers. If a taxpayer makes a profit from a transaction or operation, that profit is income if the transaction or operation is not in the course of the taxpayers business but: • the intention or purpose of the taxpayer in entering into the profit-making transaction or operation was to make a profit or gain, and • the transaction or operation was entered into, and the profit was made, in carrying out a business operation or commercial transaction. Paragraph 12 of TR 92/3 states that for a transaction to be characterised as a business operation or a commercial transaction, it is sufficient if the transaction is business or commercial in character. TR 92/3 makes it clear at paragraph 42 that even if a taxpayer did not originally acquire a property with a profit-making intention, the profit made on its eventual sale will be income if the taxpayer later ventured the property into a profit-making commercial transaction: 42. For example, if a taxpayer acquires an asset with the intention of using it for personal enjoyment but later decides to venture or commit the asset either: (a) as the capital of a business; or (b) into a profit-making undertaking or scheme with the characteristics of a business operation or commercial transaction, the activity of the taxpayer constitutes the carrying on of a business or a business operation or commercial transaction carrying out a profit-making scheme, as the case may be. The profit from the activity is income although the taxpayer did not have the purpose of profit-making at the time of acquiring the asset. If a property is entered into a property development sometime after it was acquired, it is the taxpayer's intention at the time the property is committed to the development that must be considered. In considering the taxpayer's intention, TR 92/3 states that it is not the subjective intention or purpose of the taxpayer that is relevant. Rather, it is the taxpayer's intention or purpose discerned from an objective consideration of the facts and circumstances of the case. In determining whether activities relating to isolated transactions are a profit-making undertaking or are the realisation of a capital asset, it is necessary to examine the facts and circumstances of each particular case. There can be several factors for consideration: • The extent of work being done to the land. The more work being done to the land the more it leads to the conclusion that the activity has a business or profit-making intention. • The financial risk in respect of the development. The more financial risk there is for the land owner, the more likely that the activity or development is a business or profit-making development. • Cost of the development relative to the value of the land. Where the associated costs of the development are significant relative to the value of the land being developed, the more likely it is that the development amounts to a business activity or one of profit-making. | Detailed Reasoning - Application to your circumstances: You have clearly stated that your intent with respect to the construction of the two units was to provide separate homes for your family members to live in. You purchased the property for their future benefit, and your intent was to develop it for their future benefit. It was not your original intent to make a profit from the development of the property. This intent changed however, following a series of events in both your lives that had a financial impact on you both. The impact on your finances meant that you needed to consider selling at least one of the units to re-coup your costs from the construction. Given the original intent to provide homes for your family members, selling just one unit would have made this original intent unattainable. Additionally, while the sale of one unit would have seen a significant reduction in your debt, if not full discharge the debt, it would not provide you with funds for future living costs. With the pending redundancy of Person B's spouse, and the potential of long term unemployment, the need for additional funds to live on contributed to the decision to sell both. Paragraph 8 of TR 92/3 states "It is not necessary that the intention or purpose of profit-making be the sole or dominant intention or purpose for entering into the transaction. It is sufficient if profit-making is a significant purpose". The property originally consisted of one dwelling on the land. The demolition of that dwelling and construction of two separate units represents a significant change in the nature of the asset. The subsequent sale of the two units is not a mere realisation of the original asset, but essentially two new assets that were sold. The total construction costs were $X. You jointly financed this with separate loans and drawdowns from superannuation and an investment offset account. The original purchase price of the property of $X was funded from savings and again, drawdowns from superannuation and from an investment offset account. This represents a significant financial undertaking and potential gross profit from the sale. The outcome is that a significant part of the original value of the property lies in the sale of the two units that were constructed on the land. Making an overall assessment on the factors set out in TR 92/3, it is the Commissioner's view that the sale of the two units is not a mere realisation of a capital asset. Rather, the sale of the two units is considered to be part of an isolated commercial transaction entered into with a view to a profit and therefore the resulting profit will be assessed as ordinary income under section 6-5. | Detailed Reasoning - Question 2: Would any applicable capital gain be reduced by any amount assessable as ordinary income? | Summary: While Capital Gains Tax (CGT) event A1 will happen upon the sale of each of the two units, any capital gain made on their disposals will be reduced to the extent that the profit from the sales is already included in your assessable income. | Detailed Reasoning - Assessable under capital gains tax provisions: The CGT provisions are contained in Parts 3-1 and 3-3 of the ITAA 1997. Broadly, the provisions include in your assessable income any assessable gain or loss made when a CGT event happens to a CGT asset that you own. Section 102-20 of the ITAA 1997 provides that a capital gain or loss happens only as a result of a CGT event. The most common event is CGT event A1 which happens when a person disposes of a CGT asset to someone else under section 104-10 of the ITAA 1997. CGT assets include real estate acquired on or after 20 September 1985. The inclusion of the profit or gain on the sale of a CGT asset as ordinary income does not mean that a CGT event does not happen in relation to the asset. However, section 118-20 of the ITAA 1997 operates to ensure that amounts which are assessable income under another provision of the act, outside of the CGT provisions, are not also taxed as capital gains. Therefore, while CGT event A1 will occur when an asset is sold, any capital gain will be reduced by the amount included as ordinary assessable income under section 6-5 of the ITAA 1997. | Detailed Reasoning - Application to your circumstances: While CGT event A1 did occur on the sale of each of the two units, any capital gain made on the disposal is reduced to the extent that the profit from the sales will be included in your assessable income under section 6-5. | Detailed Reasoning - Issue 2: Goods and Services Tax - Margin Scheme | Detailed Reasoning - Question 1: Were the sales of newly constructed residential premises situated at Unit Address A and Unit Address B taxable supplies in accordance with section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | Summary: Your sales of Unit A and Unit B were taxable supplies in accordance with section 9-5 of the GST Act and GST was payable on the sales. | Detailed Reasoning - Detailed reasoning: In this section of the ruling, unless otherwise stated: • all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) • all terms marked with an asterisk are defined in section 195-1 of the GST Act • all reference materials cited are available on the ATO website www.ato.gov.au 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 with the indirect tax zone; 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. | Detailed Reasoning - Paragraph 9-5(a): Supply for consideration: You entered into contracts for the sale of Unit A and Unit B for amounts of $X and $X respectively, and settlement was finalised.The margin scheme was applied to both supplies. On this basis, you made supplies of the units for consideration and, in doing so, satisfied paragraph 9-5(a). | Detailed Reasoning - Paragraph 9-5(b): Supply in the course or furtherance of your enterprise: Under subsection 9-20(1), 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; or Subsection 9-20(2) specifies activities that are not an enterprise, but none of those exclusions apply in your circumstances. Paragraph 159 of Miscellaneous Taxation Ruling MT 2006/1 The New Tax System: the meaning of entity carrying on an enterprise for the purpose of entitlement to an Australian Business Number (MT 2006/1) discusses how to determine the extent to which an activity or a series of activities amounts to an enterprise: 159. Whether or not an activity, or series of activities, amounts to an enterprise is a question of fact and degree having regard to all of the circumstances of the case. Furthermore, paragraph 160 of MT 2006/1 discusses the need to identify all the relevant activities when determining whether an enterprise is being carried on: 160. It is important that the relevant activity or series of activities are identified in order to determine whether an enterprise is being carried on. This is because one activity may not amount to an enterprise but that activity taken into account with other activities may form an enterprise. All activities need to be taken into account including activities from the commencement to the termination of the enterprise. For further information on commencement and termination activities, see paragraphs 120 to 148 of this Ruling. Paragraphs 177 to 179 of MT 2006/1 discuss the main indicators of carrying on a business, with reference to the principles in Taxation Ruling TR 97/11 Income tax: am I carrying on a business of primary production? Indicators of a business 177. To determine whether an activity, or series of activities, amounts to a business, the activity needs to be considered against the indicators of a business established by case law. 178. TR 97/11 discusses the main indicators of carrying on a business. Based on that discussion some indicators are: • a significant commercial activity; • a purpose and intention of the taxpayer to engage in commercial activity; • the activity is or will be profitable; • the recurrent or regular nature of the activity; • the activity is carried on in a similar manner to that of other businesses in the same or similar trade; • activity is systematic, organised and carried on in a businesslike manner and records are kept; • the activities are of a reasonable size and scale; • a business plan exists; • commercial sales of product; and • the entity has relevant knowledge or skill. Based on the facts, we consider that the indicators outlined in paragraph 178 of MT 2006/1 are not present to a sufficient degree to support the conclusion you are carrying on an enterprise in the form of a business under paragraph 9-20(1)(a). The activities undertaken to develop, subdivide and sell the units do not exhibit the salient characteristics of a business, such as transactions entered into on a continuous and repetitive basis. Adventure or concern in the nature of trade Paragraph 234 of MT 2006/1 distinguishes between activities done in the form of a 'business' and those done in the form of 'an adventure or concern in the nature of trade': 234. Ordinarily, the term 'business' would encompass trade engaged in, on a regular or continuous basis. However, an adventure or concern in the nature of trade may be an isolated or one-off transaction that does not amount to a business but which has the characteristics of a business deal. Paragraphs 243 to 261 of MT 2006/1, outlines the characteristics of trade, including the 'badges of trade'. They are as follows: • The subject matter of realisation • The length of period of ownership • The frequency or number of similar transactions • Supplementary work on or in connection with the property realised • The circumstances that were responsible for the realisation • Motive • Trade v. investment assets Paragraphs 262 to 302 of MT 2006/1 deal with isolated transactions and sales of real property. The ruling provides that often the question of whether an entity is carrying on an enterprise arises where there is a one-off activity or isolated real property transaction. The issue to be decided in such cases is whether the one-off activity is of a revenue nature (an enterprise) or a mere realisation of a capital asset. Paragraph 265 of MT 2006/1 provides guidance for determining whether activities involving the sale of real property are a business or an adventure or concern in the nature of trade as opposed to a mere realisation of a capital asset. It states: 265. From the Statham and Casimaty cases a list of factors can be ascertained that provide assistance in determining whether activities are a business or an adventure or concern in the nature of trade (a profit-making undertaking or scheme being the Australian equivalent, see paragraphs 233 to 242 of this Ruling). If several of these factors are present it may be an indication that a business or an adventure or concern in the nature of trade is being carried on. These factors are as follows: • there is a change of purpose for which the land is held; • additional land is acquired to be added to the original parcel of land; • the parcel of land is brought into account as a business asset; • there is a coherent plan for the subdivision of the land; • there is a business organisation for example a manager, office and letterhead; • borrowed funds financed the acquisition or subdivision; • interest on money borrowed to defray subdivisional costs was claimed as a business expense; • there is a level of development of the land beyond that necessary to secure council approval for the subdivision; and • buildings have been erected on the land. MT 2006/1 also provides that in determining whether activities relating to an isolated transaction are an enterprise, or are the mere realisation of a capital asset, it is necessary to examine the facts and circumstances of the particular case. In addition to the factors outlined above, there may be other relevant factors that need to be considered in reaching an overall conclusion. No single factor will be determinative, rather, it is the combination of factors that leads to a conclusion as to the character of the activities. A trading asset is generally dealt with or traded within a short time after acquisition. However, assets purchased with the intention of holding them for a reasonable period of time, to be held as income producing assets or to be held for the pleasure or enjoyment of the person, are more likely not to be purchased for trading purposes. It is important to note that the nature of an asset can change from being a private or capital asset to that of trade and vice versa. Where a property that was not originally acquired for resale at a profit later becomes the subject of substantial renovations for sale, or demolished to construct purpose-built structures such as yours, it is necessary to consider if the activities have a commercial flavour and whether the asset has changed to one of trade. Example 32 in paragraphs 288 to 290 of MT 2006/1 illustrates a scenario involving a subdivision undertaken to provide a block of land to a child. That example provides a useful point of comparison: Example 32 288. Astrid and Bruno live on a large suburban block. The council has recently changed their by-laws to allow for smaller lots in their area. They decide to subdivide their land to allow their only child, Greta, to build a house in which to live. 289. They arrange for the approval of the subdivision through the council, for the land to be surveyed and for the title of the new block to be transferred to Greta. She pays for all the costs of the subdivision and the cost of her new house. 290. Astrid and Bruno have not carried on an enterprise and are not entitled to an ABN in respect of the subdivision. It is a subdivision without any commercial aspects and is part of a private or domestic arrangement to provide a house for their daughter. In your case, you initially intended to construct the units for private purposes, including longer-term occupation by your family members and leasing in the interim. However, your activities differ materially from Example 32 and go well beyond a private or domestic arrangement. Unlike Astrid and Bruno, who merely subdivided their land to transfer a block to their daughter without any commercial attributes, you changed the purpose for which the property was initially held as a single residential premises and, in doing so, undertook a coordinated property development including: • engaging a builder • lodging a planning application • demolishing the existing dwelling • constructing 2 new 4-bedroom, 3-bathroom units • subdividing the property, with the intention that the units would be occupied by your children in the longer term and leased in the interim • funding the construction through borrowings • completing works beyond the minimum required to obtain subdivision approval • selling both units within a relatively short timeframe • applying the margin scheme to the sales of the units. Although the property was initially acquired and held for private purposes, the nature and extent of your activities changed before the completion of the units. Your decision not to hold the units long-term due to financial circumstances, and to instead sell the newly constructed units, further supports a shift toward a financial outcome. Accordingly, we consider the activities you undertook went beyond the mere realisation of an asset and instead constituted an adventure or concern in the nature of trade. There are additional relevant factors indicating that your activities went beyond the mere realisation of an asset. In particular, you engaged the services of professionals including real estate agents and a builder to design, develop and construct the units. In Ian Mark Collins & Mieneke Mianno Collins ATF The Collins Retirement Fund and Commissioner of Taxation [2022] AATA 628 ( Collins ), Senior Member Olding observed at paragraph 63: That the applicant, with no professional experience in land development, should engage others to carry out works and market the subdivided lots is scarcely surprising. The engagement of contractors to provide advice and carry out engineering and construction works and real estate agents to market land is, I would have thought, a hallmark of modern subdivision projects. While that may mean Mr Collins was relatively passive in respect of these activities, I do not accept that this weighs heavily in the applicant's favour in the context of a development of this nature which involved the undertaking of extensive skilled work. The decision in Collins is relevant to your circumstances. It supports the view that the engagement of appropriate professional expertise, even in a relatively small-scale development, does not preclude to finding that activities have gone beyond mere realisation and can amount to an enterprise. In your case, the activities are more appropriately characterised as an adventure or concern in the nature of trade, given they were undertaken as a one-off development. Your stated reason for not holding the units' long term was due to financial reasons, partly due to Person B's spouse's employment and not being in position to hold a unit for each of the family members. However, the facts indicate that Person B's spouse was a contract employee at the time of entering into the arrangement. For GST purposes, the assessment of whether the activities constitute an enterprise requires consideration of the activities as a whole. While original intention is relevant, it is not determinative. In this case, the nature and extent of the development activities undertaken prior to the sale of the units support the conclusion that the activities went beyond the mere realisation of an asset. Your activities, viewed as a whole, constituted an adventure or concern in the nature of trade within paragraph 9-20(1)(b). These activities included demolishing the existing dwelling, constructing new residential premises and undertaking subdivision as part of a coordinated development carried out in a businesslike manner. The significance of this finding under paragraph 9-20(1)(b) is discussed further below in determining whether you were required to be registered. Section 195-1 defines carrying on an enterprise to include, doing anything in the course of the commencement or termination of the enterprise. Accordingly, the sale of the units occurred in the course of carrying on your enterprise. | Detailed Reasoning - Paragraph 9-5(c): connected with the indirect tax zone: Your supplies of the units satisfied paragraph 9-5(c) because they were supplies of real property that are connected with Australia under subsection 9-25(4). | Detailed Reasoning - Paragraph 9-5(d): Required to be registered for GST: You advised that you registered for GST on the advice of your tax adviser, but you now consider this an error. We need to examine whether you should have been registered for GST at the time you sold the units, given that the inclusion of the sale proceeds in your turnover calculation would cause you to exceed the registration threshold. Section 23-5 provides that an entity is required to be registered if: (a) it is carrying on an enterprise; and (b) its annual GST turnover meets the registration turnover threshold. As determined earlier in this ruling, you were carrying on an enterprise in relation to the construction and sale of the units. The projected GST turnover from the sale of the units exceeded the registration turnover threshold of $75,000. As a result, you satisfied section 23-5 and were required to be registered for GST in relation to the sale of the units. | Detailed Reasoning - Input taxed or GST-free supply?: The definition of a taxable supply in section 9-5 provides that a supply is not taxable to the extent it is input taxed or GST-free. There is no GST-free provision that applies. In particular, the sales were not supplies of a going concern for GST purposes and no other GST-free provision is relevant. However, there is a question of whether the supply of the units was input taxed or taxable. The definition of residential premises in section 195-1 refers to land or a building that is occupied as a residence or for residential accommodation, or is intended to be occupied, and is capable of being occupied as a residence or for residential accommodation (regardless of the term of occupation or intended occupation). Section 40-65 sets out that sales of residential premises will be input taxed unless they are new residential premises or commercial residential premises. Section 40-75 defines new residential premises: When premises are new residential premises (1) *Residential premises are new residential premises if they: (a) have not previously been sold as residential premises (other than *commercial residential premises) and have not previously been the subject of a *long-term lease; or (b) have been created through *substantial renovations of a building; or (c) have been built, or contain a building that has been built, to replace demolished premises on the same land. Paragraphs (b) and (c) have effect subject to paragraph (a). Note 1: For example, residential premises will be new residential premises if they are created as described in paragraph (b) or (c) to replace earlier premises that had ceased to be new residential premises because of paragraph (a). (2) However, the *residential premises are not new residential premises if, for the period of at least 5 years since: (a) if paragraph (1)(a) applies (and neither paragraph (1)(b) nor paragraph (1)(c) applies) - the premises first became residential premises; or (b) if paragraph (1)(b) applies - the premises were last *substantially renovated; or (c) if paragraph (1)(c) applies - the premises were last built; the premises have only been used for making supplies that are *input taxed because of paragraph 40-35(1)(a). In your case, the units are new residential premises under paragraph 40-75(1)(c), as you demolished existing premises, and at the time of sale, the units had not been used for making input-taxed supplies by way of lease for a period of at least 5 years. The units are not commercial residential premises. Accordingly, the sales of the units were not input taxed supplies under section 40-65 and were taxable supplies. Additional comments Your GST registration may be backdated to the date you first became required to be registered for GST. This may allow you to claim input tax credits for your earliest creditable acquisitions, such as those you incurred when you entered into a construction contract with the builder. However, your entitlement to input tax credits is subject to the four-year time limit in section 93-5. Underthis provision, an input tax credit is no longer attributable to a tax period if more than four years have passed since the due date for lodging the GST return for that period. Accordingly, while backdated registration may permit claims for earlier creditable acquisitions, input tax credits can only be claimed to the extent they fall within the applicable four-year limit.