Private ruling: GST
Date of advice: 26 October 2018
Published: February 2019

Ruling: Q1: 1. Will the subdivision of the specified property and the subsequent sale of the resulting Lots be made in the course of the furtherance of an enterprise carried on by the entity? 2. Will it be necessary for the entity to register for GST as a consequence of the activities associated with the subdivision and sale of the Lots? | A1: 1. No. 2. No.

Relevant facts and circumstances: ● The entity owns the property situated at the specified address. ● The entity purchased the property, which consisted of land and an existing dwelling many years ago. ● The property was the family home until recently, when the entity was required to sell the property. ● The best way to retrieve the capital value in the site was to demolish the existing home and divide the land into several Lots. ● A Surveyor was engaged to prepare a subdivision Plan. ● Application was lodged with Council to subdivide the land. ● The house was subsequently demolished. ● The entity undertook and managed the subdivision project itself. The entity had no prior experience or training in matters related to property subdivision. ● The level of development carried out did not exceed what was required to comply with the Council Approvals. ● The Lots will be sold as vacant land. No buildings have been erected on any of the Lots.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 9-20, and | A New Tax System (Goods and Services Tax) Act 1999 section 23-5.

Reasons for decision: Detailed Reasoning - Are you carrying on an enterprise and are you required to be registered for GST?: Under section 23-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), you are required to be registered if: ● you are carrying on an enterprise; and ● your GST turnover meets the registration turnover threshold. The issue to be considered is whether the land subdivision and sale activities undertaken by the entity constitute an enterprise. Section 9-20 of the GST Act which provides the definition of enterprise for GST purposes, includes an activity or series of activities done in the form of a business; or in the form of an adventure or concern in the nature of trade. Miscellaneous Taxation Ruling MT 2006/1 sets out guidelines on the meaning of the word 'enterprise' for the purpose of entities' entitlement to an Australian business number (ABN). Goods and Services Tax Determination GSTD 2006/6 confirms that the principles in MT 2006/1 apply equally to the term ‘enterprise’ for GST purposes. If an entity is dealing with property, including one-off transactions, the entity may be considered to be conducting an enterprise. Whether activities relating to isolated transactions constitute an enterprise, as defined in section 9-20 of the GST Act, is a question of fact and degree having regard to all of the circumstances of the situation. On the facts provided, based on the principles in MT 2006/1 and GSTD 2006/6, we consider that for GST purposes, the entity’s activities in relation to the subdivision and subsequent sale of the subdivided Lots would not amount to carrying on an ‘enterprise’ as defined in section 9-20 of the GST Act. As the entity is not carrying on an enterprise, it will not be required to be registered for GST under section 23-5 of the GST Act at the time of sale of the subdivided Lots. Consequently, GST will not be payable on the sale of the specified property, constituted by the subdivided Lots.